Representitive Ron Paul, from the 14th district in Texas, has been proposing legislation to abolish the Fed and return to the Gold Standard since the late 1970's (acutally, "return" is the wrong word, because Paul believes we have never been on a true gold standard).Paul supports the libertarian free market version of the gold standard, which would allow rapid deflation. This is sometimes called the "crash landing" gold standard. There is a more moderate version of the gold standard favored by some monetarists.

God, and I thought British politicians were crap.Leaving the economics aside for a moment, the idea that there should be a government gold standard ishardly libertarian. DominiConnor

QuoteOriginally posted by: DCFCLeaving the economics aside for a moment, the idea that there should be a government gold standard is hardly libertarian. DominiConnorA pure libertarian wants no standard at all, because a standard requires enforced agreement. However, pure libertarians were all killed by driving on the wrong side of the road and drinking things from bottles with Mr. Yuk on them.If you accept the need for some government, either as a philosophic accomodation or a reluctant compromise with other people, then it helps to have some sort of standard value exchange: for taxes, salaries and contract definition. Using gold minimizes the involvement of the government: you don't need a treasury or counterfeiting laws or the Fed. Anyone can mint their own coins, or try to get people to accept their paper money.This version of the gold standard basically trashes existing financial arrangements. Since the US government does not have the gold needed to buy up all currency (much less repay all debt), the price of gold relative to dollar bills would soar. On the gold standard, the price of gold is fixed, so the price of everything else would fall sharply.A more mainstream version would tie the dollar to gold at current levels, so it would have no immediate price effect. Gold is only a theoretic benchmark, the kind of "gold exchange standard" we had before 1971. No one is forced to deliver gold, the government is the backstop, not physical gold. This sharply reduces the potential for inflation, and also the economic power of the government.

"The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial 'boom' followed by a recession or depression when the Fed-created bubble bursts," said Paul. So are we crash-landing?