Forty-two: Reserve Judgment

Ron Paul is suggesting that the gold standard is required by the Constitution. This is not the case. Gold is mentioned once in the Constitution, in Article 1, Section 10. This article basically says that no State is entitled to act like the federal government. Thus, “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

So, if the Constitution were making a mere confederation of states with no other authority but the states themselves, then there might be a case for saying that gold and silver were a required basis for currency.

But this is not the case, as the authority of Congress overrides the States in this area. This is handled in Section 8 of the same article:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow Money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; [etc.]

Clearly, the Constitution would allow Congress to do pretty much anything that its members deemed was necessary to secure the wealth and prosperity of the United States.

One of these things has been the establishment, in 1913, during Woodrow Wilson’s administration, of the Federal Reserve System. This basically oversees the banking system and is intended to secure against the kinds of financial panics that are frequent occurrences in the capitalist system. The Fed was designed to protect capitalism from itself, and there have been plenty of cases where it has clearly achieved this – though it has failed on several occasions also, mainly due to faulty management (e.g., 1929 & 2008).

The assault on the Federal Reserve System from the right is intended to allow unfettered capitalism to reign once more. The notion that the economic cycles of boom and bust that preceded the 1913 creation of the Fed would be preferable to the oversight of the financial markets currently in place is absurd. Ron Paul’s grasp of history is flimsy at best – and he makes Gingrich look like a veritable scholar in this department – but this isn’t too much to grasp (though, of course, one has to note that one strand of Republican thinking wants chaos for its own sake – a return to the notion of the survival of the fittest, with everyone’s hands on the Bible and a gun – so it may not be that Paul is blind to these realities after all).

Republicans generally hope that people forget history altogether so that they can make up their own historical transcript out of their own fanciful whole cloth. They certainly excel in this area.