You beat me to the Owsley article -- but how absolutely wonderful of Ann Althouse to write about that! (I absolutely love psychedelic nostalgia....)

Dadgum. See, you tease and antogonize the Ron Paul supporters like that, and they'll descend upon Classical Values like a swarm of locusts. They are really an unhinged bunch, and won't take kindly to you switching from thier idol to Thompson (who, I think, will be the Repub nominee).

Locusts are always welcome at Classical Values! (For that matter, so are plagues and floods. As I see it, if it fits with the classical theme, bring it on!)

Ah, yes. The second time I met Ron Paul (and also Dr. Tim) was at that 1988 fundraiser. It was a great evening. And precisely the kind of event that separates libertarians (even of the conservative bent) from conservatives. Dr. Paul was amused at where life had brought him. And, wow, the view from Dr. Leary's house was gorgeous.

A vote for Ron Paul is a vote for Jerry....

A vote for Fred Thompson is a vote for Bobby...

No one cares about Bobby....

He can't even fill 2000 seats nowadays...

Any Deadhead who loved Jerry is a Ron Paul supporter!

Ron Paul is totally not serious. When given the chance to grill Greenspan in depth, to confront him with his about face in regard to the the Gold standard, he wimped out.
Alan Greenspan is the most guilty of all appointed government officials is the last quarter century. Yet when Paul, who is a closet Objetivist, had the opportunity to grill him in congressional hearings, he asked only the polite questions without a hint of confrontation. At dinner parties and other social occasions Greenspan will say that he stands by his early writings about the importance of a sound currency. Yet his actions as head of the Federal Reserve speak volumnes.
Not that I disagree with Paul's positions on most issues. It's just that he doesn't have a chance in hell of winning the primary, let alone the general election.
And if he can't muster up a good argument in person with a turncoat like Greenspan, what good would electing him President accomplish?
`

Frank,

One leetle problem with the gold standard if we went back to it.

There is not enough gold in the world to support the world economy. That means gold would have to be inflated. That would hurt all the mfg. industries (read mostly electronics) that use gold in their production process. Stupid idea.

Greenspan is right. Ron Paul is wrong. The Gold Standard is a good idea. It is also too late. We are now at the mercy of the Central Bankers. All we can hope is that they are moderately honest. In that respect Greenspan was a good choice.

M. Simon:
What you say is true only if we went back to a gold standard with freely circulating gold & silver coins. But what if the creation of money by central banks was tied to gold?
The ability of governments to inflate and thus destroy savings, to set artificial interest rates, to redirect money to areas of the economy not dictated by the market, all of this would be limited by a gold standard. Greenspan knows this, and privately acknowledged it while head of the Federal Reserve, yet acted to inflate the money supply creating two huge bubbles, dot-com & housing.
Paul had the perfect opportunity to expose this man as a fraud. He could have brought up his failures at controlling inflation, his failure while heading the last round of government attempts to "save" Social Security, his trips to Russia and China to help THEIR economies, and pointed out that almost all of his answers at congressional hearings were nothing more than double-talk given purposely to obfuscate.
He had the chance to not only show Greenspan's duplicity, but to offer an alternative. He blew it.

Gold is some protection.

It is not fool proof. Spain was on the gold standard in 1492. The huge increase in the gold supply caused by the looting of the Americas caused horrendous inflation. The same could happen when we start mining asteroids.

By the same token an American economy whose production increases 3% a year with a gold supply only increasing 1% a year would cause strong deflationary pressures. Unfair to borrowers. It discourages risk.

I kind of like a system with small and consistent inflation. It encourages investment and discounts risk. I know every one else must pay a premium for this risk discount. Still, all in all I think it is a good thing.

Very heretical for a libertarian I know. I have given this question 20 years of consideration. That is my conclusion.

A good central banker will try to match money supply with economic output with a slight bias on the high side. IMO.

M. Simon:
Your argument about a good central banker matching money supply with economic output is derived from Plato. The "good" dictator thing.
Central planning is central planning.
The market is distorted by the well intentioned, and even enlightened actions of those government sanctioned individuals who know best what we lowly serfs should want.
It's got to the point where the Fed won't even release M3 money supply data.

I look at the sad recent history of Argentina, a country that was meant to be the economic powerhouse of South America, as well as it's intellectual center, and know that the same hyper-inflation they suffered has destroyed so many trusting people. Lifetime savings ruined. Bank runs. Poverty. Death squads. Do I need to recount our own history of government play money from the Continental to Civil War script?

What it all amounts to is theft by government. It can be very incremental like the actions of an Alan Greenspan, or more direct like Roosevelt's confiscation of gold.
And I would argue that Greenspan's inflation was much more than what is obvious.
Our government was able to hide most of it's inflation because of cheaply manufactured consumer goods flooding in from Asia. In other words, prices should have declined much more than they did, and our living standard should have increased, and our savings rate should have been more, but Greenspan and the Fed redirected that money. Where?
The Mexican bailout. The Brazilian bailout. The dot.com fiasco. The housing bubble.
And yes, now the Iraq quagmire.
Not that I don't support our efforts there.
But inflation is theft. It is dishonest. And deceit even if well intentioned leads only to disaster.

Frank,

By your criteria the electrical grid is centrally planned. Because the grid operators match the power output of the generators with the power demanded by the load.

In other words you are a victim of unclear thinking.

BTW it is a funny kind of theft that can be countered by prudent investment.

Restricting the growth of an economy to the increase in the gold supply restricts the available economic growth to less than the economies' potential.

What you propose is a system where by keeping your gold in a mattress would give you a profit. That is unhelpful except to the folks with the gold. It also puts your money supply at the mercy of events: i.e. a huge gold find or new technology for gold extraction.

As I said, I fail to see how matching the money supply to economic growth is central planning.

Gold can not match its growth in supply to the growth of the economy. Prudent central bankers can.

What you propose is biasing the economy to the risk adverse. Given the wealth creation opportunities of new technology I think that is unwise.

To counteract any inference of unclear thinking, let me be perfectly clear about this.
Either money has an intrinsic value or it doesn't. Right now money, whether in the form of actual bills and coins, or digits, has an intrinsic value of zero. It is not gold, silver, beads, shells, or cigarettes. It is nothing but nearly worthless pieces of paper, zinc coins, and digits somewhere in computer space.
As long as central banks don't issue too much it, as long as the insane derivatives markets hold, as long as the good faith and credit of this country holds, all well and good.
But history sheds a cold dark shadow on this type of venture.
Central banks are political instruments. They don't exist in some objective world of reason. Their managers are politically appointed and serve at the mercy of governments. The temptation in a crisis is to inflate. And that is exactly what we are experiencing right now, in this country.
I see it every day at the gas pump, in the grocery store, and especially in the operation of my business.
Bernake suggested dropping money form planes, if necessary. Of course it was a metaphor. But the Dow hitting 14,000 suggests to me that money is being created through credit instruments in gigantic proportions.

Hopefully you will be proved right, M. Simon. And all the optimists will own out.
But I wouldn't bet on it.

Frank,

The real wealth is not gold. Gold is not even a good store of value. There isn't enough of it to store all the value without inflating its price. As you agree.

Real wealth is goods and services.

If worthless paper money helps us produce more goods and services it is a good thing.

Pegging a currency to gold insulates us from some shocks and opens us up to others. Like deflation which would bring on financial collapse from the debt created to ramp up production faster than the gold supply will allow. Like a change in the demand for industrial gold. Or changes in production methods. Or a huge gold find (not likely on earth).

All the things you fear from central banks are certainly possible. However, the central bank is run by bankers. Since libertarian Milton Friedman explained it, we know the basics of sound monetary policy. Match money supply to growth. It is in the bankers interest. Their loans get paid back in dollars with a reasonable value.

Just as it is in the interest of the guys running the electrical grid to match supply with demand.

In this human world the best we can hope for is to align incentives with desired behavior.

One final post before this thread goes into archive history.
That you quote Friedman doesn't impress me. I have long discounted anything he advocated.
Your main point, as was dear old Milton's, about the difference between fiat money, and real money, is that fiat money is the sum of all the goods and services of the country that issues it. Even Rand echoed those thoughts on several occasions, when making excuses for her once disciple, Alan Greenspan.
Fine.
But if you will add up all the chits outstanding against this country, from those held by Japan, China, the European Union countries, the Arabs, and those citizens & countries who foolishly continue to buy treasuries, and the buckets of money trucked into the wastelands of Iraq and Afganistan, and promises of future payments to an expanding group of aging boomers, and the continuing current expense deficits, you will find that the fiat money you think represents all the goods and services of this country is in fact a huge minus sum.
So enjoy it while it lasts.
I would rather have something tangible.
I would prefer money to represent something other than a promise.
Especially when those issuing the promise are political hacks.

America's fiat money (debt) is about $10 trillion. America's assets are about $100 trillion.

In fact the government alone owns enough assets to cover the $10 trillion.

Frank says:

I would prefer money to represent something other than a promise.

So you don't hold dollars I take it. Just gold and silver. Good for you.

In fact if you don't believe in fiat money there is nothing keeping you from exchanging it for gold and/or silver and convincing others to do the same.

M. Simon: Ok, a final post and that's it.
I sense a defensiveness in your replies to my arguments that is personal.
First of all, I am not in the camp of those who are defenders of Von Mises, and have flowed into a world conspiracy mode, are anti-Jewish, and see bankers as some kind of pox on civilization.
Quite to the contrary, bankers and lenders are at the center of economic expansion and are necessary.
What I see is a kind of utilitarian backing for the current non-objective monetary system.
You would have us all knuckle under to political appointees running world banking. I find that dangerous. Much more so than the discipline of gold backed currency.
Yes, what you say about the limiting of credit expansion under a gold standard is true. But trade that off against unlimited credit expansion as witnessed so many times, in so many countries with fiat currency, and it pales in comparison.
I would argue that without Wiemar Germany and it's hyper-inflation there would never have been a Hitler, no ovens, no pink triangles, and no WW2.
I don't own any gold, other than a few pieces of jewelry.
I have no money left over to buy stocks, let alone precious metals.
But I do value those dollars that are there to buy a car, pay off the carpet purchase at Sears, and put into a puny retirement account.
That they are being devalued relentlessly through fiat money creation by people like Greenspan & Bernanke pisses me off.
I feel that I'm working for peanuts, and ending up with shells.

Frank,

Spend your money as soon as you get it and put the rest in investments that return above inflation.

BTW I know of no place where the monetary system isn't political. Ours is less so than others because it is run by bankers mostly. Their interest is small reliable increases of the money supply above what production can reasonably absorb. So putting your money in a mattress isn't a viable option. They want you to spend it or invest it.

As far as I am aware fractional reserve banking has always been legal in America. We now have the bankers in charge of the money supply. Now the only way to diversify is to own other currencies. However the Federal Reserve limits how fractional the reserve can be. Which is probably a good thing.

Bankers have always "robbed" people. Now they control the money supply. What else is new?