First, this has been fun to follow along with. I'm a "Paulian" and I understand why going back to a gold standard is a bad idea and this thread has been quite informative.
Wrong. If you bought gold in the early 80's, you'd just now be breaking even on value, accounting for inflation. Barely breaking even.
Yeah, that's a great investment there.
I think that was the point of the user you responded to. Gold as an investment is horrible, but it is inflation proof. Well, at least when compared to holding onto actual FRNs. That's always a losing position in today's world.
Now, gold wouldn't be that stable if the US was using the gold to back their dollars. I have no illusions of that. If we were then other countries, like China as Manedwolf has pointed out, would, or at least could, be playing games with our currency. Then again, under our current system the Chinese still hold about 1.3 trillion in US dollars that could be dumped on the market any time. I have no idea what that'd do to inflation because I have no idea how many dollars are actually out there.
Does anybody at this point? We don't even know what's going on with the "M3" index or whatever it is anymore. Yes, I realize just mentioning "M3" sends up flags that I pay attention to the tin-foil hat brigade of the finance world.
It isn't so much
what is backing the US dollar that bothers me. It's that there's
nothing backing it. As far as I know, and I could be entirely wrong on this, there's nothing that would stop the Federal Reserve from just doubling the money supply in a single night. That sort of bothers me.
I've never taken Ron Paul's words on the Fed and the gold standard as him insisting that we return to the gold standard itself. Perhaps I'm reading him wrong. I think he just uses it as an example of how the US worked before the Fed could print money willy-nilly. Said system was obviously far from perfect as Mike Irwin has pointed out. We don't ever want to go back there again.
But, to tie the money supply to something -- anything -- outside of the whims of the Fed seems like a decent idea to me. That could mean a cap on what percentage increase they're allowed in a year. If done wrong, as in set too low, recessions and depressions might ensue, but if done right then we'd at least know what kind of yield on investments we'll need to counteract inflation.
Now, I'm not so ignorant to believe that we can do something as silly as say no more than X% of the money supply may be increased in a year. The formula would be much more complex than that, taking into account increase in the national GDP, our rank in the world marketplace, and God knows what else.
All I want are some agreed upon rules for how our money supply is managed. I don't think "GOLD!111elventy!! R0N PAUL IS G0D!" is the answer. I'm not real keen on letting the Federal Reserve control the whole damned thing either. It's certainly better then the former, but it still seems far from ideal to me.