Wlidcat keeps harping on the same issue, which I've tried to explain in the past.
Here is an example: Einstein's special relativity requires the conceptualization of ideas that don't reflect common experience. For example, when you speed things up to near the speed of light, they contract along the line of motion. But you only see this if you're stationary. The mathematics involved work out such that to all observers, they each see something completely different, yet they're all consistent.
The fact is there are a lot of people that are simply incapable of understanding special relativity. They can study it, they can struggle with it, can try very hard, but in the end they seem to be incapable of grasping it. It's just a sort of blind spot, or something.
The concept of 250 billion in gold backing a 13 trillion dollar economy is a blind spot to Wildcat, which he appears simply incapable of understanding. To understand it one has to think outside the box. One has to grasp a bigger picture, and wildcat appears unable to make this step.
The dollar isn't backed by anything. You can't go to where dollars are printed and get anything tangible and fixed for your dollars. You can only trade your dollars with other people that have real things and are willing to accept your dollars in exchange. The dollar is a representation of wealth and value only because collectively enough people have faith that it has value. It is merely a piece of paper (or cloth, whatever it's made of), supposedly difficult to conterfeit, and it has "Federal Reserve Note" stamped on it. Aside from that it's valueless.
Now the true situation is that the dollar is way, way, way overvalued. People are able to buy real things for their dollars merely because huge economic entities (nations, large corporations) are willing to hoard dollars, and keep them out of circulation. China has something like 1.5 trillion dollars just sitting around. These aren't being spent. They're just...there. Some of those dollars are recycled back into the US national debt by buying Treasuries. This finances ongoing US government operations (like the war in Iraq, or the US empire in general, or all the federal entitlement programs).
Now if everyone hoarding dollars were to at the same time try to exchange their dollars for things of real value, what happens? Suddenly the price of everything, in dollars, must rise, because you have a fixed amount of goods and services for sale, and a vast amount of dollars trying to buy them. The price must rise. That means dollars effectively become worth less and less. How far down can they go? Anyone's guess. And it depends on what the government and the fed do. They can simply continue pumping more dollars into the economy, and this makes the problem worse. This is what smart people are expecting "Helicopter Ben" to do to try to combat the recession/depression we're in.
This was Bernanke's claim -- he boasted that he'd have been able to solve the 1930's depression, no problem -- just run the printing presses until the depression ends. Dumping dollars out of helicopters. This is his philosophy, and magically he has the opportunity to test it out. But it won't work. It can't work. All it can do is make the situation worse.
The US needs a financial collapse in order to deflate the ridiculous bubble/debt economy we find outselves in today. The dollar value is just a huge, bloated balloon, searching for a pin to pop it. There is simply no way to preserve the buying power of all the dollars in existence. It just can't happen, impossible, there is no magical way to do it. Once the dollar falls enough, everyone hoarding dollars will start a manic rush to sell their dollars. It is a positive feedback system -- getting out of dollars makes the dollar even more valueless, and that causes more people to want to escape dollars...a downward spiral.
All fiat currencies in history have always ended thus. With a panic attempt to get rid of them in exchange for things of real value, before they truly become worthless.
So the concept of Ron Paul supporting a gold backed currency does not address the issue of how to preserve the existing distribution of dollar wealth and buying power. That problem cannot be solved. The value will vanish one way or another and there is no way of stopping it. Individuals who act first can preserve 100% of their dollar wealth. Ones who act slower can preserve some of their wealth. Those who wait too long will lose all their wealth, when the dollar finally collapses. When a loaf of bread costs $1000 today, and $1500 tomorrow.
A gold standard is for the aftermath of the collapse. It is for how to recover after the dollar collapses. The dollar is replaced by a "New Dollar" or whatever you want to call it. This "New Dollar" is backed by gold, at a fixed exchange rate. Somehow it's introduced into circulation, and people grow to trust it. Some people receive these ND's and convert them to physical gold. Others are content to hold the ND's themselves. The point of the ND is to keep government honest. They can't simply print more ND's and dump them into circulation when the government wishes to pay for things not directly financed through taxation -- as a means to buy re-election for example.
The concept that wildcat is unable to fathom is that the current dollars are toast, there is no going back to a dollar standard on the current dollars, where the dollars can be redeemed at a fixed exchange rate for some amount of gold. No one except wildcat believes Ron Paul intends to attempt that. And in fact if dollars were to be backed by gold, the correct exchange rate might stabilize around $40,000 per ounce.
The current USA economy is in the process of collapse. We're just in the earlier stages of it. Vast existing wealth will simply evaporate, like the morning dew under a strong sun. There is no way to stop it. All the debt owed to people holding bonds will simply vanish, as the dollars the bonds are valued in become worth less and less.
It is a great time to be in debt -- provided you don't have adjustable rates on your debt. So if you've got a 30 year fixed mortgage at 6% you're in fantastic shape. You'll basically be getting your house for free. But if you owe credit card debt where there is no mechanism to limit the interest the credit card company can charge on that debt, you could be screwed. They can simply raise the rate to 80% annual or whatever they need to to balance out the devaluation of the dollar. Or in the case of an ARM home loan, you could be screwed for the same reason if the interest rate goes way up after the teaser period ends.
It's a terrible time to have loaned out money, because the money you'll get paid back in (even assuming you get paid back, there are a lot of defaults going on and bankruptcies are increasing all the time) won't be as valuable.
A gold standard is a means to keep government honest. Our government isn't honest. They use devaluation of the currency as a means to finance re-election and to keep the public "content". They also use budget deficits to pay for stuff the taxpayers wouldn't ever OK, if they had to be funded out of taxes.
The thing Bernanke faces right now is 2 choices: On the one had he can keep interest rates ridiculously low, but this will have the effect of prolonging the bubble economy and it will destroy the value of the dollar. On the other he can raise interest rates very high (double digits) but this will choke off money and will usher in a massive recession -- but it will preserve the purchasing power of the dollar.
In the second case, the US citizenry must then make an honest attempt to pay down all the accumulated debt on all levels -- credit card debt, municipal debt/bonds, state bonds, and the federal government debt. That means years and years of budget surplusses to pay down the debt, buying back bonds. It will be a struggle to get back to zero debt. Bitter sacrifice and shockingly miserly spending all around.
This is a bitter pill to swallow. So in the end I and most people believe Bernanke will just keep pumping dollars into the system, hoping to buy another year, another month, another week, another day...hoping some miracle happens and the economy can run on its own without the constant injections of money. But it won't happen. It can't happen. Going down this path, foreign nations will give up on the dollar and will write off their accumulated hoards of wealth. This will cause a very sudden collapse of the dollar, and a depression to boot.
So it's do the right thing and suffer today, or continue doing the wrong thing and suffer a bit more tomorrow. And a bit more the next day. And even more the day after. Until the final day when the whole thing flies apart.
Ron Paul is the only candidate telling it like it is. All the others have no understanding of the economy, or if they do they're playing politician and quickly change the subject to something inane, like whether illegal aliens should have drivers' licenses. Ron Paul didn't create the economic disaster we're experiencing right now. He fought it every step of the way. Those who claim Ron Paul is a nutcase are just completely misunderstanding the real situation. Ron Paul represents a choice for the american people -- do you want to join reality, or continue living in a fantasy world. The fantasy world is collapsing in on itself even as we speak. I think the corrupt powers that be are merely scheming to get past the 2008 elections. Clinton, Obama or McCain, anyone will do. Just not Ron Paul. He's too honest and uncorruptable.
-Dave
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