Ron Paul on Competing Currencies

Ron Paul, among other things, has been a supporter of alternative currencies - which would compete against one another - being allowed to circulate among the American people, giving them other options than the failing U.S. dollar.

Before the United States House of Representatives, Subcommittee on Domestic Monetary Policy, Hearing on Sound Money: Parallel Currencies and the Roadmap to Monetary Freedom, August 2, 2012, Paul said this:

One of the most pressing issues of our time is the push for monetary freedom. The only sound monetary system is one which protects sound money and allows consumers, businesses, and investors the freedom to transact in the currency of their choice. The importance of sound money is summed up nicely by Ludwig von Mises: "It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments." It is no wonder that governments fight tooth and nail against sound money, as sound money protects the well-being of the middle class and the poor while preventing the expansion of government.

As we've talked here a number of times, Paul also noted that since the creation of the Federal Reserve, it has debased the U.S. dollar by 96 percent.

Over the past 100 years, the Federal Reserve has continually pumped new money into the economy, resulting in a 96 percent devaluation of the dollar. This devaluation does not affect everyone equally, as the banks who receive this new money first benefit from using it before prices rise, while average Americans suffer the price rises first and receive only a trickle of money well afterward. In this way the Fed enriches Wall Street while impoverishing Main Street, leading to a growing disparity of wealth.

Shaming the American government and the Federal Reserve by countries that already allow competing currency options in their countries, he cited Mexico, Singapore, and other countries in Asia as those already participating in the practice.

Mexican workers can set up accounts that are denominated in ounces of silver, and can take delivery of that silver whenever they want, tax-free. In Singapore and some other Asian countries, individuals can set up bank accounts denominated in gold and silver. Debit cards can be linked to gold and silver accounts so that customers can use their gold and silver to make point of sale transactions, a service which is only available to non-Americans. In short, Americans have far fewer options to protect their wealth than citizens of many foreign countries do.

The solution to this problem is to legalize monetary freedom and allow the circulation of parallel and competing currencies. There is no reason why Americans should not be able to transact, save, and invest in the currency of their choosing. Unfortunately, decades of government restrictions and regulations have hampered and prevented the circulation of parallel currencies and destroyed the familiarity of Americans with any sort of money aside from Federal Reserve Notes or bank deposits denominated in U.S. dollars. The thought of introducing parallel currencies undoubtedly scares many people who understandably wish to minimize their financial risk.

All financial activity is fraught with risk. Most people understand the risks inherent in stock or bond investment, but the risk of holding savings accounts or cash is still drastically under-appreciated. Everyone is familiar with the maxim "Don't put all your eggs in one basket" and investors and savers are constantly urged to diversify their portfolios, yet the U.S. government continues to set roadblocks that force Americans to transact and save in dollars that continue to depreciate.

Paul is absolutely correct in his assertions. Most Americans are subject to the strength or weakness of the U.S. dollar and interest rates in association with it.

Now people have their money in savings accounts that generate almost nothing in interest, while inflation continues to run at about a 2 percent annual rate. That means the average American, or anyone in a country with no competing currencies, are subject to the practices of the central bank, which in America is of course the Federal Reserve.

The more Americans and people around the world understand the inherent risk in relying upon a single currency, the more they'll work towards eliminating central banking and also for the adoption of alternative currencies in their respective countries.