The Fed caused America’s worst banking crisis (1933), its worst economic crisis ever (1929-1945), and its worst sustained inflation (started in 1955). The last year when the CPI did not rise was 1954.

I am so angry at how we have be manipulated and screwed so badly!

I advocate private money, which will base its value on whatever the market values. I do not support government setting the price of the dollar at $20 per opunce, $35 per ounce, $38.71 per ounce, or any other amount. The government has no better clue as to what the correct price of gold or the dollar should be than it has of the correct price for cars, rent, health care or anything else.

Under private banking, banks would issue their own banknotes instead of the Federal Reserve issuing banknotes. There would be no FDIC insurance (though private companies would be free to sell such insurance and banks would be free to purchase it). There would be no government mandated reserve requirements. Individuals would have to investigate the safety of banks – and there would be outfits akin to Consumer Reports that would provide such services in a free market. During the period of free banking in the United States during the 19th century, there were companies that published information on the soundness of a particular bank’s notes – and different banknotes traded at different discounts or premiums.

I support a free market for money and banking, just as I support one for all other goods. Would gold back the better banknotes? I would guess so, but given that I do not fancy myself as a central planner I cannot say for sure. But it is likely that banks would maintain their own reserves based on their own judgment of the market (including their depositors’ demands), and that some of those reserves would be in the form of some store of value such as gold.

Gov. Palin warned about this fact many days ago.

“We do need to eliminate fiat currency.”

Do you advocate a gold standard? (I do.)

Thank you for raising this story. It is a critical story and an ominous crisis that is coming. And neither party in Washington has a clue of how to deal with it.

We do need to eliminate fiat currency. However, it is even more critical to get the government out of the business of money in the first place. Having the government issue gold backed currency is not any better than the current system, because the government remains in the position of price fixing the value of its currency.

What is needed is a free market in money and banking. That would mean allowing banks to issue their own banknotes, in the same way that today they issue their own credit cards.

The consequneces to our government’s ability to finance the welfare state without being able to print money should be obvious. The government could never spend the way it does now if it could not print its own money. Given the complete lack of will – not to mention complete lack of ideological understanding of the need to – cut government spending, if a crisis overtakes us, it could lead to a very serious disaster.

And we currently have a President who lives for disaster. Not a good sign.