Disclaimer: I wrote in Paul in the Republican primaries last time, would vote for him again. But I'm not a registered Rep/Dem. Kucinich, Baldwin, Barr, Nader, or McKinney also would have been better than McCain or Obama. Technically, a brick would have been better than them. A brick can't sign any legislation.
That said, abolishing the Fed is spot on, we don't need to be paying interest on an inflated money supply. Obviously, it's impossible to ever pay this off. And we don't need that type of authority vested in an organization with the Fed's type of behavior. If anything, the authority should be with Congress and inflations should be out in the open in legislation.
Now here's the point: it's one thing to say we shouldn't have the Fed, it's something completely different to say we should never inflate the money supply, even through a transparent Congressional process. I happen to agree with it, but I've considered the implications of that, or at least I think I have.
Apparently, Ron Paul wants to replace our current system with a gold-based money supply:
I disagree (I think). First, an endorsement of a gold based supply is an endorsement of inflation, albeit naturally controlled inflation. As more gold is mined, the supply will increase. I can't find a decent reference right now, but here's a google with the Spanish inflation and gold imports from the New World:
It seems to me that a gold-backed supply is inherently flawed because of this. I would support (again, I think) a constant currency supply, fiat-based. Then, money is only an abstract store of wealth, and prices are completely subject to the market. Don't take that to be a corpratist cronyist Republican stance, that's not what I'm talking about. I'm talking strictly about price discovery, I'm not saying that we shouldn't have tariffs, and I'm not saying we should be involved in all this Free Trade nonsense.
The common argument against this, and for controlled inflation, is that money supply must increase to account for increased growth in the economy (whatever that means) and to maintain price stability. This is taken pretty much as dogma, as near as I can tell.
Now let me go out on a limb: I can't think of a single reason why this should be true. If more product is being produced more efficiently, then prices should fall, right? But traditionally, that's taken to be price instability, and bad for the economy, because people can't live as well doing the things they have traditionally done.
But isn't that just the reality of technological progress? That inevitably, some things will go by the wayside? It seems to me that our desire to maintain our notion of price stability is basically a national macro economic policy of subsidizing buggy whip makers and whale oil.
In all the reading and listening to other people that I've done, I've never heard any good reason that economically or morally justifies a variable currency supply.
Back to Paul's stuff, even if we did end the Fed, I doubt that we can peacefully and sanely replace the Fed with a gold-backed supply. The entire American system of doing things is based on deficit spending, inflation, and effectively stealing manufactured goods through the threat of military force. The two big problems we would face would of course be our entitlement programs and our defense spending. We simply couldn't pay for it with a gold-backed supply. I know that Paul has said we should cut a lot of the defense spending, and use the savings to pay out to people we've already made entitlement commitments to, and phase out the entitlements from there on.
But I don't know if he actually believes that. We can't remove the threat of force from the rest of the world, and seriously expect them to keep sending us cheap commodities just because they like us so much. But I'm off in conspiracy land now, and I realize a lot of people don't agree with this. A lot of people believe that there really is demand for the dollar as a reserve currency because other countries have faith in our system.
The establishment would probably even admit that we've had serious problems with the USD's value in this century. But the accepted establishment theory, AFAIK, is that the USD was genuinely and voluntarily valued as a reserve currency throughout the last half of the 20th century. I'm skeptical.
So basically, I definitely don't agree with what's going on. But with as bad as the problems have gotten, I'm not sure that ANYONE, even a mythical benevolent dictator Cincinattis type figure, could fix things. I don't see any peaceful solution to all of this.