Simple question. Say Ron Paul was somehow elected US President. Could he unilaterally change the US back to the Gold Standard or would Congress and the Senate have to approve that?
The Federal Reserve System ( http://en.wikipedia.org/wiki/Federal_Reserve_System ) would most cetainly have to get involved, as it controls the US money supply and whatnot.
“The Fed” was established by law (in 1913) for this purpose, by Congress.
Note, in the wiki article, one of the critics of the FRS is Ron Paul, down near the bottom, in the section titled Congress. (Seems he realises that he would need to abolish “the Fed” to work on his gold standard goal.)
I don’t think the President can abolish an organisation set up by the law via the Legislative Branch…
Otherwise, Ron Paul would have to convince “the Fed” that the gold standard is a good idea. Tall order, me-thinks.
Without trying to get political in GQ, there have been a few instances where the current administration has, through “signing statements”, essentially said that it intends to ignore or massively reinterpret new law passed by Congress.
Deciding to massively reinterpret old law, perhaps by simply directing the Treasury to not pay any payroll or rent on behlaf of the FRS, would perhaps be an extreme case of that same idea.
It’d be interesting to see how far that could go before provoking a constitutional crisis. It’s certainly something I’d rather watch from a suitable distance, like say from Australia.
Yes, Congress would absolutely, positively have to pass a law. The essence of a gold standard is that you can bring in your currency and get gold in return. Neither the Treasury nor the Fed can hand out gold on its whim (nor at the present time do they have the gold to hand out); they would need authorization by law.
If the gold standard were to happen, could you do the same in reverse and bring in your gold to get currency?
Yes, that’s how money is created under a gold standard. You could either have it minted into gold coins, the old-fashioned way, or (depending on what the law allowed) you could exchange it for paper money.
And if Ron Paul is consistent on anything, it is that the powers of Congress are laid out in the Constitution, and they are no more and no less than what is listed. I do not support Ron Paul one whit, but were he elected president, I think it is safe to say that going back on the gold standard by presidential decree would be completely out of character for him (not to mention illegal).
So then the banks would effectively become pawn shops, or would there be a specific form that the gold would need to come in?
No, a gold standard can co-exist with fractional reserve banking, as it did for many decades in the United States.
There are at least three different forms of gold standard:
Version A: In terms of currency, gold is king. Burn the green pieces of paper with presidents on them, and carry gold coins. You can still bring those coins to a bank and open a checking account, or use a credit card, but for legal tender, it’s gold or bust.
Version B: The Treasury still prints green pieces of paper, but only hands them out in return for the requisite quantity of gold. You can trade gold for cash, or cash for gold, and spend either as legal tender. And again, you can (if you wish) allow fractional reserve banking, with checking accounts and credit cards and the like.
Version C: The Treasury prints green pieces of paper, and issues them to pay government expenses, sometimes in excess of the amount of gold redeemed, but all such paper money is redeemable for gold. This was the system used in the United States between the Civil War and the Great Depression. As you can see, it’s a bit of a confidence game, because the Treasury will be bankrupted if everybody hits it for the hard metal at the same time. And again, you can have banks which add a second layer of reserve–you have gold, serving as a fractional reserve for currency, which in turn serves as a fractional reserve for demand deposits.
I don’t know which version Ron Paul is proposing, or if he has said.
The president has indeed used signing statements. Not a few, but more than 750.
It’s not at all clear, however, whether any of the provisions the president has wanted to ignore or massively reinterpret have been done so in fact. I know of no court cases that have been brought by so doing. It appears that these signing statements have so far been simple PR moves rather than any serious attempt to create law or circumvent Congress.
Reinterpreting old law to remove the Fed is not an extreme case of the same idea. It is an extreme conspiracy theory. It doesn’t pass the laugh test. It wouldn’t even make a good skit on a comedy show.
There’s no question that Congress (not Congress and the Senate - what is this, an episode of Jaywalking?) would have to pass legislation making it happen.
ETA: Sorry. Since you can’t see location when in reply mode (and why not?) I didn’t realize that the OP was Canadian.