With all the recent talk about the debt ceiling, central banking, the federal reserve, the gold standard, the crash of the dollar, interest rates, and inflation, I think that people get twisted up in all these terms and decide to just step out of the circus. We know what they are all talking about, and at the same time we don’t have the slightest clue.
I’m going to try and give a simple example of what has happened to the value of the dollar. Hopefully, this will help you understand why Ron Paul has been Captain End the Fed for so long.
Let’s say that we live in the cozy little village of Dinglehoffer. Now, what we use to exchange goods and services in Dinglehoffer is snoodles. The amount of snoodles that it costs to buy certain items is based off of the fact that there is only a certain amount of snoodles, and they are backed by a real asset (like gold.) Now let’s say one day, everyone has double the amount of snoodles, and no one knows why. This is great right! “Oh, zank ze heavens, more snoooodles fer everone!” So now everyone wants to run out and buy all of the floogerdoodles that they could never afford before. This is fine at first, until floogerdoodles are running low. Now the floogerdoodle maker has to raise the price of floogerdoodles because the demand for them is higher. So now, it costs more snoodles for the same floogerdoodles. Therefore, the value of a snoodle is less than it was before. Savvy?
(Can you tell that I have recently made multiple trips to Ikea??)
Printing more money with the same amount of assets backing it (or none at all!) is bad. It is a technique used to make rich bankers and people on Wallstreet richer, but it makes us poorer. The dollars that we work hard for are worth less. That is inflation. And that is why Ron Paul feels that the gold standard is the only true source of sound money. He feels that if we don’t back money by something real, like gold, we will just print our way into a hole that we can’t snoodle our way out of.