Ron Paul on Legal Tender Laws, Coin Shortages, Interest Rates, Municipal Bonds, the Gold Standard

Commodity Online News has an interesting article regarding a new bill introduced by Ron Paul to repeal legal tender laws, an investigation of the coin shortage, and Paul's positions on interest rates and a return to the gold standard.

Please consider Ron Paul to probe US Mint Coin shortage

Rep. Ron Paul, R-Texas, has one question for the U.S. Mint: why is there a coin shortage? He is aiming to get to the bottom of this during a scheduled April 7 hearing of his U.S. House Subcommittee on Domestic Monetary Policy to examine the bullion programs at the U.S. Mint.

“We are going to try and find out what the Mint has done so they can give us a better answer as to why there is a shortage. Why can’t they keep the supply of coins up?” said the congressman in an exclusive interview with Kitco News.

Part of the problem lies in manufacturing the blanks, said Paul. The blank planchets are not made at the Mint, which hasn't had the production capacity for this stage of the minting process since the budget cuts of 1981.

“Looks like we don’t even get (all) blank coins made in the U.S. – there is a contract with a foreign company, which makes no sense at all,” said the congressman.

Free Competition in Currency Act of 2011

In March, Paul introduced H.R. 1098, the Free Competition in Currency Act of 2011, which would repeal legal tender laws in order to prohibit taxation on gold, silver, platinum, palladium and rhodium bullion. The bill has been referred to the House Committees on Financial Services, Ways and Means, and Judiciary.

A staunch critic of the Federal Reserve, Paul said that instead of arguing his case for the Fed to close down tomorrow, he’s arguing the fact it should not hold a monopoly. “They have a monopoly on a type of money that isn’t even constitutional,” he said.

“We would use no force, nobody has to use gold and silver coins,” said Paul. Rather, he said the Fed does use force. “They are a cartel and they make us use Federal Reserve notes,” he said.

Gold Standard

A common assumption is that Paul is calling for a return to a gold standard. He clarified, saying he is not so inflexible. “I wouldn’t be overly rigid and say, ‘you must have a gold standard, you must go back to what we had.’ Our gold standard was imperfect, even though it worked better than the paper standard,” he said.

Lawmakers in several states, including Tennessee, Virginia, New Hampshire and South Carolina, have introduced bills to look into minting their own currencies in the event of a complete breakdown of the U.S. Federal Reserve. In Georgia, a bill to make the state only use gold and silver is in committee.

Utah has received the most media attention on this subject as the House and Senate have passed HB317, which would recognize gold and silver coins as legal tender and exempt them from certain state tax liability.

“Governments over the many, many centuries have always demanded monopoly control over money. Even when gold and silver were principally used in the economies, they still wanted monopolies,” Paul said.

Hence, he is not confident that any Utah law would be allowed to stand. “Well, they are going to fight it tooth and nail. They are not going to go along with this even though we have the law and Constitution on our side and it should appeal to all Americans to have competition.”

Interest Rate Hikes and Municipal Bond Defaults

Regarding U.S. interest rate hikes, Paul said they are going to be gradual and steady but they are indeed coming. “The next big shoe to fall will be interest rates going up on municipal bonds -- that means a lot of these bonds will start defaulting,” he said.

There is more in the article including a discussion on another run for president. I hope he does run even though he has little chance of winning.

His issues are important ones and they merit adoption. The first step, however, is more awareness, and his running for president would do just that.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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