Ron Paul Schools Bachmann on Gas Prices
When Michele Bachmann told the Wall Street Journal that she lays on the beach and reads Ludwig von Mises some libertarians perked up, but most of us saw it as a shameless appeal to the first wave of the Tea Party that campaigned for Ron Paul in 2008. Then when she promised $2/gallon gasoline we all rolled our eyes and understood she didn’t know the first thing about Austrian economics. But it’s only appropriate that Ron Paul, who probably mumbles more Mises in his sleep than Bachmann has ever read, be the one to school her. At the Reagan Library/MSNBC/Politico debate on Tuesday the good doctor said,
It’s unfortunate that there isn’t a lot of time for detailed explanations in these debates but Ron Paul was absolutely right on this point. I can explain.
Before 1964 US dimes were made of silver. They weren’t the nickle plated copper we use today. Today’s dimes hold less melt value than the pennies in those days. At 90% purity a silver dime contains approximately 2.4g of silver. With today’s silver spot just peaking at $42/oz, and today’s average gas price around $3.66/gallon the price of a gallon of gasoline in silver dimes is about $0.12. That’s based on the melt value of the silver, not the collector value of the coin. So, Dr. Paul called it within $0.02. But measured against silver this is an historically low price for gasoline. In 1964, when silver dimes were still in circulation, the average price of gasoline was about $0.30/gallon. In real value we’re paying about half what we were in those days. So why does it seem so expensive? Well, Paul called it right again. It’s all about inflation.
The drafters of the US Constitution recognized the importance of honesty currency and they understood inflation, which is why they wrote,
People mistakenly believe that inflation is an increase in prices, but this is merely the side effect. Inflation is the increase in the money supply. Unable to fund this devastatingly expensive Federal Government, Congress long ago abandoned the stability of precious metals and embraced a fraudulent system of paper currency. This allows Congress to fund their projects without directly taxing their subjects. The dollar is no longer backed by any commodity. It derives its value from legal tender laws that obligate subjects to use it, in fact if you went around buying things with silver you might be declared an economic terrorist by the FBI. When the government borrows money the collateral on that loan is the future earnings of those subjects. In other words, the government is selling you, and the dollar is the receipt.
When Congress and the Federal Reserve increases the money supply (a.k.a. When they sell you) it dilutes the buying power of the money already in the economy. This means that the same number of dollars buy less goods. Prices rise. The buying power of that new money is stolen from the buying power of the dollar in your pocket. It’s an invisible tax that is built into the US monetary system. Increases in the price of oil usually indicate decreases in the buying power of money, not authentic market fluctuations.
The disparity between the $3.66 gallon of gasoline in today’s dollars and $0.12 gallon of gasoline in silver dimes is the degree to which we have already been sold to the government’s creditors. Since the inception of the Federal Reserve in 1913 the buying power of the U.S. dollar has decreased 96%. Soon it will not be worth the paper it’s printed on, and this country will enter into the same economic crisis that toppled the Soviet Union. On the other hand, a silver dime will probably still buy a gallon of gasoline.
When Michele Bachmann told the Wall Street Journal that she lays on the beach and reads Ludwig von Mises some libertarians perked up, but most of us saw it as a shameless appeal to the first wave of the Tea Party that campaigned for Ron Paul in 2008. Then when she promised $2/gallon gasoline we all rolled our eyes and understood she didn’t know the first thing about Austrian economics. But it’s only appropriate that Ron Paul, who probably mumbles more Mises in his sleep than Bachmann has ever read, be the one to school her. At the Reagan Library/MSNBC/Politico debate on Tuesday the good doctor said,
It’s unfortunate that there isn’t a lot of time for detailed explanations in these debates but Ron Paul was absolutely right on this point. I can explain.
Before 1964 US dimes were made of silver. They weren’t the nickle plated copper we use today. Today’s dimes hold less melt value than the pennies in those days. At 90% purity a silver dime contains approximately 2.4g of silver. With today’s silver spot just peaking at $42/oz, and today’s average gas price around $3.66/gallon the price of a gallon of gasoline in silver dimes is about $0.12. That’s based on the melt value of the silver, not the collector value of the coin. So, Dr. Paul called it within $0.02. But measured against silver this is an historically low price for gasoline. In 1964, when silver dimes were still in circulation, the average price of gasoline was about $0.30/gallon. In real value we’re paying about half what we were in those days. So why does it seem so expensive? Well, Paul called it right again. It’s all about inflation.
The drafters of the US Constitution recognized the importance of honesty currency and they understood inflation, which is why they wrote,
People mistakenly believe that inflation is an increase in prices, but this is merely the side effect. Inflation is the increase in the money supply. Unable to fund this devastatingly expensive Federal Government, Congress long ago abandoned the stability of precious metals and embraced a fraudulent system of paper currency. This allows Congress to fund their projects without directly taxing their subjects. The dollar is no longer backed by any commodity. It derives its value from legal tender laws that obligate subjects to use it, in fact if you went around buying things with silver you might be declared an economic terrorist by the FBI. When the government borrows money the collateral on that loan is the future earnings of those subjects. In other words, the government is selling you, and the dollar is the receipt.
When Congress and the Federal Reserve increases the money supply (a.k.a. When they sell you) it dilutes the buying power of the money already in the economy. This means that the same number of dollars buy less goods. Prices rise. The buying power of that new money is stolen from the buying power of the dollar in your pocket. It’s an invisible tax that is built into the US monetary system. Increases in the price of oil usually indicate decreases in the buying power of money, not authentic market fluctuations.
The disparity between the $3.66 gallon of gasoline in today’s dollars and $0.12 gallon of gasoline in silver dimes is the degree to which we have already been sold to the government’s creditors. Since the inception of the Federal Reserve in 1913 the buying power of the U.S. dollar has decreased 96%. Soon it will not be worth the paper it’s printed on, and this country will enter into the same economic crisis that toppled the Soviet Union. On the other hand, a silver dime will probably still buy a gallon of gasoline.
