Kyle Townsend wrote:
...continued.
But I digress.
As I was saying, permitting competition in money is a much better solution. For example, we could immediately allow gold and silver to be used as competitive currencies merely by repealing the capital gains tax on these monetary metals. We have already removed the other major impediments to using gold and silver as money, because it is again legal for private parties to own these monetary commodities, and it is also legal (I believe) to write enforcable gold contracts.
If we took this simple step, then I would imagine that commerce would cary on much as it does now, and only a small set of "gold bugs" would begin using gold and silver immediately. Of course, over time, the advantages of using gold and silver would become more obvious, and more and more people would use it (or, the central bank would start defending its currency more vigerously in order to preserve its value). Over time, this would likely drive up the market price of gold and silver when measured in fiat money to some "natural level" that would fluctuate, in much the way that exchange rates fluctuate today.
I think it would be more politically possible to sell this idea, than any type of mass conversion to a government imposed gold standard. After all, who can argue against a little free market competition? It certainly sounds much less threatening and less disruptive to the average person (of course, governments would find it very threatening, but would be more likely to eventually agree to this sort of thing as opposed to the alternatives).
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Concerning Geoff's comments regarding Austrian economics, I would add one slight clarification. Geoff talked in about various types of "equilibrium." While the Austrians do recognize artificial constructs such as the "evenly rotating economy" as helpful thought experiments to elucidate certain points, it is very important to realize that Austrians maintain that the economy constantly strives towards certain equilibrium conditions, but never actually reaches them, because circumstances are constantly changing. This is a very important difference between Austrian and neoclassical economics. Neoclassical economics placed undue emphasis on the idea of equilibrium states (as if they existed in the real world) and were thereby led into fallacy. To reiterate, Austrians maintain that equilibrium is NEVER reached in the real world, and that it is misleading to pretend that these equilibrium states actually exist.
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