Tag Archives: tea party

I Will Honor the (fiat) Dollar!

Ron Paul and many of his supporters in the tea party want a return to the gold standard and the elimination of the Federal Reserve.  The argument is that the supply of gold is limited and thus governments are constrained in their ability to inflate a gold backed currency.   Gold has traditionally been highly valued by humans and thus able to serve as a store of value.   But golds limited supply is also its weakness, and the human desire to hold gold in times of uncertainty causes its value to be volatile.  Gold’s value can move independently of other values in the economy, especially during times of uncertainty.  If your currency is on the gold standard, then your debts are denominated in gold, when a speculative rise occurs in the value of gold, then your level of debt has increased.  The value your employer or the economy places on your work may not have  increased with your level of debt, in fact, employers are unlikely to hire and may have to layoff employees in times of uncertainty, and may prefer holding gold to employing your labor during times when the value of gold is high.  The gold standard is one of the factors that contributed to the great depression.  The uncertain international financial situation caused a rush to the safety of gold and currencies like the dollar that were denominated in gold.   Prices of goods had to fall in gold terms and this price deflation is much harder to economies to adjust to, especially when debt is denominated in gold.

Is gold really a reliable store of value?  How valuable is gold, and what would be the effect of forcing currencies to be backed by gold?   Gold has been a remarkably consistent store of value over the ages, but that ignores its volatility.   The price of gold was over $700 in the late 1970s,  but was back down to around $300 for a couple decades after that, and is now priced at over $1400.    Gold’s high prices limit its economic usefulness.  As a good conductor of heat, it would be useful in pots and pans and computer heat sinks, but it is too expensive for those uses.  Very small amounts of gold coatings can protect materials such as electronic connectors from corrosion, but most gold is used in dentistry and jewelry and as a store of value.   At high prices, even its usage in dentistry and jewelry is reduced or deferred in the hope of lower prices.

An economy or culture that values gold highly will expend effort and resources to produce or obtain more.  Is an economy that devotes more resources to mining, refining or trading gold a better economy?  Which economy is more likely to grow more rapidly, one that invests in gold, or  one that invests in capital equipment that increases the productivity of labor, or invests in research and development?  Isn’t an investment in gold, really an admission that you can’t find a more productive use for your money?

The high value of gold is subjective and speculative.    A cultural recognition in India for instance, that it would be better off investing in capital equipment, could flood the market with gold.

But what is the value of a fiat currency?  Doesn’t just printing more steal value from those that already hold it, and cause prices to rise?  What backs a fiat currency?  It’s value seems less intrinsic and even more subjective than that of gold?   Yes, the value of a fiat currency is mainly symbolic, its value is the fact that so many are willing to honor it.  Ultimately, it is legal tender for paying the taxes of the  issuing state.  The dominate roll of the US dollar in the world economy gives it a privileged position as the worlds reserve currency.   Many countries keep reserves of dollars to back their currencies, and set or manipulate the value of their currencies relative to the dollar.

So what backs the value of the dollar?  All the people that will honor it.   In the current economic situation in the United States, there are 20 million un- and under- employed workers willing to honor the dollar.  China and Europe are keeping the value of their currencies low or stable relative to the dollar, so they are willing to honor it.

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Tea Party diversity and the centrist compromise

I will probably be viewed as a Tea Party heretic,  so I might as well embrace the identity.   The tea party movement is diverse, and perhaps more diverse than the typical conservative participant appreciates.   They know there are libertarians in the movement, but perhaps don’t know much about them.  For instance, most libertarians, probably two-thirds, are atheists or agnostics.   My anecdotal experience is that about 30% of tea party participants are libertarians; that would mean about 20% of the tea party is atheist or agnostic.  Even if I grant that that the libertarian tea party participants are drawn more from the Christian libertarian element, that would still leave a 10-15% figure that would probably come as a surprise to the tea party majority.

Why is the “majority” unaware of the atheists among them?  Attend a tea party event and you will see socially conservative signs taking pro-life, traditional marriage and religious positions and practically none taking socially liberal positions.   Libertarians, like the rest of the country, are split on abortion, those that view the fetus as a human with rights,  see a role for even much a more limited government in protecting those rights.  Most libertarian atheists are small “a” atheists, their atheism isn’t their identity.  They don’t evangelize it like the capital “A”, atheists of the progressive secular  humanist ilk.  While the libertarians might have no objection to homosexual, polygamous or polyandry marriage, they also don’t see a role for government licensing of marriage.   Given these characteristics, the more socially liberal libertarian activists stick to the central tea party compromise on the financial and constitutionally limited government issues that constitute most of the tea party rhetoric and signs.

While liberals have tried to paint the tea party movement as racist, (undoubtedly in a movement of its size there may be some racists), the explicit compromise has nothing to do with racism, and the libertarian component of the movement effectively inoculates the movement against a generalization of the tea party members as racists.  There is no less racist group than the libertarians, and there is no group that even if they were racist, would be less likely to support racist policies.    Given the constitutional orientation of the conservative participants, even they would be philosophically constrained from implementing any race based policies.

With a president that attended a black liberation theology church for more  than a decade and identifies blacks, latinos and women as constituencies, and with progressives that embrace divisive critical theory race and ethnic identity politics,  the liberals can only play the race card as a first strike diversionary tactic.  It is the tea party movement that transcends race and is more diverse than even most of its participants realize.