Gold vs. A Sultan

Ron Paul takes on fiat money and Keynesian Yale professor Stephen Roach in the video below. My focus is on what Roach says at around 4:00 in defense of central banking:

According to Roach, Dr. Paul is "overstating" the superiority of hard money over fiat money. His proof: the responsible regime of Paul Volker, Federal Reserve Chairman in the late 1970s and early 1980s. However, this is precisely what is wrong with a fiat monetary system compared to a commodity based currency such as a pure gold standard, as the fiat currency depends on the whims of one person--a Sultan, or a handful of people at the most; whereas a commodity based currency depends on the entire market.

If we have to wait around for 30 or 40 years for a fiscally responsible Fed Chairman to come along, those odds are not very good for us, folks. I'd much rather take my chances with an inanimate object, like a piece of metal.

This means--contrary to what popular opinion says--that a commodity based currency is inherently more immune to manipulation, since it would be necessary to involve great numbers of people to do so.

By the way, in support of Dr. Paul's argument about the inherent weakness of paper money--it ought to be noted that every fiat currency ever issued in the history of mankind has ended up being destroyed, whereas an ounce of gold from Roman times, is still an ounce of gold, and in fact has many times the purchasing power today relative to its purchasing power 2,000 years ago.

Finally, if the ideology that Roach is propagating is correct--that gold is in no way a better and sounder currency than paper--why is it then that governments outlaw competing and private currencies?