But we’re in agreement. A gold standard is quite preferable to what we have now. And free-market created money, in my opinion, is preferable even to a gold standard.

I have a few points I’d like to contribute to the discussion.

One advantage of hard money is that the commodity underlying it has value as a consumption good. This acts as a buffer. When thee is a lot of demand for gold, gold consumption is reduced, and “consumed” gold gets converted to a form used for money (people selling old jewelry to be melted down into bullion). Conversely, if some guy finds a gold mountain, and the price of gold in terms of other goods falls, consumption will naturally rise, again mitigating the price fall.

My next point is about fiat currencies. I disagree with Ron Paul that should the Federal Govt establish a gold standard again, that we would have moved away from a fiat money; a fiat money is one that is imposed, and whether or not we are on a gold or a paper standard is irrelevant, some one, somewhere is commanding that people use the standard, and backing it by some degree of force.

The problem I have with fiat currencies are that they are not being established on a free market. A free market money is one that is selected, over time, by market participants as the primary medium of indirect exchange. Because the process is voluntary, and arises out of the decisions of numerous actors, it results in a money that is widely popular and thus more likely to be in demand in the future.

If I were named supreme dictator for life of the Earth, and decreed that we would hence-forth be on a moon-rock standard, odds are that if I should die, or be deposed, or just change my mind, people’s reserves of moon rocks could suddenly become worthless. This is far less likely with a free-market money. So to me, the U.S> returning to the gold standard, while a step in the right direction is not sufficient. We must end this notion of governments dictating what is money and what isn’t.

OK with that out of the way, I have a devil’s advocate type contrarian postulate (meaning I don’t agree with this, but am throwing it out there for people to jaw over).

There is one advantage to financing a government through inflation rather than taxation; rather than having an expensive and intrusive enforcement apparatus to collect the taxes, you have a relatively inexpensive printing press. If the government can resist the temptation to try to fight inflation with price controls and the like (Ha! Ha!), then people will be allowed to structure their affairs however they want. Of course, this is more or less what happened to the Continental and it got us the U.S. Constitution, which I believe was the first step in a long road headed in the wrong direction. :)

All this is what makes inflation the worst form of legal plunder by government. Taxation, at least, is abrupt and it’s generally noticable when they take money from you.

Inflation, on the other hand, is slow and insidious as the government knowingly and willfully decreases the value of what you’ve earned.