Ron Paul's efforts to restore a sound currency in the United States continued this week as hearings were held on his proposed legislation that would allow American citizens to chose from among competing currencies. Ironically, the one man whose proposals could ultimately save the U.S. financial system from collapse, was completely ignored by the mainstream press who provided zero coverage of H.R. 1098.

H.R. 1098, introduced by Ron Paul in March is known as the Free Competition in Currency Act of 2011. According to Ron Paul, This bill eliminates three of the major obstacles to the circulation of sound money: federal legal tender laws that force acceptance of Federal Reserve Notes; counterfeiting laws that serve no purpose other than to ban the creation of private commodity currencies; and tax laws that penalize the use of gold and silver coins as money.

Ron Paul noted that gold and silver have constituted sound money throughout history. Loss of confidence in the dollar and profligate deficit spending by the government have caused people to flee to gold and silver as a store of value. Paul noted that Even central banks have come to their senses and have begun to stock up on gold once again.

Presently, the use of gold and silver by citizens is being severely punished by the government. Ron Paul cited the case of Bernard von NotHaus, creator of the Liberty Dollar, who was convicted of counterfeiting for creating his own gold and silver currency and another individual who was convicted of tax evasion for paying his employees with silver and gold coins instead of fiat dollars.

H.R. 1098, according to Ron Paul, would allow citizens to maintain the purchasing value of their money and prevent the government from conducting excessive borrowing which will enslave future generations with debt.

Testimony at the hearing for H.R. 1098 was given by Dr. Lawrence Parks, Foundation for the Advancement of Monetary Education, and Dr. Lawrence White, Professor of Economics, George Mason University.

Dr. Parks, who presented 63 pages of prepared remarks, opened by stating that the current monetary system is not in conformity with the Constitution, is dishonest and unstable and in the process of blowing up.

Selected excerpts from Dr. Parks testimony:

With no exceptions, the history of legal tender irredeemable paper-ticket-electronic money is that its purchasing power always approaches its cost of production: ZERO!

With gold-as-money, and without the banking system creating money out of nothing, the amount of financial leverage would be de minimis with no possibility of collapse. Because legal tender irredeemable paper-ticketelectronic money can be created without limit, there is no market based self-correcting mechanism to limit financial leverage. Especially at a time when those who engage in leverage do not bear the full risk of loss, but are able pass the risk on to the public through the banking system, whose balance sheet and liabilities are de facto guaranteed by the public, financial collapse is a certainty.

Many think that the Great Depression was a “market failure.” Mr. Greenspan has written extremely eloquently that the Great Depression was in fact caused by the Federal Reserve feeding too much credit into the banking system, i.e., enabling the banking system to increase leverage too much.

Dr. Parks notes that the price level of the U.S. was stable until President Nixon defaulted on the U.S. promise to redeem dollars for gold.

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Dr. Parks says that because the U.S. dollar is the reserve currency of the world, when the dollar collapses, the global financial system will also collapse, plunging most of the world into poverty and war.

Dr. Parks admits that as a practical matter, absent the debacle of a complete collapse, there can be no abrupt changes to our monetary system.

The continual appreciation of gold against paper money suggests that the monetary system will not be reformed in time to prevent a financial disaster. The ongoing debt crises in Europe and the U.S. also provide little hope that governments will diverge from their path of monetary disaster as they seek to cure too much debt with more debt. The only survivors at the end of this mad experiment with fiat money will be those holding the eternal sound currency of gold and silver.