US Constitution, Article 1, Section 8: The Congress shall have Power .... To coin Money, regulate the Value thereof, .... To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
US Constitution, Article 1, Section 10: "No State shall .... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts."
While I am no fan of the Federal Reserve or Fractional Reserve Banking, some people are are passionate about returning to a purely gold and silver-backed currency. Ron Paul calls this "sound money". But the Constitution doesn't just say US Coinage should be gold-backed, it could be interpreted that only gold and silver be issued as money. While I have no absolute aversions to gold and silver, there still are many issues that make dealing with them difficult.
1. If we return to gold, do we only use 99.9999% pure gold and silver as coinage and money?
2. If we let there be impurities, how debased can we allow the currency to be? 99% pure? 50% pure?
3. Maybe the US could just use a cheeper metal like copper and add a microscopic amount of gold and silver to the coin to make up its value?
4. Do we mine enough silver and gold to meet the money supply demands of our nation?
5. What do banks do with the need to store all these coins?
6. All banks have operated on fractional reserves. This means the bank lends out 10x the money it has in the vault. This evil practice needs to stop as well. Fractional reserve money is virtual money creation which is the job of Congress and not the banks? Virtual money isn't gold.
7. For all large purchases, banks would have to arrange large shipments of bullion for every transaction. Can you imagine the drag on the economy (velocity) if physical coins had to be stored and shipped constantly?
8. The Point of the Safety Society System is that other things like land, real estate, and durable commodities have real value just like silver and gold. Therefore, while the Federal Government coins a certain amount of silver and gold coinage for circulation needs, I think the federal government could create digital money for local loans which is backed by the land, realestate, durable commodity that the money is being created to purchase.
9. So, in this case, in addition to circulating coinage, there would be digital money that is backed by land, realestate, certain durable commodities. If there were a default, the bank would repossess a real asset and not fail.
10. Also, if banks used only gold and silver 100%. No fractional reserve anything, then how could they make a loan? How is it just that a bank take your deposited gold and risk it by lending it to someone else? If there is a default, then the bank just lost your gold.
11. However, with SSS, the bank keeps all your money/gold in your account 100%. All loans are digital money that is backed by the land, realestate, durable commodity being purchased.
12. This SSS digital money system would perfectly provide the credit, velocity, and money supply needs of an advanced economy. SSS would operate along with circulated gold and silver coins.
13. Lastly, If only gold and silver can be used as money, how can the federal government pay to purchase gold? How do you buy gold with gold?