Among gold and silver investors there is a common cry to get rid of the Fed and return to the gold standard. However, with the Establishment having controlled our schools and universities for decades, the masses are duped into believing that the money and banking are much too complicated to be understood by anyone but those educated at our “more esteemed” universities.

Without a doubt, the masses believe that the arcane workings of the Fed and our monetary system are to be left to “the better educated,” to those who have “made a life of studying economics” and even have doctorates from Yale or Harvard. If you doubt this, try criticizing the concept of central banking (The Fed is our central bank.) in front of anyone with a college degree.

You may run across someone who is quick to criticize the Fed’s actions. “The Fed should lower (or raise) the discount rate,” is a likely comment. Those who really want to show their knowledge of our banking system may lay something like this on you: “The Fed should cut the minimum reserve requirements on CDs.” Better yet, you may get, “The Fed needs to raise the margin requirements on stock loans to cool stock market speculation.” Now you know you have a college graduate who sat through a couple of finance classes. This person has been completely indoctrinated into the world of central banking and government control of money. He (or she) is your average college graduate, and that is how the fraud of the Federal Reserve System is perpetuated. But, don’t even begin to try to get the average college graduate to discuss dumping the Fed and going back to the gold standard.

Fortunately, calls for dumping the Fed and returning to the gold standard come not just from “gold bugs” but also from economists who truly have made the study of economics lifetime endeavors. One such economist was the late, great Murray N. Rothbard.

Murray N. Rothbard was a scholar extraordinaire who made major contributions to economics, history, political philosophy, and legal theory. He developed and extended the Austrian economics of the legendary Ludwig von Mises and established himself as the principal Austrian theorist in the latter half of the twentieth century. Rothbard applied Austrian analysis to historical topics such as the Great Depression of 1929 and the history of American banking. Oh, yes, Rothbard received a PhD from Columbia University in 1956.

In 1995, Rothbard wrote a piece titled Taking Money Back, which was printed in the September and October issues of The Freeman. Taking Money Back outlined Rothbard’s reasoning and steps for dismantling the Fed and returning to the gold standard.

Lew Rockwell recently chose Taking Money Back as the lead article for his website, which has become one of – if not the most – popular free market, Libertarian websites on the Internet. Read Taking Money Back and learn that a truly learned man has called from dismantling the Fed and returning to the gold standard.

If you are interested in furthering your knowledge and understanding of money (and the flaws of our monetary system), start with a couple of Rothbard’s books. Excellent choices would be What Has Government Done to our Money?, The Case for the 100% Gold Dollar and The Case Against the Fed. All can be ordered from mises.org. If you want to learn the real cause of the Great Depression, order a copy of Rothbard’s America’s Great Depression.

These books will make you uneasy about the current financial state of affairs, but they will make you much more comfortable about investing in silver and gold.

Perhaps the fundamental fear behind every gold investment is that the paper money being gotten rid of could become worthless. In theory (probably in actuality), that fear rests with any currency not redeemable in gold or silver, which means all the world’s currencies. No world currency, not even the fabled Swiss franc can be redeemed for gold or silver at the Swiss National Bank, which is Switzerland’s central bank, the equivalent of the U.S. Federal Reserve Bank.

The destruction of paper money usually comes about after the abandonment of the gold standard and the institution of fiat money, which is money by governmental decree. The dollar is money by decree, “all debts, public and private.” However, in many cases, one fiat currency is introduced to replace another fiat currency. Brazil is famous for doing that.

Before moving on to the problems faced by the Zimbabwean gold miners, I should note that since the Bretton Woods Agreement of 1944, no country has been on the gold standard. The Bretton Woods Agreement established a gold exchange standard, under which the world’s currencies were redeemable in dollars, which were redeemable in gold. Although under the Agreement, currencies’ values were fixed relative to gold, central banks that were presented their nations’ currencies for redemption actually gave the redeemer dollars.

Zimbabwe is an economic cesspool, with government regulations of nearly every facet of economic activity. One control in Zimbabwe is that all mined gold is to be sold to the Zimbabwean central bank, the Reserve Bank of Zimbabwe (RBZ).

According to one source, gold miners are meant to be paid 35% of their production at the highly overvalued local currency and the remainder in US dollars. The RBZ pays partially in U.S. dollars because the gold mining companies need to buy equipment in foreign markets to keep operating. There is no market for Zimbabwean dollars outside Zimbabwe. Outside Zimbabwe, Zim dollars are paper.

While the official policy is for the RBZ to pay partially in U.S. dollars, the RBZ now has no U.S. dollars, or any other foreign currencies, and the gold mining companies are receiving only Zim dollars. Because Zim dollars cannot be spent outside Zimbabwe, the mining companies are unable to replace worn out equipment.

As a result, “Zimbabwe’s once proud and big gold sector could be set for a further decline,” says Tawanda Karombo, posting an article from Harare, the capital of Zimbabwe. Zimbabwe produced seven tons of gold last year compared to 11 tons in 2006, their lowest level in 90 years.

Although Zimbabwe’s gold production has never rivaled that of neighbor South Africa, for nearly a hundred years it has been a solid gold producer. Now, Zimbabwe’s gold production looks set to grind to a halt, which will be positive for gold investing.

I’ve written before that most CMIGS’ clients know more about the machinations at the Fed than the presidential candidates. That’s not exactly true, however. I would not say that most clients, nor I, know more about the workings of the Fed than GOP candidate Ron Paul.

Ron Paul has studied Austrian Economics, which is adamantly opposed to the concept of central banking, for more than thirty years. He has gone head to head with Fed chairmen during their mandatory appearances before joint congressional committees. When it comes to the Fed, Ron Paul knows of what he speaks.

Further, Ron Paul knows that gold is sound money and has called for a return to the gold standard. The other candidates, however, would prefer to ignore the issue. Actually, many so-called sophisticated columnists consider Ron Paul “a fruitcake” because of his stand on money.

Unfortunately for the other candidates, Ron Paul’s position on money is gaining a little traction, which means the other candidates may have to either join Ron Paul in calling for a return to the gold standard or start defending Keynesian economics, which has been the foundation for government intervention in the marketplace since the 1930s and are the reasons our federal government stands on the edge of bankruptcy.

Murray Sabrin has written an article for usatoday.com about Ron Paul’s position on sound money. Articles by Ron Paul can often be found at www.lewrockwell.com, a libertarian website. Here’s one I like, his Statement Before the Joint Economic Committee, November 8, 2007.

Liberty Watch has posted an excellent article about the rapidly growing in fame legal case in which a Las Vegas businessman was not found guilty for paying his employees with old US gold coins, which the businessman and his employees valued at face instead of their Federal Reserve note value.

One hundred sixty-one counts were lodged against numerous persons, but the jury delivered zero guilty verdicts. Three defendants were acquitted, but two other defendants were partly acquitted as the jury hung on one count each. The jury also hung on all counts faced by the businessman and two associates, resulting in mistrials. The government has not yet revealed whether it will re-file charges.

The results are especially fascinating because hard money advocates long have said that a $20 gold coin, regardless of when minted, has a monetary value under law of only twenty dollars. They aver that if an employee is paid a Double Eagle ($20 gold coin), he has an income of $20, not the number of Federal Reserve notes (FRNs) for which the coin could be converted, now at more than $800.

At the heart of the issue lies the fact that there is no law that differentiates among monies minted of different materials of varying intrinsic values. Before 1934, the Treasury turned out $20 gold coins and $20 gold certificates, which circulated as money because they could be converted at any bank into $20 gold coins. Over the years, through machinations only possible because of the force of government, gold certificates were replaced by FRNs. Still, Congress has made no distinction among old gold coins, base metal coins, and paper money.

Consider this: two copper-nickel fifty-cent pieces have much greater intrinsic value than one paper dollar. Still, they command the same value as money. So, why does a government-issued $20 Double Eagle have to be valued differently, for income tax purposes, while there is no difference between two half-dollars and a paper dollar?

The IRS was supposed to notify the judge in late October if the agency intended to retry the defendants whose cases were hung. The government waffled, indicating they would pursue another grand jury and issue superseding indictments.

It is my guess that the IRS will pursue the issue. The last thing the IRS wants is workers being paid in pre-1965 US 90% silver coins and those workers filing tax returns at 10% of what they would have filed if paid in FRNs. Still, it would not be a major financial problem for the government because there are not enough pre-1965 US 90% silver coins and old US coins to make a dent in the government’s income tax revenue. For the IRS, though, I’m sure it’s a “matter of principle.”

Most investors buy gold because of what the Federal Reserve System, the Fed in today’s lingo, does, which is inflate the money supply with paper money. Sadly, the history of paper money, when not linked to gold or silver, is printed until it is worthless. Yet the average college graduate, and even the nongraduate who regularly reads Establishment publications such as The Wall Street Journal, readily accepts any and all Fed actions. To them, increases and decreases in the money supply, or raising and lowering interest rates, are part and parcel to the Fed.

After all, we’re told, it’s the Fed’s mandate to “manage the monetary system,” making sure that there is “adequate liquidity,” that interest rates are “right” to keep the economy growing. The Fed is so ingrained in the public psyche that most Americans think that world commerce would not exist if the Fed and the world’s other central banks did not exist.

The only Establishment knocks you will hear against the Fed are whether the Fed is “moving in the right direction” or “moving fast enough.” No Establishment figures question the Fed itself, just as nowhere in Establishment publications will you read about the dangers of central banking. To learn about the how the Fed truly works and the dangers inherent in central banking, you have to go to such organizations as www.mises.org, the world’s premier proponent of Austrian Economic Theory.

At mises.org you can find publications and articles that explain the most esoteric aspects of Austrian Economy Theory. Some of the writings are for economists, but some are for laymen. For starters, I recommend a few short books, such as The Case Against the Fed, The Case for a 100% Gold Dollar, and What Has Government Done to Our Money?, all of which were written by the late Murray Rothbard. Rothbard’s seminal work is America’s Great Depression, which is an excellent expose of the Fed’s culpability in causing the Great Depression. Hans Sennholz’ Age of Inflation is also an excellent primer on inflation.

Of course, there are numerous websites that relentlessly attack the Fed, but for investors seeking to be educated about money and central banking www.mises.org is the site. Another site is www.lewrockwell.com, appropriately named after Lew Rockwell, who also heads mises.org. The difference between the sites is that mises.org sticks with Austrian Economic Theory and criticisms of other economic theories while lewrockwell.com gets political with some articles. Lewrockwell.com also links to interesting articles completely unrelated to either economics or politics, which makes the site interesting.

A frequent contributor to lewrockwell.com is Gary North, who is a huge critic of central banking. In my August 24th post, I linked to a North article about the Fed’s culpability in the subprime mess. Since then, lewrockwell.com has posted two additional Gary North pieces on the Fed, The Moral Hazard of Central Banking and The Ultimate “Success through Failure Manual.” Despite North’s wanderings, both are educational. (When North wanders, skip to the next section.)