Fiat currency is the later, not the former.

Here's a good paper on the subject.

That assumes that the central bankers don't all get together and change the valuation of gold or that the U.S. central bank doesn't try to game the system by printing more dollars than the reserves call for. In the end you are still trusting policy makers to act in the best interests of the people. It's an uncomfortable place to be but the gold standard is not a magic bullet.

Theoretically, in our system of government, the people own the currency, and the government only has that which it takes from the via taxation.

With fiat currency, the government is in complete control of the money via the Fed's ability to print money at will.

Of the two, I'll take "Ron Paul's School of Economics" every day.

The treasury could not, on its own, change the worth of an ounce of gold as it related to their currency...the gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold.

The only thing that on its own could impact the gold standard, was an increase in a country's gold supply...not a bad thing at its face.

That actually happened to the US with the discovery of gold in California.

The gold standard takes away a government's ability to do what our government is doing right now, which is extracting an undefined tax from us.

Yes it's a hidden tax but I don't buy into the Ron Paul school of economics when it comes to the fiat money system. Governments have always had ways to inflate currency. If you look at U.S. currency before we abandoned the gold standard you'll see that it says that can be redeemed for "one dollar in gold" or "one dollar in silver". Now I don't know of any measure of weight that's called a "dollar". Notice it doesn't say, "one ounce of gold" or "one gram of gold." So the treasury could inflate the amount of dollars in circulation by simply changing the amount of gold that one dollar equaled. Perhaps our leaders showed more restraint back then.

The Ron Paul people tend to point to the thousands of currencies that have become worthless over the course of time as evidence that proves their theory. The problem is that a lot of those currencies were anchored to some commodity. The pressure on government to inflate the money supply has always existed and the systems set up to prevent it are always flawed.

So yes, inflation is coming and no I don't think we'd be in a different place if we had silver certificates in our wallets. If you really want to hedge against inflation then you need to buy gold and silver not put the dollar back on a gold standard.

As the Fed prints money, that money enters the system at the full value of the dollar at the time of its introduction, giving the Fed the benefit of that value. The newly-printed money then immediately devalues the currency in circulation...the government secretly taxed your money!

Eventually, the government will need to remove the excess money from the system in order to stabilize the economy...enter foreign aid!

Great book to read on the subject..."The Creature from Jekyll Island. A Second Look at the Federal Reserve"

Here is a link to a lecture by the author that covers the topic of fiat currency.

Long read, but well worth it.