Ron Paul just gave an address today at Johns Hopkins School of International Studies. Here's a report from a member of the audience:
"I just got back from the event myself and it was pretty incredible. Room was near capacity with a lot of very smart people that understood his positions and asked tough questions. He answered all of them excellently. His best answer was in response to a young man saying how changing over to a gold standard would cause havoc. Dr. Paul simply stated that he wished to follow the Constitution which only allows gold and silver as legal tender; however he understands switching from Federal Reserve notes to gold would be chaos so he would just legalize gold to be used as currency by anybody who wanted to use it...and let competition do the rest. He even pointed at the guy and said if you want a currency that inflates 2-3% a year, you can have it. The guy was a little blown aback."
If competition among currencies were allowed, and various institutions started accepting and dispensing other currencies besides the dollar, or valuing payment in an alternate currency more highly, I think government agencies would pretty soon begin to follow suit. They too might prefer to have hard currency in their coffers than something that was going to lose value because of inflation! But even if government entities insisted on being paid exclusively in dollars, it seems likely to me that other currencies would still take off. After all, there are lots of uses for money besides giving it to government!
Commerce always will be pursued in the weakest curreency unless the parties agree otherwise. The big problem with gold in commerce is the tax and accounting laws.Restoring constitutional money that was defined by the weight of gold or silver would solve this problem. Another problem is that commercial banking is conducted in fiat. Another problem is that appreciation of gold vs fiat is viewed as a taxable gain on a luxury item and thus taxed in the highest bracket.Despite all of these problems, as inflation roars upward, holding of gold for storage of value will increase as will some use in contract.