Inflation and the Federal Reserve
In the words of the New York Times, Paul is "not a fan" of the Federal Reserve. In his own words, Ron Paul advocates that we should "End the Fed". Paul's opposition to the Fed is supported by the Austrian Business Cycle Theory, which holds that instead of containing inflation, the Federal Reserve, in theory and in practice, is responsible for causing inflation.
 In addition to eroding the value of individual savings, this creation of inflation leads to booms and busts in the economy. Thus Paul argues that government, via a central bank (the Federal Reserve), is the primary cause of economic recessions and depressions. He believes that economic volatility is decreased when the free market determines interest rates and money supply. He has stated in numerous speeches that most of his colleagues in Congress are unwilling to abolish the central bank because it funds many government activities. He says that to compensate for eliminating the "hidden tax" of monetary inflation, Congress and the president would instead have to raise taxes or cut government services, either of which could be politically damaging to their reputations. He states that the "inflation tax" is a tax on the poor, because the Federal Reserve prints more money which subsidizes select industries, while poor people pay higher prices for goods as more money is placed in circulation.
Paul adheres to Austrian School economics and libertarian criticism of fractional-reserve banking, opposing fiat currency and the monetary inflation. He views monetary inflation as an underhanded form of taxation, because it takes value away from the money that individuals hold without having to directly tax them. He sees the creation of the Federal Reserve, and its ability to "print money out of thin air" without commodity backing, as responsible for eroding the value of money, observing that "a dollar today is worth 4 cents compared to a dollar in 1913 when the Federal Reserve got in." In 1982, Paul was the prime mover in the creation of the U.S. Gold Commission, and in many public speeches Paul has voiced concern over the dominance of the current banking system and called for the return to a commodity-backed currency through a gradual reintroduction of hard currency, including both gold and silver. A commodity standard binds currency issue to the value of that commodity rather than fiat, making the value of the currency as stable as the commodity.
He condemns the role of the Federal Reserve and the national debt in creating monetary inflation. The minority report of the U.S. Gold Commission states that the federal and state governments are strictly limited in their monetary role by Article One, Section Eight, Clauses 2, 5, and 6, and Section Ten, Clause 1, "The Constitution forbids the states to make anything but gold and silver coin a tender in payment of debt, nor does it permit the federal government to make anything a legal tender." The Commission also recommended that the federal government "restore a definition for the term 'dollar'. We suggest defining a 'dollar' as a weight of gold of a certain fineness, .999 fine." On multiple occasions in congressional hearings he has sharply challenged two different chairmen of the Federal Reserve, Alan Greenspan and Ben Bernanke.
He has also called for the removal of all taxes on gold transactions. He has repeatedly introduced the Federal Reserve Board Abolition Act since 1999, to enable "America to return to the type of monetary system envisioned by our Nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold". He opposes dependency on paper fiat money, but also says that there "were some shortcomings of the gold standard of the 19th century ... because it was a fixed price and caused confusion." He argues that hard money, such as backed by gold or silver, would prevent monetary inflation (and, thus, would inhibit price inflation), but adds, "I wouldn't exactly go back on the gold standard but I would legalize the constitution where gold and silver should and could be legal tender, which would restrain the Federal Government from spending and then turning that over to the Federal Reserve and letting the Federal Reserve print the money."
Paul supports legalization of parallel currencies, such as gold-backed notes issued from private markets and digital gold currencies. He would like gold-backed notes (or other types of hard money) and digital gold currencies to compete on a level playing field with Federal Reserve Notes, allowing individuals a choice whether to use sound money or to continue using fiat money. Paul believes this would restrain monetary and price inflation, limit government spending, and eventually eliminate the ability of the Federal Reserve to "tax" Americans through monetary inflation (i.e., by reducing the purchasing power of the currency they are holding), which he sees as "the most insidious of all taxes".
He suggests that current efforts to sustain dollar hegemony, especially since the collapse of the Bretton Woods system following the United States' suspension of the dollar's conversion to gold in 1971, exacerbate a rationale for war. Consequently, when petroleum producing nations like Iraq, Iran, or Venezuela elect to trade in Petroeuro instead of Petrodollar, it devalues an already overly inflated dollar, further eroding its supremacy as a global currency. According to Paul, along with vested American interests in oil and plans to "remake the Middle East", this scenario has proven a contributing factor for the war in Iraq and diplomatic tensions with Iran.