The King Gold Bug Speaks

Jim Grant, who Newt Gingrich and Ron Paul always bring up, on returning to the gold standard (via Ritholtz):

Grant calls the gold standard “the least imperfect monetary system.” He notes that our present regime of purely paper currency is new: It only dates back to Richard Nixon.
I asked him, whimsically, what he’d do if he actually were to be named chairman of the Fed. He said he’d begin by communicating to the public why the present system was so wrong, and needed to be changed. He’d make the case for the gold standard.
“I would then lay out a timeline for the conversion to a constitutional dollar, a dollar as envisaged by the Founding Fathers. “ A dollar, he says, is supposed to be a fixed measure, “like a foot, or a pound,” not something that can be redefined every few weeks by the Fed.
In his ideal world, says Grant, he would lay out a three-year program to convert back to the gold standard, probably at around $2,500 per ounce of gold. He adds that he would take great care to avoid the notorious blunder made by Winston Churchill and the British back in 1925, when they went back on the gold standard at too high a price, and imposed brutal deflation on the economy. Alas, he admits, this would need an act of Congress.
He added that he would also wind down the Fed’s bloated balance sheet, selling assets for gold, and he would shut down the Fed’s open market activities completely, relying instead on the discount window alone. The Fed, he said, shouldn’t be going out into the market to provide liquidity. It should simply be there to provide temporary liquidity to solvent banks when they ask, and on the basis of good collateral.
For good measure, he’d also push for a repeal of a 1935 New Deal law that protected bank investors from runs on their financial institutions. Before the law, he notes, if a bank got into trouble, the investors were on the hook to bail it out: After all, it was their bank. The same was true of the partners in a Wall Street brokerage. The system of taxpayer bailouts, like that of paper money, is a modern innovation.

Wow.  Talk about a disaster.  How does one get rid of all the excess paper money in the world with gold fixed around $2500 an ounce?  Wouldn't it be smart then to demand gold for all your dollars?  What a deflationary mess.  Oh well, this would be the plan of today's Republican party.