Ron Paul Gives New Life To Gold Issue

AUSTIN (AP) – Facing double-digit inflation in 1981, Congress created a commission to consider a role for gold in U.S. monetary policy. The 17-member panel rejected the idea of returning America to the gold standard — except for two dissenting members.

One was a little-known congressman from Texas named Ron Paul.

Today, Paul’s surprisingly strong race for the Republican presidential nomination is drawing new attention to a notion that long has been a cherished cause for a small group of conservatives but is considered a relic of history by mainstream economists and politicians.

Paul and his supporters would like to set a firm value for the U.S. dollar, much like when it was pegged to a specific amount of gold. They say prices would be stable and inflation controlled because the government couldn’t print more money than it had gold to back it up. This approach, Paul maintains, would address many of the economy’s problems.

Other Republican candidates haven’t joined him, though, and most experts dismiss the scheme as completely unfeasible in the modern global economy. For one thing, it would require most other countries to change their monetary systems. It would also preclude the ways that nations now manage the ups and downs of their economic cycles.

“Is it feasible to go back to something called `the gold standard’? The answer is no,” said Edwin Truman, senior fellow at the Peterson Institute for International Economics, who has written about gold and monetary policy. “The United States does not have the capacity to run such a system in the world today.”

Still, talk about a gold standard, which the United States used in its early years but largely abandoned in 1933, shows how economic anxiety has fed a growing appeal for unusual remedies.

“People sense that there’s something deeply wrong with the economy, so I think economic radicalism is much more popular than it has been in the past,” said Jeffrey Bell, a GOP political consultant who helped Ronald Reagan record a campaign ad endorsing the gold standard in 1980. It never aired.

The Federal Reserve, America’s central bank, sets interest rates to keep the economy, inflation and employment on a healthy track. Truman said the Fed has been reformed frequently and a key way to overhaul it today would be to restrict the assets it buys and sells.

“The Federal Reserve is not any different in its fundamental operations than any other central bank in the world,” he said. “And, at the core, you’d still want what the Fed has, which is humans, policymakers, deciding how to set interest rates.” An inability to loosen credit has been blamed by some economists for prolonging the Great Depression in the 1930s.

Paul calls for auditing — and then ending — the Federal Reserve. He argues that with gold backing the value of the dollar, the Fed would be obsolete and thus unable to play a role in creating credit bubbles that cause misery when they burst. He says the Fed made money too easily available in recent years.

“The gold coin standard, although imperfectly adhered to, permitted startling economic growth combined with falling prices in the 19th century,” Paul wrote in his 1981 book “Gold, Peace and Prosperity: The Birth of a New Currency.” “In the 67 years since the abolition of the gold standard, the Consumer Price Index has gone up 625 percent. In the previous 67 years, under an imperfect gold coin standard, the CPI increased 10 percent.”

The United States still allowed foreign nations to convert dollars into gold at a fixed rate of $35 an ounce through August 1971, when Richard Nixon closed the Treasury’s “gold window.” Paul says that’s what inspired him to run for Congress.

Truman said going back is impossible: “It would drain all of our gold and we would go into huge deflation.”

Mark Thoma, an economics professor at the University of Oregon who also has written on the gold standard, said there’s not enough gold in the world to cover the value of global transactions and thus alleviate the need for paper money — meaning governments would still want to float their currencies’ value against gold.

David Schraeder, spokesman for the World Gold Council, an industry group that tracks gold bullion holdings, said the idea of setting a market value for gold can’t be done unilaterally by the United States.

“You cannot have a gold standard with only one country participating,” he said.

GOP candidates Newt Gingrich and Rick Perry both have called for firing Fed Chairman Ben Bernanke and reining in monetary policy, but neither has endorsed a new gold standard. They and other Republicans have avoided ridiculing the idea, however, and alienating its ardent believers.

“It’s like poking a stick at a beehive,” said Jonah Goldberg of the conservative American Enterprise Institute. “You’re not going to get rid of them. You’re just going to get them angry at you.”

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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One Comment

  1. Colt 45 says:

    Even if we took our entire GNP and paid it toward our nation debt of fifteen plus trillion dollars it would be impossible to pay of due to interest. Everyone knows inflation is real and exceeds the levels being published by the feds. I predict with the US printing money almost 24 a day inflation will inevitably rise into the double digits within the year. First the dotcom bubble, then the housing bubble, and now the dollar bubble is about to burst. Unfortunately it’s a Global economy, Europe is financially collapsing and the domino theory is real. First Europe and then the American and Asian economies will experience inflation that will make the Great depression look like the good ole days if based on the dollar. WE will survive but there will be inflation as never seen in this country and a Global economic EVOLUTION with the dollar a thing of the past. Just saying…..

    1. DDR says:

      We won’t survive Nobody will.

    2. Will says:

      It is very difficult for inflation to go up with unemployment, world wide, this high. As long as global deleveraging is going on, we are probably OK on the inflation front, After that we are in huge trouble.

      1. Ron Cox says:

        Just watching the price of bread , meat, and other staples the past 6 months alone I ve seen inflation in progress and believe it will only accelerate 🙂
        Thanks for the input! Gives me something to chew on!

  2. Kay Lacy says:

    YOU do know Ron Paul owns allot of gold stocks and mines correct? -_-

    1. Ron Cox says:

      I was referring to Ross Perot not Ron Paul. The economic evolution is coming regardless, even if Ron Paul didn’t exist. Ron Paul is just better prepared.

    2. DDR says:

      Gold has historically gone up in times of recession and depression, genius. Whether he owns mines or not is moot. The price will skyrocket with or without his opinion, and whether or not we ever return to the gold standard.

  3. LibertyGuy says:

    The United States still allowed foreign nations to convert dollars into gold at a fixed rate of $35 an ounce through August 1971, when Richard Nixon closed the Treasury’s “gold window.” Paul says that’s what inspired him to run for Congress.

    Dr. Paul saw the writing on the wall. He knew those who didn’t have gold would suffer the consequences of not reading and understanding history.

    1. Ron Cox says:

      Well put!!

  4. roman says:

    @colt45 .how many suicides per thousand would you estimate before economic stabilization in the u.s. .in europe and central and south america? i venture to estimate 1/50 families will experiment suicide .how many victims of violent crimes .some will survive .many will loose their minds and become schizophrenic.

    1. Ron Cox says:

      Roman God only knows the answer to your questions. During the Great Depression there were thousands of suicides. There will be riots. People will kill to take from others who may have food fuel or other life necessities. We need to pray for our children and future, I’ve been watching the news and Europe continues be downgraded financially.

      1. DDR says:

        Glad I’ve got that belt-fed M60 (among others).

  5. DDR says:

    The only metal I thought Ron Paul would take interest in would be tin and aluminum, to make all those foil hats to keep us safe from the alien and government mind control beams.

    1. xxixipines says:

      This is the mantra of the uninformed

      1. Ron Cox says:

        I feel very well informed, not by reading any one article or book but by watching the daily headlines, markets, national debt and reviewing history. I’ am not an economist but do feel my “mantra” is a strong possibility. I pray I am wrong though!

  6. Justin says:

    Living within your means is “economic radicalism”? Considering this is coming from an “expert” we are in trouble.

  7. dstroma says:

    The article is extremely one sided. It presumes that central banking is good, that fiat money is good, that we would be lost without the Federal Reserve managing the economy, and that all alternatives are possible.

    The United States Constitution states that only gold and silver shall be legal tender. The fact is that our current monetary system is illegal. Point that out and you get called a radical.

    It’s actually not that hard to get rid of the Federal Reserve System. All we have to do is legalize alternative forms of money and let the free market work. It will choose the best one.

  8. Louis Nardozi says:

    Just when I think I’ve heard EVERY stupid explanation of why the gold standard won’t work – “there’s not enough gold for the money we have.” Author, in case you haven’t noticed, in a gold standard DOLLARS are valued in GOLD. More dollars just mean more dollars per ounce. The thought of there somehow ‘not being enough’ gold for any given amount of dollars is worse than ludicrous – it smacks of stupidity. Go to sleep, maybe when you wake up you’ll think better.

  9. John Williams says:

    Ron Paul talks about the Gold standard all the time, I have no idea why. What he has proposed is competitive currencies. Look up H.R. 1098: Free Competition in Currency Act of 2011. What it proposes is a repeal of currency laws that give the Federal Reserve, a quasi governmental agency in no mans land, a monopoly. If that were to occur then people could legally choose to use gold, silver, any precious metal, tokens, asset backed securities as money. No one would be forced to use and hold federal reserve notes and could use any currency they wanted. 100 years ago that would have been extremely hard to do due to how hard it would have been to exchange between competing currencies but with the telecommunication breakthroughs of the last 2 decades it is entirely possible today. Ron Paul is right it is time to introduce competition and innovation to the backbone of the economy, half of every single transaction, the monetary system and get rid of the inefficient Federal Reserve monopoly which is propped up through coercion. This article, along with the majority of the MSM, completely misses the point and misunderstands what Ron Paul proposes.

    1. Ron Cox says:

      Excellent reply! Well put!

  10. xxixpines says:

    Ron Paul gives Life to changing the status quo.

    Change the status quo Vote for Ron Paul and make him President.

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