American gold investment

GOP go for gold bullion

Jan Skoyles assesses recent Republican deliberations on gold bullion and money, as Mitt Romney et al bring gold once more back into the mainstream. Is this a boon for investors who buy gold, or another failed attempt by politicians to grab the nettle and work with, rather than against, gold?

Mitt Romney’s announcement that the GOP draft platform will include a Gold Commission has taken some by surprise, with some major news publications claiming this was the first time gold has returned to the national debate for thirty years.

This isn’t quite true. The most oft cited, mainstream debate prompter came from Robert Zoellick back in 2010 when, in an op-ed piece for the FT, suggested that gold be considered for a role in the monetary system. Not only that, but the entire Republican nomination debacle has seen repeated mention of some sort of role for gold bullion within the monetary system.

Ron Paul on gold bullion

Dr Ron Paul is the most obvious promoter of the gold standard having been a part of the ‘original’ gold commission back in 1981. Gaining a huge amount of support for his Republican nomination, although sadly not enough, was his long standing push for a return to the gold standard.

Newt Gingrich was also quick to jump on Ron Paul’s bandwagon as the GOP candidate race hotted up earlier this year. In January, Bill McGurn, writing in the WSJ, called the gold commission one of the best ideas seen in the campaigns. He called on Newt Gingrich to steal Dr Paul’s idea, which he promptly did.

I could go on, but the gold standard debate has been hotting up for some time now, in fact since 1971. When the world’s most powerful nation, who issue the global reserve currency, sees the issue of sound money and central bank audits become a point for political debate then this is no longer something which can be dismissed as a reworked issue from the past.

Dr Ron Paul has acknowledged that Romney’s move may well be just to appease him. Whatever his motivations, he may well be a gold bug for all we know, the fact is the Republicans have realised that this is a debate about who can save the economy.

Invest in gold (voters)

In the history of recent elections this is unusual, in my lifetime elections have been fought on issues of foreign policy. Now economic anxieties have pushed this to one side.

The Republicans know that the ‘spend, spend, spend’ tactic will not be swallowed for much longer. The press believe this move has been done to secure the ‘gold bug vote’ for the November elections.

This is something which politicians are interested in not just because it is a good idea, but also because it is what the people are beginning to think about, if they haven’t been for a long time already.

Several states in the US, of which Utah is the most famous, are making moves to see gold and silver become legal tender. This would not be done unless there was a demand for a sound alternative to fiat money.

On Friday afternoon CNBC ran a poll asking voters if they would support a gold standard. Of 19,000 voters, 69% voted ‘yes’, 7% voted ‘unsure’ and 24% voted ‘no’.

Gold Standard of democracy

In terms of finding a democratic monetary system, you find a historically proven one which works as well as a precious metal standard. As Peter Schiff writes;

‘…if you believe in individual liberty and limited government, then the gold standard is your best ally. Many people…look badly on the gold standard because it prevents central banks from using monetary policy to manage the economy. This, of course, may be its greatest attribute. Under a gold standard, the free market determines money supply and interest rates. Under our current system of paper money a few politically connected bankers make those determinations. The results have been disastrous, with the recent housing bubble and financial crisis being just the latest iterations.’

Some, in fact many, have blamed this on a desire to hark back to simpler times. It seems that the voters have finally realised that the only ones who are benefiting from the current system is the central bank and government. The gold standard would certainly prevent governments from hiding behind promises with big budgets and spending programmes. But it would secure the money supply of those who fund and vote for government.

Winding up mainstream antagonism to gold

What has been most amusing about the (potential) resurrection of the Gold Commission is the numbers of irate mainstream journalists and economists it has stirred up.

As Paul Krugman wrote in the New York Times at the weekend, ‘say this for the GOP: by resurrecting the very bad, no good, truly awful idea of a gold standard, they’ve given us something to talk about.’

Journalists seem terrified that if the Republicans were to restore the gold-back dollar then ‘the greenback’s credibility [as a reserve currency] would vanish and global superpowers would risk a new trade war’.

As we pointed out in an earlier article, the economist Robert Mundell once argued no national currency should ever be used as a leading reserve currency. He argues precious metals were used as international money over the centuries ‘because they were more efficient than other instruments in fulfilling the required functions of money.’ Mundell goes onto argue that currencies which are controlled at the whim of a government tend to weaken over the long term as supply begins to outweigh demand.

For Mundell, currencies in which there are opportunities to exploit and overvalue due to the monopoly of government, is ‘bad’ money. This has been no more the case than with the United States and the dollar.  Not only are citizens choosing to opt out of using it but whole trading nations are as well.

The Libertarian Dr Tim Baker once said to me, he doesn’t know which currency is the right one but whatever currency is chosen by the people is the correct one. It might not be a majority yet, but there are plenty of US citizens who are looking for a new monetary system and they are looking to gold.

Perhaps those gold voters they are after are keen to uphold the US Constitution, which states ‘No State Shall make any Thing but Gold and Silver Coin a Tender in Payment of Debts’.

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About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles

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  • RUSS SMITH, CALIFORNIA

    Hi, Patrons Of Reseach & Analysis Et Al:
    Mention of Dr. Ron Paul as a long term Congressonal proponant of the gold standard plus outlining the Constitutional mandate that OUR States are to make nothing but gold & silver coins a tender in payment of debts brings into focus to review what the Constitution itself is recommending. Dr. Ron Paul is recommending a new paper money backed by a gold redeemability clause on the face of the note similar to the failed, flawed so called redeemable notes valued @ $35/troy oz. represented at Bretton Woods which was renigged upon by President Richard Millhouse Nixon on August 15, 1971. We do not need to reset this option to ever be repeated again in the future do we? OUR Founders knew this type of fallacy well enough to design their economic policy within OUR Constitution mandatig physical possession of the specie gold & silver coins as OUR money only but in physical possession of every citizen as a continuous day by day audit of OUR money in hand; not the confussing, perplexing, unfahonable unknowables that now exist with OUR Nation’s gold being held within guarded far off repositories. In order to honor not Dr. Ron Paul’s or any other demagogue, popular aristocratic beaurocratic figures whoever they are, the gold now being held within repositories such as Fort Knox, Kentucky etc, need to be delivered to OUR US Mint, in order to be melted down & minted into gold coins for FREE distribution amongst all US citizens as their daily bread money which would altogether put the Federal Reserve System that operates producng fiat money only entirely out of business without even a wisper of an audit per say. There would be grave economic dislocations yes for a season but at least the specie gold & silver coins in the possession of all US citizens could NEVER become totally wortless could they? If we continue on the road to continuing economic serfdom using the present unending, fiat debt money system now utilized, that is the economic road to ruin & economic suicide isn’t it & who wants to continue enduring that terrible road til death do we part?
    RUSS SMITH, CALIFORNIA (one Of The Broke States)

  • Rusty Brown in Canada

    Please enlighten me: doesn’t a “gold standard” mean that dollars can be redeemed for a given amount of gold from the “treasury”, and, if so, doesn’t that imply that entities such as China – and many others – that hold huge amounts of U.S. dollars will send them back to the U.S. and demand gold from Fort Knox in exchange (which is precisely what Charles DeGaulle did, prompting Nixon to arbitrarily declare an end to redemptions. The drain on U.S. gold holdings was such that he had no choice).

    You would end up with the U.S. holding all that printed paper as its value plummeted while China and the others would have the gold, whose value would be soaring.

    Is it possible to go back to some kind of “gold standard” without experiencing massive “redemptions” by outsiders from the U.S. gold hoard in the process?

    Your opinions and insights would be appreciated.

    R.B. in Canada

    • Bob Kudla

      True, and gold gets repriced through demand. So, what if that means China must pay $10,000 for that ounce of gold? Gold is going to float until there is a equilibrium, then it can be fixed along with the money supply. They are not going to be able to steal our gold unless we let the politicians print more dollars than are backed by gold.

      • silverbug

        Indeed!

  • Mutt Romney

    It’s a fake-out …. by talking up Gold, Mutt Romney can steer m,any Ron Paul supporters onto his team …. but when Mutt Romney gets into office – he’ll just print paper (it’s alot easier than actually mining).

  • silverbug

    This is the biggest banker scam brewing to date. You can not have a GOLD standard. There is not enough to go around unless you price it somewhere north of $10,000 oz.for starters.It’s all about the BONDHOLDERS. Anyone who get’s fooled by this is a bigger fool.Dr Ron Paul is an advocate of a competing currency not a GOLD STANDARD. MORE MSM MOPE.