From Bloomberg News to George Soros to the Houston Chronicle, suddenly gold and the gold standard is hot in the news. Have the elites finally begun to understand real money…or is something else at play?
Ron Paul: Hello everybody and thank you for tuning in to the Liberty Report. With me today is Daniel McAdams, the co-host and Daniel it’s good to see you.
Daniel McAdams: Thank you, good morning.
Ron Paul: I would like to talk this morning or today about a very important issue and that is money, but it’s about gold. I’ve been instructed while in office by the authorities that gold is not money. I’m still a little bit hesitant to accept that explanation, because I believe gold is the ultimate money. All of a sudden they are talking more about gold as money, which is very interesting. The last time we got interested in talking about gold as money, in a sort of way, at least to dispel some of the things that are going on and that was back in 1979. Interest rates were 21%, inflation rate by prices was 15%, there was chaos all through the 70s, it was stagflation going on and people were concerned. The setting was so good that they passed my amendment to have a gold commission to study the role of gold in international and national order.
We had the gold commission and not too much positive came of it, other than the fact that it was established. But, here it is today interest rates are negative and it doesn’t seem to be a tremendous price inflation, a lot more than they admit, but we certainly aren’t having the government CPI admitting a 15% increase in prices, but all of a sudden they are talking about a gold standard and the pros and cons, sometimes I think there is more cons than pros.
But, a major article appeared in Bloomberg that caught the attention of a lot of people, gold bugs or not, the people who hate gold, all of a sudden came out to blast this whole notion. But, the title of the article was sort of a takeoff on current politics. The title was Make America Gold Again and calls for a favorite controversial standard are back. So, what do you think about this, do you think anybody’s serious up there? We could speculate a little bit about the motivation, we are sort of the suspicious type that wonders about some of these things and what the real motivation is behind the scenes.
Daniel McAdams: I think if you are interested like we are in media and how media is a tool of propaganda, looking at this article and its contents and especially the headlines, it seems to me as if they are recognizing a very strong undercurrent in society and you have said this many, many times, the real malaise among Americans is they know there is something wrong, but they are not sure exactly what it is, I think that explains Donald Trump phenomenon and to some extent the Bernie Sanders phenomenon, which I think is the same phenomenon, different parties, but look at what they do.
They take an undercurrent that is running heavily in society and they pretend to cover it, while at the same time ridiculing it and making it look like it’s just this part of this whole Trump thing, all this cookie people following Trump they are interested in gold and then the people they quote in the article are the experts who actually hate gold, someone like George Selden From Kato, he says the gold standard is like humpty-dumpty, you can’t put it together, so all the experts who they quote are against it. It seems like a kind of a con job.
Ron Paul: Did they concede that I might have been on the right track or did they sort of ignore that point?
Daniel McAdams: You are mentioned as a footnote, you are the standard bearer of gold or you had been and you are sort of buried at the bottom of the article and said I don’t want to deal with the philosophical point that you make.
Ron Paul: And you don’t have to worry about that, that if gold is money and history is correct, it’s been around for 6,000 years, gold wins out. And they do make a lot of fun of this and one of the arguments is why have gold, it’s inert, it doesn’t earn money and stocks and bonds, they can’t possibly. There was a recent article in The Houston Chronicle, they can’t possibly compete because over the long term, stock and bonds are the place to be, and yet if you look at what has happened with gold. Since the Federal Reserve was created, the gold went from $30 an ounce to $1,800 an ounce and now it’s $1,300 and I would say that it’s acting rationally and that it truly is a special type of commodity and it is special money.
The others keep arguing that it makes no sense, but what they are afraid of and I think the real reason why they have to attack gold is that gold is a restraining force on government. If you have an honest gold standard, you will restrain government, government spending, government debt, government special interest, the welfare state, the warfare state, because they can’t print the money.
Of course, you can read thousands of articles why if you had the gold standard in ’08 and ’09, I mean a lot of these companies would have gone bankrupt. We might have been back to economic growth again and there was a lot of things that are different, but they don’t look at that and say it’s very, very bad. Now, when they compare it and say gold earns nothing, stock and bonds earn something, something has happened along the way. If you put your money in the safest investment, in dollar savings or paper savings, you put it in a CD or a Treasury bill, you get the negative interest rates and you have the inflation factor to deal with, you have taxes to deal with, so it’s very negative. How can they say that that is worthwhile compared to the fact that at the beginning of this century gold was over $300 an ounce and the Bush wars were ushered in and look it’s gone up to 600%, $1,800.
So, it’s just utterly silly to say it’s just a commodity and no special, no difference, gold is not money and therefore it would only hurt the people because how would it preserve the financial market, but my suspicion is something you alluded to is that the people know that there is something going on and they might not understand it completely and we certainly don’t understand the timeline for this or when it’s going to happen, but anybody who understand anything about monetary policy understands that you cannot just create money out of thin air endlessly and think it will maintain value.
Daniel McAdams: I think even kids understand that, but you mentioned something earlier that is really interesting and maybe you can extrapolate a little bit more on it, the article was somewhat silly because they made fun of some of the important idea, but they did have a chart and we can actually put the chart up, gold versus the monetary supply, the money supply out there and I think that actually tells more of a tail than anything else.
Ron Paul: Yeah, this one is recent and it has a point, but you can find to charge someplace where it doesn’t go so smoothly, so sometimes gold doesn’t go up like you think, the money supply increase and if gold doesn’t respond immediately, but this one was rather dramatic, because this was getting out of the major crisis in ’08, when we knew there was tremendous amount of debt and malinvestment and bankruptcies and somebody had to be rescued and had to be Wall Street.
So, if you look at the blue line and it’s crawled along there at the bottom, but if you look at ’08, it was around 800 billion dollars, that was the monetary base and that is when they had to increase the base and usually when you increase the base of money, it will expand into M1 and M2 and M3, people will be reassured and they go back to economic growth. That hasn’t happened, so the worse it has got, the more they have printed. But, gold under these circumstances definitely responded, because at the beginning of the century gold was $300 an ounce and look at where it has gone and that might be just really the beginning of a curve and right now I think the blip on the while line going up at the end is gold, now up $1,300.
I think that it is going to continue because they are not giving up on this and there will be the bailing out of anybody and everybody and the frustration that I have with the campaign that is going, nobody talks about it, what should they do with interest rates and whether it’s Trump or Sanders, they are not going to allow the market to set interest rates, because there is some pain with that and they are not going to have that happen, so they are going to have that happen, so they are going to insist the Fed keep interest rates low or it’s going to hurt the economy, but guess what? Keeping interest rates low really hurts the economy.
Daniel McAdams: That is probably one of the more frustrating things about the Trump campaign, because early on, not too long ago he said something about what a bad job Janet Yellen is doing and how he needs to get in there and sort out the Fed when he is President and then just yesterday he says that is not one of my priorities, I think she is doing an ok job. So, on one hand maybe someone calls him up and says take it easy, don’t push this.
But, the other thing that I wanted to ask you and this is not about the gold standard or physical gold, but this really went across our radar screen he other day and it is about gold, which is the news about George Soros and which are his positions.
Ron Paul: George Soros is no dumbbell and he is no libertarian. His goal was not liberty, his goal is to take his 24 billion dollars and turn it into 34 billion dollars. He is smart and shrewd, he understands the gold and doesn’t care about gold standard restraining big government, because of his own personal belief. But, yes, I find it fascinating, he helped me out, because I happen to own barrick gold stocks and there for a while they have been in the doldrums, because I am a long term investor or preservation of wealth, so I have a barrick gold, but he sold 37% of his stock holdings and then he went and bought a ton of barrick gold and he got it, I think Barrick Gold has gone up tremendously since he went in and bought this, but he is doing this, because he is shrewd. The Chinese have purchased a gold facility in London, 2,000 tons of gold that they will be involved in. So, that is a tremendous amount of gold exchanging.
Another number that fascinated me is that in one year the transaction in London in gold, is 5.5 trillion dollars worth of transactions, buying and selling and speculating and also sales in real gold, but that is a lot of transactions, so somebody is using that as money. Ultimately, that is the only thing throughout history that has ever restored confidence to a currency. They can badmouth gold, but gold always survives, it has been known to be used as money for 6,000 years, but there is no good example of how paper money thrive for a very long period of time. If our currency became totally fiat, paper money in 1971 and they said well, it’s going pretty well. It’s not going pretty well, people are panicking over it, but it is rather long for paper money. But, I can guarantee it, if history means anything at all, if common sense means anything at all and if economic law means anything at all, the paper money will self-destruct and just when and how and the transition, but eventually you have to have the confidence restored.
We did it with the continental money, we did it with the dollar and turn it into greenback, we had to restore that and the confidence we had to reinstate it in gold, but they are under the gun right now, because it’s the debt and the malinvestment and the complexity of world finances is so broad, that just saying tomorrow people will say if Fed guarantees the dollar at $2,000 an ounce, everybody will be reassured. I am not going to be reassured. In a year it could be $3,000, so that is not it, unless you live within ones means. If the government doesn’t run up debt and can’t tax people anymore, can’t borrow anymore, all that it can do is print, but then if people lose confidence and they won’t be able to do that and that will be the end of it all. There will have to be a promise that the people believe that government is going to live within its means and that is the hang-up.
The special interest and there are a lot of special interests out there, whether you are a socialist or whether you are a Wall Streeter or you are dealing with financial markets and you don’t want interest rates raised, everybody will argue you can’t do it, you can’t do it, because it’s sort of like being treated for cancer, nobody wants it, because it’s acknowledgement, but if you don’t get the treatment you destroy oneself, the patient gets destroyed and in this case it will be the economy that is going to get destroyed.
Daniel McAdams: Yeah and there is one more segment that you forgot to mention. People who don’t want to deal with the reigning in the currency and that is the military industrial complex, the warfare state, they are the last people wanting this and this is the old critique about the gold standard, it limits the amount of cash in circulation, it’s going to be terrible for the economy. It’s only terrible for those sectors.
Ron Paul: The Byzantine Empire I think lasted for more than a thousand years, but they stayed on the gold standard, they were well know for this and it’s when they went off the gold standard, finally that Empire disappeared.
I remember the private conversation I had with President Reagan, I was flying in a helicopter from treasury to the airport at Andrews and he knew, as a matter of fact I was coming from a gold commission meeting and we talked and he knew I was interested in it and he said, his statement was there has never been a great country that abandoned the gold standard, that remained great. We are still great to a degree, but we are greatly in debt, we are much closer to the financial collapse, but I think he basically understood this and had respect for the gold standard and why it’s restrained.
But, that is the most important thing about the gold standard. I restraints government growth. You can argue all the economics, a better economy and no inflation and all these things, but I argue that the most important thing, you can restrain government, because once you fool the people for a while and you can keep printing money, that was the reason Bretton Woods broke down. We were printing money, claiming it was $35 an ounce, but then the foreigners came in, especially the French and said you say your dollar is worth $35 an ounce and they want their gold and then they had to give up and we had to close that system down.
It doesn’t work, so governments can keep running their welfare state and they can run their warfare state and of course destroy productivity, because they destroy the whole idea of interest and savings and that is where we are today. We have a shrinking pie, we have no productivity and we have factions, just clawing there and different factions to say that they are entitled to this and whether it’s the entitlement of Wall Street or the entitlement of Main Street. Everybody gives a socialist a pass and say that is doing good and helping poor people. Ultimately, you are not helping poor people, you are destroying the middle class. So, all this idea that you can all of a sudden control the distribution of the inflated dollars to help the poor versus the rich. The rich always win out on that argument, because they are powerful and they control the strings and they become part of the shadow government and they can control things the way they want.
So, it to me is an attack on the people, it’s an attack by big government and we get involved in wars, but we lose our civil liberties too. All you have to do is think about TSA, they were attacking us we had to do something. And think of how we’ve suffered in the last 15 years, it’s always attacking the American people and all you have to do is look at those pictures on TSA and say wow, we have to do that, because we want to be safe. I think people are waking up to that, just like they are waking up to the fallacy of this economic system and maybe the dollar.
Daniel McAdams: You are making me think that maybe I was too hard on the article’s headline earlier, maybe if we want to make America great again, maybe we should make America gold again.
Ron Paul: There as one quote that was in one of the articles that I though was pretty interesting. He was down, plane gold and he said only weird people abdicate, so I think you are with me on that, so we are the weird people, we believe there shouldn’t be paper money just out of thin air, so we are the weird people. And his conclusion was most people don’t want to be like them. So, we have a job right now, but it looks like there are more and more people wanting to be like us, because they are attacking those people and trying to show how stupid this is and why would you own gold, it doesn’t earn interest and all the silly stuff, you buy stocks and all these kinds of things.
So, I think it is pretty fascinating that this is in the news and I think it’s the opening salvo of a lot more discussion because we are about to see some explosive changes in our financial system and the value of the dollar and it’s going to continue to get worse, because right now, the real threat is the contest between the factions of entitlements. Who is entitled to something that is shrinking, the wealth of this country is shrinking, the productivity is not going up and that is why there has not been a recovery. We would not have to go through this.
Would it be a panacea without the gold standard? No, it wouldn’t be, and people use this as a point, the gold standard always failed and it has failed frequently because the government has deliberately made it fail. We were on a pseudo gold standard all through the time since we have had the Federal Reserve and the Bretton Woods was pseudo gold and they kept printing money and it failed, it’s the abuse of the gold standard that makes it fail. But, if you had an honest gold standard where you take the power away from the government ever to monetize, which is a major task, there is always the special interest that will abuse the current system that we have or even the gold standard.
But, the reason why gold offers more protection is it always has to be a gold coin standard, so if the people become a little bit concerned, they should be able to take their paper money, put it in their bank and find out if the government is honest and find out if they really have the gold. It is under those circumstances that we could restrain government.
I do want to thank everybody for tuning in today to the Liberty Report. This is a subject of course which fascinates me, because it is related to our economic policy, our foreign policy, it is related to our civil liberties and what freedom is all about and to pretend that we can have the politicians in secret declare by fiat and computers what money is, that if people don’t have a vote, it always fails and that is what we are involved in now. It is in the midst of this failing system and this is the reason we are forced to be talking about the gold standard. Even if they come in a little bit closer in wanting to use gold, believe me they are not anxious to have an honest gold standard and that is the reason that we need to continue to do the work we are doing, to educate the people and the coming generation on how important monetary policy is if they are interested in living in a free country.
I want to thank everybody for tuning in today to the Liberty Report and please come back soon.