Ron Paul: Why Big Government Hates Gold

Date: 06/07/2010

Why Governments Hate Gold

by Ron Paul

This past week several emerging and ongoing crises took attention away from the ongoing sovereign debt problems in Greece. The bailouts are merely kicking the can down the road and making things worse for taxpaying citizens, here and abroad. Greece is unfortunately not unique in its irresponsible spending habits. Greek-style debt explosions are quickly spreading to other nations one by one, and yes, the United States is one of the dominoes on down the line.

Time and again it has been proven that the Keynesian system of big government and fiat paper money are abject failures in the long run. However, the nature of government is to ignore reality when there is an avenue that allows growth in power and control. Thus, most politicians and economists will ignore the long-term damage of Keynesianism in the early stage of a bubble when there is the illusion of prosperity, suggesting that the basic laws of economics had been repealed. In fact, one way to tell if a bubble is about to burst is if economists start talking about how the government and the Central Bank have repealed the business cycle.

The truth is the laws of economics are constant and real, no matter how inconvenient they might be to politicians and bankers. This reality is setting in and the bills are coming due. In the mean time, countries that have no money have bailed out other countries that have no money, except for the phony money created by politicians, bureaucrats, and their partners-in-crime at the central banks. This may be preventing big well-connected banks from having to take on massive losses, but it is all at the expense of the taxpaying citizen.

As governments and central banks continue the cycle of spending and inflating, the purchasing power of their currencies is constantly being degraded. These currencies are what the people are working for and saving. This inflation guts the savings and earnings of the people, who have very limited options for protecting themselves against these ravages. One option is to convert their fiat currency into something out of reach of central banks and government spending, such as gold or silver.

It is fairly typical in the midst of economic crises like these for gold to come under attack from Keynesians economists and their amen corner in the media. The arguments against gold are usually straw men, based on a fundamental misunderstanding of the purpose of buying gold. Gold is not a typical investment. It is a defense against the predictable behavior of governments to debase a fiat currency under its absolute control. The people who run the printing presses have trouble shutting them off. In order to limit one’s exposure to this reckless behavior, it is wise to exchange unsound assets for sound ones.

As the foundation of their power, their fiat currency, is rejected or avoided, government power is compromised. Fiat currencies trade the people’s freedom and security for the government’s freedom to squander the wealth of the nation on wasteful pet programs, wars, and corruption. This is why the freedom of the people is so intertwined with a sound monetary unit. This is also why the founders liked gold and silver, and supporters of big government hate them.

  • Dfens

    Article 1, Section 10 of the US Constitution says: “No State shall … make any thing but gold and silver Coin a Tender in Payment of Debts” which means states can create their own gold and silver currency — legally — now. That means no laws have to be changed to allow states to coin their own gold and silver coins.

    So again my question is, if it’s such a great idea to use gold and silver coins for currency, why doesn’t Ron Paul advocate the state of Texas create their own gold and silver currency? If it works well for Texas, then other states can follow suit. If it doesn’t work, then no one else will make that mistake. Better one state should try and fail than the entire US. If Ron Paul can’t sell this in Texas, or any state for that matter, why is he still beating this drum?

    This is not some strange interpretation of the US Constitution. It’s the way it has been interpreted by mainstream Americans for 200 years. This seems like a great opportunity for Ron Paul to demonstrate one of his primary platform tenents. Why is he not making use of this?

    • Libertarian777

      and the 2nd Amendment of the constitution allows all citizens to keep and bear arms and yet there are still laws restricting those rights (see McDonald v Chicago for the current pending SCOTUS case to regain those rights –

      Additionally the US Constitution has an ex post facto law in Article I, Section 9; and yet President Bush enacted a law to shield telecoms companies from violating wiretapping laws, after they’d already committed the crime.

      So, to your question. Yes the Constitution states it explicitly, however the US Federal Government uses Legal Tender Laws to enforce the use of Federal dollars.

      Your idea is not however without merit. Ron Paul has been advocating repealing Legal Tender Laws first. I don’t think it would be a stretch for him to be open to the idea of each state coining its own currency. That way citizens would have the choice of which currency they wish to store their wealth in (however Congress would no doubt enact ‘interstate commerce’ clause to expropriate your State coins if you had coins from a state you did not reside in).

      As an aside, a number of states HAVE been passing laws concerning firearms that are manufactured in the state, for use in the state, will NOT be restricted by federal laws. Congress cannot use their overreaching power of ‘interstate commerce’ to override those laws. So hopefully your idea catches on and one brave state (that’s not in a fiscal crises) coins their own gold and silver currency; for use within the state, and that would prevent the Feds from using ‘interstate commerce’ clause to disallow such currencies.

      I think sometimes some people miss the point. We’re not advocating that you store all your wealth in gold (that would be silly… non-diversification is stupid), however shouldn’t we be allowed to have the choice of what our currency is backed by? I.e. does the currency actually have some backing to it? other than the ‘full faith and credit of the US government’. In fact one could conceivably have a currency that consists of claims on land (e.g. 1 acre in montana = 1,000 property dollars). That could still be used as a medium of exchange (exactly the original concept of money).

      Additionally, no matter whether you believe in gold as a backing or not, surely you cannot ever support the federal expropriation of citizens’ property (gold) in 1933 (Executive Order 6102) or the debasement of citizens’ assets. Gold was $20 /oz (you could physically exchange your $ for gold at that rate) in 1900. In 1933, the government took your gold and gave you $20 in paper. Shortly thereafter they changed the peg to $35/oz of gold (remember now no-one was allowed to own gold; so you aren’t ‘richer’, since you have no gold to now sell at $35/oz). If at that stage they allowed you to own gold again, you’d only be able to own 0.57 oz of gold for the same amount of dollars. Any way you look at it that was pure debasement of the currency, and theft (of gold) by the government (you owned 1 oz before the ban, you own 0.57 oz after the ban. whether you believe in gold as a backing or not, you own less of it).

      If, as Fred likes to argue, we’re so into monopolies (since we’re anti-tariff), why do we hate the Federal Reserve’s monopoly on currency?

      • jim

        I tried to respond to you twice below but it didn’t work. I’ll just do it here.

        Libertarian777 I agree with you 100%. And on the korean information I was giving it was just to let you know the facts. Of course you couldn’t know the facts I know. I’m living in Korea with firsthand information. Just thought you might want the information on the ground. I can’t believe everytime I hear South Korea mentioned on international news it sounds like the country’s at deathcom 5. It’s such a joke. A couple of my korean friends mentioned the ship being sunk and how sad it was. That’s it. North Korea is nothing that is on a south korean person’s mind. And the economy is doing great. It feels like how the 80’s were in Canada. Everybody had enough to get by on and everyone feels safe.

        And libertarian777, as a canadaian I just wanted to say thanks. I’m much more into american history now because of Dr. Paul. We and the rest of the world owe you debt of thanks. Your country was the first true democracy on this planet and others wouldn’t exist now if not for you. Did you know that Canada doesn’t even have a constitution??? The shame that fills me as I write that (sigh). Ignored or not your goverment has the blueprint for the resurrection of your country lying at it’s very core. If I could I’d just copy and paste yours right into law in Canada. I’d probaly leave out the 16th amendment but I don’t think you’d hold it against me. Liberty and best wishes to you.

        • Libertarian777

          thanks Jim, but i’m not American… yet.

          I get to apply for citizenship this year (yes i’m actually a LEGAL immigrant 😉

          I come from a country that has so many more problems than the USA. It’s actually nice that we can (mostly) have discourse without worrying about whether you’re going to get shot daily.

          Guess I’m moving up Maslow’s hierarchy of needs. Since I don’t have to worry about physical security or food as immediate needs, I can worry about this political stuff. 😉

        • jim

          Best wishes on your citizenship. Not sure where you were from before but hope there (probably not in our life time) gets liberty as well.

    • SS

      If you felt the need to ask the question again, we can assume that you did not recognize it’s lack of anything approaching reality. Try to make your questions a little less obviosly bogus.

      HR 4248


  • jim

    Legalize gold. It should be illegal not to be able too. If fiat money is so great why would anybody use gold anyway??? I smell something fishy and I believe it’s called MONONPLY. Thank god the board game is still around. If we lose the game money soon enough the monoply money our goverment makes will be worth the same… a piece a paper.

    • fred the protectionist

      Libertarian/Neocons love monopolies.

  • jim

    canadadadgretzky canada is not in as big as trouble as the US. We didn’t have the international currency of the world. But in the long run we are heading down the same track.

    First, I’m sure lots of companies and banks in Canada are holding american dollars. When their dollar crashes so does every american bill being held in Canada.

    Socialized Medicine. I’m living in South Korea but I know dad is paying 38% income tax in Canada right now. You know as well as I the way they justify that amount of income tax is largely because of our “FREE” healthcare system. Well no matter what you here on the news South Korea is doing fine. My co-teachers mother was just in the hospital for a month. It cost the equivalent of $1000 canadian. But they pay 5%income tax with no GST,HST, or PST floating around. Just think about that for a moment. In Canada we pay 38% income tax plus 15% hst on anything we buy. Do you understand right there is over 50% of every dollar we spend is on tax. Then add on airport taxes, hidden alcohol, cigrarette taxes etc. I bet we spend at least 60-70 percent of every dime we make on tax.

    Question: Would you rather live in a country where you pay 60-70% tax bare minium of every dollar you make with “FREE” health care or live in a country where you pay 5% tax and have to pay up to $1000 canadian a month to be in a hospital.? Oh yeah I still smoke because it’s $2.50 a pack here.

    We have a central bank too. It hasn’t produced like america’s but we can expect a slow decline with one forever.

    No Canada is not an immediate dominoe. But don’t kid yourself. Canada would be much better with smaller goverment. And all the stuff I see Ron Paul say I see actually happening in South Korea. Less taxes and no printing presses means alot more money for a country’s people. Seeing alot more Samsung cellphones, Kia and Hyundai cars then you were 10 years ago. I wasn’t home for 7 years until last year for a year. Couldn’t believe how much korean stuff people were buying. Not too many chevs or fords on the road. And every road is paved and looking great here. Canada looked like a bomb hit it when I got home. We don’t have money to repair simple infrastructure. I love Canada, happy we got gold at the olympics, but Canada’s goverment needs a big wake up call.

    • Libertarian777

      it’s also nice when the USA provides 30,000 troops to secure South Korea’s border, airspace, nuclear deterrence and maintain open seaways for it.

      • jim

        I don’t think they should and trust me, most south koreans don’t think they should. But goverments don’t always ask the people what they want.

        • Libertarian777

          not trying to knock the South Koreans.

          Just saying, if they had to spend the full amount required to actually do their own security, their own deficit might be larger.

          Either way, we shouldn’t have troops in other countries, whether they want US troops there or not.

        • jim

          And south korea has an active force of 655 000 soliders. And they have 3 040 000 soliders on standing reserve. You have to know that every korean man has mandatory military service for 26 months. And trust me, i have alot of male korean friends. It’s very physical training for 22 months of it. They all tell me the last 2-4 months is great because you get to tell the new guys what to do.

          And the country has a population of 50 million people. Those stats are just official numbers. Every korean can fire a gun. It doesn’t matter if you are 25 or 60. If you can see and pull a trigger you can fire a gun and be effective. If war truly ever did break out (which trust me it won’t… south korean people laugh at the idea. Had to get my korean co-teacher to tell my mom how ridiculous that is. Just another fabricated story. ) no matter how nuts north korea is , with no help, south korea would mop the floor with them.

          Unless the Bleeper went nuclear and then i don’t think it will matter where you’re living. But as always on extremists would believe he’s that nuts. And not one south korean person is afraid of North Korea.’

  • jim

    wwe… do you understand what Dr. Paul means when he says it’s not a typical investment??? If you can understand that then you understand why gold is different from fiat money and why even people who have gold will want even more. It’s not because you can exchange gold for sevices or commodities. Yes fiat money does this too. What is the difference???

  • GB

    What a great article.

  • Don’t You ever get sick of being right all the time? Becuase of these Keynesian Idiots still don’t get that worthless paper will get us into bigger debt. Very good update sir.

  • ValerieBarlow

    Ron Paul is one of the very, very few honest politicians left. God bless him and all he stands for.

  • Dr. Paul,

    You’re comments are all too true, and they make so much sense. I’ve told people just to visit the grocery store if they want to see real, hard evidence of how devaluation has eaten up our dollar. Everyone seems to agree, then they’ll remark how they think things will get better. They have their head in the clouds. It’s not going to get better–it’s going to get a lot worse before it gets better– Americans will face more unrelenting and dramatic hardships as a result of our present economic structure. Then only God knows what will happen when the people of our nation are forced to do without some necessities and comforts to which we have become so accustomed. To restore some sort of equilibrium to our financial situation, whatever government is in place at this point will be forced to re-evaluate its economic policies and practices in order to restore order and instill confidence back into the system.

  • Hkepfer

    Mr. Paul speaks what other politicians will not say.
    Government has the basic nature to ignore reality when there is an avenue for power and control.
    So are we satisfied with the current nature of our government?
    Is our government ignoring reality?
    Has our government proceeded down an avenue of more power and control?

    The Libertarian mind set will challenge any status-quo; its wisdom is the utilitarian view of government while being patriotic.
    Mr. Paul, please keep us thinking.

  • mrdoonbeg
  • wwe107

    People still miss the point that they give cash for gold. Then they have to exchange gold for cash. You’re still feeding the same pig if you use both.

  • ZullGostnu2

    Gold and silver certificates are the banks way to get around hard currency. Goldman Sacks has 100 paper ounces to every real gold ounce. If there is a run, gold prices will go ballistic. Goldman Sacks used this to blackmail the US government for a bail out. A skyrocketing gold price would destroy every fiat currency, including the US dollar. Do not buy any certificate, demand the actual gold or silver. A gold standard destroys banks and limits governments.

  • canadadad99

    Hey Ronny, is Canada one of the Dominoes.

  • wwe107

    People should really think about who owns the gold. How many dollars it costs to buy gold and those dollars go to the people who OWN THE GOLD. So obviously the people are doubling profit if they own and sell gold to people. Research one of the biggest gold mines in the U.S. and who killed and strong armed it, indeed the U.S. Government. The same forum shoves it your face that the ELITE OWN THE GOLD, yet they want you to buy it? Come on.

  • iiguns

    last night a paid program, That states they buy gold. The shows host went on to say, this is the stuff thats in the back of your draw, old gold charms broken chains and so on. He shows a bag & pulls out a bunch of jewelry. Then he goes on & say see this stuff is worth around $900. The lady next to him can not believe that gold is worth that much. He than states that “Gold will not sustain this price & its a great idea to sell your gold, pay bills & so on” They want your gold, ask why?

  • mattamiller

    Should I be buying gold right now, its SO expensive? What about buying silver or platinum?

  • LastReplaySC

    not only gold hates BigBrotherGovt!

  • tetekofa

    @1984IcameandIstayed – LBJ repealed executive order 11110 just hours after JFK died, actually LBJ repealed it on the flight back to Washington with JFK’s body onboard.

    • T. Leary

      E.O. 11110 was never reversed by President Lyndon B. Johnson and remained on the books until President Ronald Reagan issued Executive Order 12608 on 9 September 1987 as part of a general clean-up of executive orders. E.O. 12608 specifically revoked the sections added by E.O. 11110 which effectively revoked the entire Order.

  • Eraser7622

    Get out of paper fiat money and into gold and silver TODAY.. and NOT paper gold/silver.. NOT ETFs.. No, only accept physical gold and silver that you take possession of. Finally, do not keep most of your precious metal in your home.. keep it securely hidden off your property if possible.. NOT in bank safe deposit boxes or paid vaults either. This is the safest possible approach.. if you deviate, don’t let it be the part where you only accept physical.

  • MishuTaste

    The government hates gold because ordinary people can become empowered by it & they want POWER over ordinary people! The government & central banks can’t print & distribute as much gold as they want and regulate the value of it.