( April 25th, 2006) Rep. Ron Paul speaks before the US House of Representatives.
(2006) Ron Paul: GOLD AND THE US DOLLAR [Part 1]
http://www.youtube.com/watch?v =_GcP_Lw4BCc
(2006) Ron Paul: GOLD AND THE US DOLLAR [Part 2]
http://www.youtube.com/watch?v =sHsh_SwAstw
(2006) Ron Paul: GOLD AND THE US DOLLAR [Part 3]
http://www.youtube.com/watch?v =C04kIwnzRSg
(2006) Ron Paul: GOLD AND THE US DOLLAR [Part 4]
http://www.youtube.com/watch?v =GEm03U7eXTw
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(Transcript)
Madam Speaker, the financial press and even the network news shows have begun reporting the price of gold regularly.
For 20 years, between 1980 and 2000, the price of gold was rarely mentioned. There was little interest, and the price was either falling or remaining steady. Since 2001, however, interest in gold has soared along with its price.
With the price now over $600 an ounce, a lot more people are becoming interested in gold as an investment and an economic indicator. Much can be learned by understanding what the rising dollar price of gold means.
The rise in gold prices, from $250 per ounce in 2001 to over $600 today has drawn investors and speculators into precious metals markets. Though many already have made handsome profits, buying gold, per se, should not be touted as a good investment. After all, gold earns no interest, and its quality never changes. It is static and does not grow as sound investments should.
It is more accurate to say that one might invest in a gold or silver mining company, where management, labor costs, and the nature of new discoveries all play a vital role in determining the quality of the investment and the profits made.
Buying gold and holding it is somewhat analogous to converting one's saving into $100 bills and hiding them under the mattress, yet not exactly the same. Both gold and dollars are considered money, and holding money does not qualify as an investment. There is a big difference between the two, however, since by holding paper money, one loses purchasing power. The purchasing power of commodity money, that is gold, however, goes up if the government devalues the circulating paper currency.
Holding gold is protection or insurance against government's proclivity to debase the currency. The purchasing power of gold goes up not because it is a so-called good investment. It goes up in value only because the paper currency goes down in value. In our current situation, that means the dollar.
One of the characteristics of commodity money, one that originated naturally in the marketplace, is that it must serve as a store of value. Gold and silver meet the test; paper does not. Because of this profound difference, the incentive and wisdom of holding emergency funds in the form of gold becomes attractive when the official currency is being devalued. It is more attractive than trying to save wealth in the form of a fiat currency, even when earning some nominal interest.
The lack of earned interest on gold is not a problem once people realize the purchasing power of their currency is declining faster than the interest rates they might earn. The purchasing power of gold can rise even faster than increases in the cost of living.
The point is that most who buy gold do so to protect against the depreciating currency, rather than as an investment in the classical sense. Americans understand this less than citizens of other countries. Some nations have suffered from severe monetary inflation that literally led to the destruction of their national currency.
Though our inflation, that is the depreciation of the U.S. dollar, has been insidious, average Americans are unaware of how this occurs. For instance, [Page: H1730]
few Americans know nor seem concerned that the 1913 pre-Federal Reserve dollar is now worth only 4 cents. Officially, our central bankers and our politicians express no fear that the course on which we are set is fraught with great danger to our economy and to our political system.
The belief that money created out of thin air can work economic miracles if only properly managed is pervasive in the District of Columbia. In many ways, we should not be surprised about this trust in such an unsound system. For at least four generations our government-run universities have systematically preached a monetary doctrine justifying the so-called wisdom of paper money over the foolishness of sound money.
Not only that, paper money has worked surprisingly well in the past 35 years, the years the world has accepted pure paper money as currency. Alan Greenspan bragged that central bankers in these decades have gained the knowledge necessary to make paper money respond as if it were gold.
(...)
[ http://www.c-spanarchives.org/ congress/?q=node/77531&id=7442 935 ]
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