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Ron Paul and Gold

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JAlanKatz Posted: Thu, Nov 15 2007 8:44 AM
Here's a question that occured to me this morning while I was daydreaming. I have been buying gold for several years now, acquiring when I have money on hand, and I started buying in the 200s. Gold is now at around 800, but still off from my prediction of 5000, so buying on down days still seems reasonable. Since it has fallen a good deal today, I was preparing to buy some (the dip in price for the day would be equal to my shipping, which is my buying signal). However, my prediction of gold 5000 only makes sense if Ron Paul loses, and the hyperinflationary nonsense continues. If he wins, I'd lose. So buying gold in the 700s gives me a conflict of interest - of course I want Paul to win, but I'm buying assets that will likely fall in value if he does. So buying gold is a bet against Ron Paul. A couple ideas follow: 1-Don't buy gold. 2-Buy gold as a hedge - at least I'll still have something if the greatest hope for the past century fails. In this case, I'll just buy gold equal to the amount I donate up to my donation limit, and donate the remainder to Mises or LewRockwell. 3-Arbitrage between gold, contracts on Ron Paul's chance of winning, and other assets that would do well under Paul, so that neither outcome costs or gains much. Then another thought occured to me, which is actually the point of my writing. After an event involving Ron Paul, perhaps we should check the gold price. A decline in gold shows that smart money believes Ron Paul's chances have increased, while an increase in gold shows the opposite.
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leonidia replied on Thu, Nov 15 2007 11:03 AM

 That thought had occurred to me too. I want Ron Paul to win too, but even if he does,  I'm not sure how much and how fast one man can change things. So I think gold is still going up.

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If Ron Paul won and made gold a parallel currency, wouldn't demand for gold increase, making you guys richer? 

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ft88 replied on Thu, Nov 15 2007 11:49 AM

If Ron Paul could actually make gold the new money standard, its value would increase dramatically.  I may have my facts incorrect and am to lazy to look it up but I believe there is enough mined gold in the world for 1 ounce per human being on earth, ie 5 billion ounces.  If it is the standard for use as money it will be extremely valuable. 

 Currently the value in gold is in its aesthetic and symbolic use as wealth.  Also as a hedge against inflation but most folks use the usual bond and stock investments for investment inflation hedging (saving, without losing money to inflation). 

The real value to gold is anymovement towards being used as actual money.  In practical terms this is unlikely to happen even if Ron paul were president. 

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LUCHAC replied on Mon, Nov 19 2007 12:04 PM

I too think the price of Gold would go higher if Ron Paul wins. Actually, I am not really sure as to the implementation of the Gold Standard if some president in the future decided to implement it. The value of the US$ is inversely related to Gold, and so, I think the dollar would inmediately collapse with the implementation of an alternative currency, even if it is a transition period.

I do not know the exact figures, but I can guess that at least 90% of americans' savings are not in Gold or similar commodities, but in US$. What would happen, then? How would this new system come about? 

And don't get me wrong, I am for the abolition of the Fed.

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MikeL replied on Mon, Nov 19 2007 2:55 PM

 I'm no economist, but I think it would go higher too. I bet that even the suggestion that gold and silver might be legalized as competing currency would send the market into a panic of buying. But saying this doesn't remove the sting of loss in the nomial value of G and S over the last few days. Ouch. 

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JAlanKatz replied on Mon, Nov 19 2007 4:01 PM

But saying this doesn't remove the sting of loss in the nomial value of G and S over the last few days.

Actually, I celebrate each time the price of gold falls, as should anyone who still has USD in the bank.  It's another chance to get in. 

 Question to the group about the competing currency - the assumption in most of the replies seems to be that, due to the instability and lack of trust in the dollar, once a competing currency is introduced, the competing currency would be the popular one, and the dollar dropped.  Doesn't Gresham's Law suggest the opposite, that a competing currency would fall flat on its face if the USD was still in existence?

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Harksaw replied on Mon, Nov 19 2007 4:44 PM



A competing currency would not have legal tender status. This being the case, intelligent stores would have separate prices for everything: One in US dollars, the other in a competing currency. Gresham's Law  only applies when two coins or bills with different intrinsic values are forced to have the same value by law. 


(I've just been discussing this in the Liberty Dollar blog post)

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Thorgold replied on Wed, Nov 21 2007 9:07 PM

If Ron Paul wins, and he does what he promisses to do, and he is not shot, then he should make gold a legal tender, as per constitution, and remove the legal tender status from FRNs.

Further, it was correctly noted above, that the Grisham's Law works when you have a paper tha says 50 dollars and a dollar coin that says 50 dollars, which is obviously not the same thing, by the law says they are.

As for the value of gold in that case, I think it would increase for two reasons :

- discontinuance of gold price suppression by our government

- sudden popularity

A sudden crash in purchasing power of FRNs, meaning that even other thing held equal, the one holding dollars will have less purchasing power that the one holding gold coins. Did I phrase this correctly? In other words, I mean that barring above two points the purchasing power of all gold stock wouldn't increase, (because there is only precious metal money stock either way, with FRNs being a convenience sertificates for PMs that at this stage of a con  have a promise of stability and redemability through free market, but not holding those promises well, because of intentional, planned, never ending, high inflation) but the distribution of purchasing power among the market participants will change.


Ethically, this would be a good thing, as an unescapable punishement for readily taking FRN against our own supreme law of the land. 


I just don't believe Ron Paul will be allowed to do what he wants, or what he says he wants... 

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