Aptly Named Insana Disses Ron Paul
Bob Wenzel has a good response to CNBC commentator Ron Insana’s putdown of Ron Paul’s economic views.
As many of you know, I am often a self-hating Austro-libertarian, and I bend over backwards to understand what motivates those who disagree with me. So on this issue of Ron Paul’s “scandalous” investments in gold-mining stocks, I tried to turn the tables to understand how someone like Paul Krugman would react to the news.
I think I’ve got it: Al Gore. I suspect many readers of this blog are skeptical of the global warming hysteria, and so when you heard that Al Gore stood to profit quite handsomely if governments around the world investing in “green” sectors, I bet that just fueled your cynicism. I mean, surely Al Gore didn’t really believe all the nonsense about climate tipping points, etc. So now his behavior makes perfect sense–he’s just trying to get more power for the government, and increase his personal fortune!
Don’t misunderstand, I still think Ron Paul’s views are correct, and I don’t see anything wrong with him investing his personal wealth in a smart way. I’m just saying that if you are someone who thinks any honest observer can see that the gold standard caused the Great Depression–why even right-winger David Frum knows that!–then seeing all the GoldLine commercials etc. on conservative blogs would confirm your views that these goldbugs are a bunch of frauds.
To repeat once more: My purpose in these types of observations is to defuse the anger and bitterness amongst those who think like me. The difference between you and “those insane liberals / statists” etc. is not as huge as it first appears. With just a few tweaks of their value scales and intellectual beliefs about how the world works, it’s perfectly understandable why they have the heroes they do, and how they can demonize our heroes.
I don’t think that works very well. Al Gore pushes policies that would increase the value of “green” investments. Ron Paul opposes policies that would increase the value of gold.
Well it’s tricky. For example, if the Fed implemented the plan I discussed here a few weeks ago, then Bernanke would start a massive program of buying physical gold. That would clearly push up the price of gold, quoted in dollars.
But make it even harder and go the other way: Suppose they announce a new dollar/gold peg where an ounce of gold will be targeted at $750. So Bernanke jacks up interest rates and starts emptying the Fed’s balance sheet, in order to (loosely speaking) suck dollars out of the system and deflate the gold price.
Even so, owning gold mining stocks or even bars of gold would still leave you sitting pretty. It’s true, the nominal value of your holdings would drop, but the nominal value of other assets would get crushed. The reason is that the relative price of gold would rise, and so even though its nominal price would fall, the fall would be less severe than for most other assets.
The one thing that would be helped for sure would be dollar-denominated assets like corporate bonds (or life insurance policies). They would still pay out in the same number of dollar bills, and with the rampant price deflation that would be much more valuable in real terms.
So really, if the Fed and/or Treasury once again linked the dollar to gold, this would first of all increase the real purchasing power of the US dollar. It would also raise the value of gold relative to most other things.
But if Ron Paul really wanted to bank on tying the dollar back to gold, he would be sitting on long-term bonds and life insurance policies. On the other hand, if he were worried about hyperinflation, then he would be sitting on gold.
I was thinking mainly of RP’s opposition to massive government spending.
English Bob, are you sure? If gold were used as money, its value would increase.
I think you are missing several key points:
– Ron Paul doesn’t really advocate for gold as money; he wants competing currencies.
– Only gold and silver can be made legal tender, per the constitution.
So, Ron Paul’s purchase of MONEY (gold and silver) is definitely not on par with Al Gore’s rigging the game to get himself rich.
Peter Schiff has given the most excellent response to this that can be used as a talking point.
Everything Ron Paul promotes undermines his investment in gold.
Sound fiscal policy, extremely limited government, and an end to the Federal Reserve system would stop the rise in the value of gold.
If the government were to adopt a gold standard today, pegging the dollar to 1/1200th an oz of gold, Ron Paul would not stand to make any money at all.
Ron Paul only owns that gold because he feels he will be unsuccessful in his attempts to stop the destruction of the dollar.