What the Price of Gold is Telling Us

[G2099]

HON. RON PAUL OF TEXAS
Before the U.S. House of Representatives

April 25, 2006

Holding gold is protection or insurance against government’s proclivity to debase its currency. The purchasing power of gold goes up not because it’s 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 that 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’s 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.

http://www.house.gov/paul/congrec/congrec2006/cr042506.htm

[yourout]

1. It tells me the dollar is tanking in a big way.

The chickens are coming home to roost as far as all the deficit spending goes.

[tsuki]

4. When I heard that the Canadian dollar was $.90, I knew we were

in trouble. The Yen is at 110, and the Euro at about 1.30. Not good news.

[Proud_Democratt]

2. Forerunner to Recession or Depression.

[OmmmSweetOmmm]

3. The dollar falling, interest rates will be on the rise along with the

price of oil. People with adjustable rate mortgages and other loans are going to be hit very very hard.

Great economy? Ha!