Ron Paul's Missed Opportunity
Thursday, July 14, 2011 at 6:59PM Ed Bugos here, giving Jeff a break from the blog today.
Like Jeff (in yesterday's blog, The Bell Tolls For Thee, Dollar), I watched Ron Paul's five minute scuffle with Ben Bernanke with great anticipation. BTW, what is up with having only 5 minutes to question the man in charge of the official money supply for the US? The Kardashians get an hour of airtime every week. The man in charge of the lifeblood of the economy in the US? Five minutes every few months. That probably explains as well as anything why the US is in the dire straits it is in right now.
Getting back to Paul vs. Bernanke, though, like most lovers of liberty I have great affection for Ron Paul, even though he is a politician.
;)
As an interesting aside, back in 2007, out of curiosity, I tagged along on a political rally for Ron Paul in Vancouver, Canada. The rally was headed up, interestingly enough, by the Prince of Pot, Marc Emery. The group didn’t know me. I was the only stranger to respond to their ad so they thought I was a narc... since Marc was to be extradited to the US in the new year for selling marijuana seeds over the internet. He was one of the Feds’ most wanted criminals in America then. Here is a pic I snapped of him and his girlfriend at the end of the night.
I remember Marc Emery from my youth. I thought he was a socialist. So I asked him. He said he was. I asked what changed his mind. He said that he read Ludwig von Mises’s Human Action. There you have it. Proof that Ludwig von Mises transformed someone (the Prince of Pot in this case) from a card carrying socialist into a consistent laissez faire and freedom loving libertarian activist spreading the word about Ron Paul in my backyard!
I was elated. It was music to my ears. And you know how the crowd greeted the posters? With disdain. They lumped Paul in with George W. Bush and showed their scorn in many ways... not altogether politely. Canadians. So ignorant about America.
That’s because they got the winners’ account of American history up here.
But Ron Paul let us down in yesterday’s question and answer session - which I've attached again below.
He came very close to endorsing the socialist ideal of helicopter money – at least over the bailout of the big banks and corporations – by saying that if the $5 something trillion went to consumers instead of the banks and corporations it would have been a better result. He stopped just short of the endorsement. So okay, let him go that way, I thought, as I patiently listened. Maybe he’s got something up his sleeve that will corner the Bernank.
Then the Bernanke responded. He lectured Paul about the reason the Fed was supposedly created – to stave off crises... that their mission is to create financial system stability and protect consumers. Bang, I thought. Paul had him cornered. All he had to do now was to point out how ludicrous it is that the institution that causes the crises and instability is the same one that apparently saves us from these things.
Indeed, Dr. Paul interrupted the Bernanke nicely – just at the right moment for this. It was perfect. I was beaming with anticipation. But he continued on the consumer line instead. He asked Bernanke if he thought consumer spending was important.
Then, he asked Bernanke if gold was money. Naturally, the Bernanke said no, it isn’t. And in fact, it isn’t. What was Paul’s point here? He had the chance to nail the Fed as the “final cause” of society’s core problems, but dropped the ball and then asserted a myth that is one of my greatest pet peeves. If someone tells me that gold is money I will tell them they do not understand money. If gold were money we wouldn’t have these problems.
When you can take an ounce of gold and buy something with it in Wal-Mart, then you can tell me it is money. Granted, it is not so absolute now with the internet allowing for transactions in digital gold – like Goldmoney. In these cases gold is money. But, in most places, wherever the legal tender monopolies have the power to outlaw the use of it, gold is not money. It has monetary value. Yes.
Moreover, it is not a commodity because it is not consumed. It is hoarded like an asset. But it is not equity or debt. It is a reserve asset. It is insurance against the fiat money based centralized fractional reserve banking cartels with their legal tender monopolies and other protections. And we know how fast the cost of this particular insurance has risen.
So, technically, Bernanke is right; gold is not money. What did Ron Paul achieve by getting him to admit the obvious?!
We may hope that one day the world moves back to sound money. And there’s nothing in the definition of sound money that states it has to be gold or silver. It probably will be. But that’s up to the market –according to the “sound money principle,” which simply states that the government buds out of determining the object or value of money and interest.
When that day comes gold may be money. I believe we are headed that way. And I think gold will be money. It is now challenging the world’s biggest fractional reserve banking cartel – the one that supports the dollar – the world’s reserve currency and the world’s current most common medium of exchange. The dollar is money. We hope gold will displace it one day.
But to assert that gold is money is naïve. It shows confusion of what should be, what has been, and what will be with what actually is. It also undermines the case for gold because asserting that something is black when it is white is not going to draw many smart allies to your cause.
And even if we could get the Fed to admit that if it were up to the market gold would probably be money, so what. The Fed has millions of supporters that think the Fed’s money is better because it is more elastic... that it is better to intervene and that gold belongs to the old world - a barbarous relic -not our plunder free paradise. The Fed has a political mandate that it gets from the people... it is the people who want democratic socialism. They don’t want the discipline of god any more than most of the politicians. Remember William Jennings Bryan’s cross of gold speech. The rabble will not be crucified on that cross!
What is important for Paul to do is to show the damage the Fed does by implementing this political mandate so as to undress it in front of its popular supporters...the people. Its other supporters – government and crony corporations – aren’t going to care. They already know that the Fed redistributes national incomes. They get the benefit of them.
Most people do not see gold as money – correctly – and to them Paul lost credibility.
Reader Comments (16)
He is getting old Ed, cut him a break. He is the ultimate freedom fighter inside DC. I wouldn't know a damn thing if it wasn't for his old "survival" newsletter. I owe alot to Ron Paul, and so does every new comer to the freedom movement. He always points out in interviews that the FED is the cause of our problems and poses as the savior.
I don't see one ounce of socialist tendency in Ron Paul as you suggested. He clearly stated that this was just an analogy. An example, nothing else.
I am not a socialist either, far from it. I consider myself even more hard line that Dr. Paul when it comes to the FED/fiat money Ponzi scheme, but by concentrating on the example you failed to mentioned that out of these idiots in the Hill Ron Paul so far is the only one who has confronted Bernanke and for matter other FED oligarchy directly when the problem lies which is the above mentioned Ponzi scheme itself.
We should be praising Dr. Paul and finding ways to get not only him in front of the cameras but also other if there are any with such a courage, to help expose these villains.
With much expectation this is my first newsletter received after signing to your site and to be honest I am so far disappointed.
James E. Mahler
There is zero insinuation that Paul would support a helicopter drop to consumers, he qualified that many times. He is on presidential campaign mode and a question like that is surely to stir up popular support. The point is, if they were going to helicopter all that money, why give it to cronies rather than the people? This video clip has gotten over 150,000 views in one day - it's the number one viewed video on YouTube in the news section. He is campaigning.
Gold is money. It's a type of money. Just because we can't go to a store and buy groceries with it does not disqualify it as a money. The entire reason gold has any value is because of its appreciation as a money. It's not as liquid as some other forms, and it's not as universally accepted, but that doesn't mean it's not money. Its physical characteristics are such that it has been proven to be a better money than any other option in many circumstances - certainly on a long enough time horizon.
When the housing market blew up in 2008 and those 700 bill bush gave away stopped working the moment the idiot signed the check, I said"oh hell, if you paid every freaking mortgage in America the comes up to 380 bill and every body can all go back to work the next day and pretend that the mess never existed. Which would have been true in fact. That doesn't make me a socialist. It just goes to prove that without the FED scheme things would have been much different for all of us and I truly mean for the better.
He was trying to simplify the matter to show Bernanke that he knows exactly how the scheme works. And yes, gold is money and good money and just the commercial say "it has never lost its value" specially when the dollar is so weak like right now. And to prove that just look at Edward Griffin's example: 2000 years ago during the Roman empire with a ounce of gold you buy a nice toga, a leather belt and an elegant pair of sandals. Today, with this same ounce of gold you go a men's store and buy a nice suit, a leather belt and a nice pair of shoes". Hummm...
OK, everyone relax. Ed is a scholar of Austrian economics. Ed probably said at least 5 or 6 times how much he has affection and respect for Ron Paul... all he said was that Ron actually missed his chance to nail him. Gold isn't money today, as Ed said.. if it was, you could buy your groceries and gas with gold coins. If gold was money today we wouldn't have any problems we have today. It is a technical definition, and if anyone has paid attention to what we've written in the last few years they would know that. Re-read what Ed said.... this is only a slight criticism that Ron, unfortunately missed out on a golden opportunity to nail Ben to the cross for his fallacies. Gold is not, today, UNFORTUNATELY, money. We... of ALL people have promoted that the world would be a better place if it was. Do not get hung up on words and definitions. Ed was ONLY trying to show Ron Paul how he could have better annihilated the Bernank. Read our last year's archives before jumping to conclusions, please. I know we have, literally, hundreds of thousands of new readers... so the fact that a few new ones misunderstood Ed's message is statically a certainly is inevitable. Read for a few days more before you begin to make presumptions.
Yeah this my first time on the site.. looking now, some great stuff. Apologies if I came off insensitive, we are all on the same team! :)
Hi Andre, Cudos for being open to changing your mind. I assure you, we are on the side of freedom here... Ed is just a scholar of Austrian economics and the official definition of money is something that is of regular use in society for transactions... and unfortunately, at this moment, gold is not considered money under that definition. If it was, we would not have any of the problems we have today. All Ed was doing was trying to provide some advice to Ron Paul about how to attack the evil and oppressive Federal Reserve in the future.... he missed yesterday... hopefully the next time he will nail the Bernank 100%! Cheers
Excellent post. For those of us new to the nitty gritty, but not to the concepts, Ed's post provided clarity to the ongoing events.I especially enjoyed the semantic slaps being thrown around in the comment's section.
Hi Ed,
You said" He had the chance to nail the Fed as the “final cause” of society’s core problems, but dropped the ball." Paul's book is called "End the Fed" and you said
" All he had to do now was to point out how ludicrous it is that the institution that causes the crises and instability is the same one that apparently saves us from these things." I've watched these dopey sessions so many times with Greenspan and Bernank. Don't you think the Bernank would have denied that his institution caused the crisis? He has forever been saying he saved us from a very deep depression. They always weasel out of addressing the question when it suits them. And finally
Doesn't the constitution of our land proclaim that gold and silver is legal tender?
Thanks. Appreciate your writings.
So let me offer apologies if I have come on too strong. Ed? Are we cool? My emotions sometimes can get the best of me.
I perfectly understand the position Dollar Vigilante has and that is precise why I signed up. I am also aware of the fact that folks like you and Jeff have one of the most difficult tasks in all of the commercial spectrum. Which is to find ways to maintain the integrity and stability of ones market through formulas, concepts, ideas etc so things don't crumble around the social environment. It is indeed an extremely difficult and risky task.
However, no economic science in the world is going solve the issue unless we work on the correct side of the problem and the problem is not in numbers and equations and dollar signs. Its in the moral principle behind the creation of the "monster" in the first place.
First of, banking economics should not ever have been this complex of a science and should always be maintained very simple and direct. As long as a banking system. centralized or not, big or small, is not required to account for every dollar or ounce of gold at any time, no matter the quantity, and never be allowed to speculate with it at any time, unless of course the has received express consent for the depositor and it is overseeing by honest and impartial observers where the depositor under proper counsel can safely decide the when, the how and the how much.
But the honest and impartial overseeing of such institution never really existed. Therefore it has left us, the depositors, with the little devil called speculation which after all is not crime On the contrary it is an intrinsic part of the whole affair. A banking system, any banking system is by design the primordial unmonitored speculator and it has always relied on governments to enforce the penalties perpetrated on the unsuspecting as a result of its basic structure.
Instead we have all the unconstitutional laws we can imagine who pretend to safe guard you and instead, controls you and monitors you and loots from your and hire armies of clever and unscrupulous people to come up with ways to take it away from you. If I go to my bank right now and withdraw 20 grand, stick it in my pocket, jump in my car and drive to Georgia to buy a little business from a fellow I saw on the paper and decide to do that because I wan to pay cash for it and not incur any illegal fee decreed by the Government, I most likely get arrested on the road by some ignorant and zealous cop who will want to incriminated me on trafficking or drug charges or something like that. You can not even walk around with you fiat money anymore and that is a total disgrace.
Having said all that what really blew my top was when Bernanke cynically said to Dr. Paul "...the FED has been a major profit center for the US Government. We turned over profits in the last two years of aprox 125 billion dollars so we're not costing any money in terms of budget deficit or anything like that..." I literally had Glock pointed at the the TV screen. What filthy creatures these people are.
Yes, Dr. Paul may have missed a great opportunity but so have the criminal Congresses and Senates and POTUS at all, who have had countless times, opportunities to end this charade and instead have fed the FED with all the nutritional elements necessary to go from a local institution, to national and for a long time now the International Ponzi Scheme of all time and all history of men. They are the masters of the world fate. They can create and destroy societies. Thru their criminal and yet so simple practices they can make a country rich or poor, go to war or not, fight with their neighbors any time they wish, they can create armies out of thin air just like they do with the currency and have its citizens killed off. And the IMF which is nothing but the office who distributes the anti prosperity drug to the rest of the world is your Nurse Ratched.
Have a good day, Gentlemen, and I look forward to more of your news.
"But to assert that gold is money is naïve. It shows confusion of what should be, what has been, and what will be with what actually is. It also undermines the case for gold because asserting that something is black when it is white is not going to draw many smart allies to your cause." -Ed Bugos
"Do not get hung up on words and definitions." -Jeff Berwick
@Ed - More often than not, when people say "gold is money" I get the impression that they're using such a statement as rhetorical flourish to undermine the credibility of the entire fiat system... not expounding upon the technicalities of it's present role within the current monetary system. With that in mind, I believe that the statement "gold is money" should be viewed... more often than not... through the lens of "propaganda" rather than through the lens of literal technicalities.
Of course, it's "propaganda" that I endorse...
;-)
-Sparx
Ron Paul may have missed another opportunity as well; after Bernanke stated gold was an asset he could have asked if he’d recommend that Congress authorize a change in the par value of the US Treasury gold holdings to its current market price. As most readers of this blog may know, the Treasury holds about 261 million troy oz. of gold at a statutory value of $42.22 per oz. through amendments in 1973 to the Par Value Modification Act - Public Law 93-110. The Treasury monetized the value of these gold holdings and the Fed in turn holds gold certificates based on this outdated value for a stated value reflected on the Feds Flow of Funds report of $11 billion. At today’s pricing this undervalued national asset is worth about $397 billion.
http://minerals.usgs.gov/minerals/pubs/commodity/gold/300798.pdf
http://www.ritholtz.com/blog/2011/07/august-2-%e2%80%93-hard-cap-or-soft/
See table L.200, pg. 84, line 15:
http://www.federalreserve.gov/releases/z1/current/z1.pdf
What brought this to mind was a June 3rd Open letter to Ron Paul post here:
http://fofoa.blogspot.com/2011/06/open-letter-to-ron-paul.html
And a follow up article:
http://fofoa.blogspot.com/2011/07/euro-gold.html
Dear Ed,
I will offer you 5 ounces of gold bullion to stop writing for this blog.
Sincerely,
Just bought groceries with gold at Wal-Mart
As I understand it, gold IS money, but not currency. And the dollar is currency, but not money. (I should have said the FRN, not the dollar, because the dollar has a definition, and the FRN is NOT it.) Naive? Misinformed? Let me know!
Ron Paul nailed Bernanke when he asked him why the central banks hold gold and the answer was
"well it's tradition"...
Hi tongue-in-cheek: I agree, I wrote about that in the previous day's blog: http://www.dollarvigilante.com/blog/2011/7/13/the-bell-tolls-for-thee-dollar.html