Republicans Embrace Gold to Hedge Non-Existent Inflation
Worth a post but this one is an item of information for gold bugs (hat tip J. McCord)
From Bloomberg:
Republicans Embrace Gold to Hedge Non-Existent Inflation
The platform the party adopted yesterday at its national convention in Tampa, Florida, calls for a commission to investigate a possible “metallic basis for U.S. currency.”
The move is driven by supporters of Representative Ron Paul of Texas, the libertarian presidential candidate who has long criticized the Fed’s control of the money supply and wants to revive the gold-dollar link to preserve the currency’s value.
….
I’m not particularly worried,” said economist John Makin of the American Enterprise Institute in Washington. “It’s not as if we’re about to rocket higher
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Such vigilance on inflation could affect the Fed if Romney wins in November. The former private equity executive has vowed to replace Bernanke, whose term expires in 2014. He’d likely fill any unexpected vacancies on the Fed board with inflation hardliners, who might favor raising interest rates before the end of 2014, as Fed policy makers currently plan, says Mark Thoma, an economics professor at the University of Oregon.
“If Romney is elected, he will put people on the board of governors who are very credibly hawkish,” Thoma said.
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Romney’s running mate, Representative Paul Ryan, the House Budget Committee chairman, called in March 2009 for the Fed to base the dollar’s value on market measures “such as a basket of commodities.” Ryan also has assailed the Fed’s asset purchases.
“There is nothing more insidious that a government can do to its countrymen than to debase its currency,” he said in December 2010.
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Critics such as Meltzer worry that the Fed will wait too long to begin withdrawing its extraordinary financial support.“We have a long history of producing money too fast, faster than the growth of the economy, and it always ends up in inflation.”
A few comments.
1) What rate is considered non-existent inflation? The rate last year was 3.2%. This year it was running at the same pace until May.
2) I am not sure gold is actually an inflation hedge – but may be a deflation hedge against a debased currency as it can be readily convertible to a more stable currency. If every currency devalues I am not sure what would happen
3) Adhering to a gold standard prevents #2 as you cannot easily rev up the printing presses
But, in the end, the way our economy and the Fed is structured we cannot go to a gold standard. So private investors will just have to do any hedging themselves.
“There is nothing more insidious that a government can do to its countrymen than to debase its currency,” he said in December 2010.
This is what the fed has been doing since conception. Read somewhere once that since conception of the fed in 1913 the dollars value is now worth 2% of its value in 1913.
Even Robert Not Paul Samuelson recognizes that this is a dumb idea.
We left the gold standard because it wasn’t working.
Inflation at a modest rate may be the price we have to pay to have an economy that doesn’t lurch from crash to crash and wreak terrible harm to the people who have to borrow money… farmers and businessmen.
jwbeene
nothing more insidious if all you care about is what the value of your money will be in a hundred years.
there are better things to care about.
Volker trying to kill inflation in 1981 or so caused more pain and economic loss than the average 3.5% inflation over the last hundred years.
But you sure can scare yourself stupid if you think that you have “lost” 98 cents for every dollar you had. you haven’t. at least not if you spent it, or invested it, the way money is supposed to be used.
tell you this: if you had “saved” it… and never spend it… you have lost 100% of its value.