Académique Documents
Professionnel Documents
Culture Documents
NOVEMBER 2014
Claudio Grass
NOVEMBER 2014
NOVEMBER 2014
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NOVEMBER 2014
Total
Against:
39%
Left to chart: This chart
illustrates the results of the
opinion poll taken on the Swiss
Gold Initiative. The figures show
that the Swiss public remains
indecisive on what course to
take.
Probably No
11%
Yes
29%
No
28%
Total
In Favor:
45%
Undecided
16%
Source: www.Mineweb.com
Probably Yes
16%
NOVEMBER 2014
Last month, Global Golds Claudio Grass met with Dr. Ron Paul
in Lake Jackson, Texas at the Ron Paul Institute for Peace and
Prosperity. Here we show you how their discussion unfolded.
Dr. Ronald Paul is an American
physician and renowned political
activist for the cause of liberty
in American political venues. He
represented the Republican Party as
former Congressman of Texas and
twice as presidential candidate. He
also entered the 1998 presidential
race as the Libertarian Partys
presidential nominee. Dr. Ron Paul
is also known for his strong advocacy
of Austrian economics, which is
reflected in his demands for limited
constitutional government as well as
adopting a free market economy and
returning to a gold-backed currency.
He is widely known for his strong
criticism of the Feds monetary policies
in the 1980s that drove up inflation.
He is currently a senior Fellow of
the Mises Institute. Dr. Ron Paul
founded a number of organizations
promoting his cause, namely the
Foundation for Rational Economics
and Education (FREE), the Campaign
for Liberty, and Liberty PAC. As a
form of media outreach to the public,
he created the nationally syndicated
podcast Ron Pauls America, in
addition to his online network The
Ron Paul Channel. Dr. Paul also has
a number of publications, including
The School Revolution: A New Answer
for Our Broken Education System, in
addition to a number of books on
Austrian economics and classical
liberal philosophy, such as The Case
for Gold, A Foreign Policy of Freedom,
Pillars of Prosperity, The Revolution:
A Manifesto, End the Fed, and Liberty
Defined.
Global Gold:
Dr. Paul, thank you very much for taking the time to speak with us. It is
a pleasure to meet with you and learn your perspective on political and
economic developments. But first, how would you describe your days
since youve retired from Congress?
Dr. Paul:
Im staying busy! Ive been involved in several things in my life. One was
practicing medicine. That was very important, but I dont do that anymore.
Even when I got started into politics, I did both for a long time. When I left
Congress and went back home I practiced medicine for twelve years. The
other activity was promoting the cause of liberty, believing that its the lack
of liberty that causes war and causes poverty and suffering and that if
people were to understand the importance of personal liberty that the world
would be a much better place. So the organization that I created was called
Campaign for Liberty but all those years whether I was in Congress or out
of Congress, I have been campaigning for liberty in different ways. When I ran
for office, it gave me a chance to speak about the issues. It actually all started
with the breakdown of Bretton Woods in 1971. That was a big monetary
event for me because Ive been observing the developments and had studied
Austrian economics. Even though it was anticipated, it was still very dramatic
when it happened. So, a couple of years later I decided to run for office. I
did not expect to win any election because, as you know, my philosophy was
different. It didnt seem to fit the pragmatism that everybody wanted. When I
got elected in 76, I started an organization called The Foundation for Rational
Economics and Education, the F.R.E.E. foundation, which is also the parent
of the new organization now, the Institute for Peace and Prosperity. Since
leaving Congress, I went in different ways, including Internet broadcasting,
programming and interviews; I do a bit of that. I also have a speaking activity,
where I go as frequently as I can. College campuses have received me pretty
well. I enjoy that and do a lot of it.
I also started a Ron Paul curriculum for homeschoolers, believing once
again in the importance of education. I dont believe that everyone should
be homeschooled or that some are more inclined than others but there is
a certain group that can handle it - parents and students. I think that is very
important. I stay pretty active and though I am retired from Congress, I am
not retired from promoting the cause I am talking about.
NOVEMBER 2014
Global Gold:
Fantastic! What has changed since you left Congress? Are you freer in
the way you can speak and address people?
Dr. Paul:
My schedule is more under my control and I only go where I want to go. And
if I dont want to fly every single week, I dont. When youre in Washington,
government is on autopilot, it just goes. The old saying used to be boy youre
lucky the legislature is out of session, liberty is safe. This isnt true anymore,
because right now the President uses executive orders to go to war, issues
statements, violates civil liberties and gets involved in the economy through
the central bank, his central economic planner. Even the judicial system rules
against us and violates our liberties. The whole thing is so out of control. I feel
I am much better off now because I can still do what I think is important, as
far as writing and speaking out is concerned. At the same time, I dont have
to spend a lot of time with those politicians in Washington.
Global Gold:
When you look at the United States, or lets say the western world in
general, what do you think of the shape were in? The stock market
is skyrocketing and the real estate market seems to be recovering or
even spiking in certain areas.
Dr. Paul:
If you look at things from the surface, it looks like things are great. I am
convinced, however, that we are probably in the worst shape the world has
ever been financially. Thereve been bubbles and distortions and currency
breakdowns for thousands of years, but I dont think that the world has ever
had a universal acceptance of a fiat currency like we have with the paper
dollar, US Dollar, today. It is being used endlessly as the reserve currency.
Debt and investments have been pyramided. Even now, stock markets are
doing well and people think that bonds are lovely. Its all a deception and even
if people claim theres no consumer price inflation, I think there is plenty but
not as much as we are still going to see in the future. A lot of people forget
that the distortions created by the inflation of the money supply will and
does lead to higher prices and these may arise in different areas. In stocks
and bonds, prices are very high, so the distortions are great. Somebody
might say the housing market is back and doing well again. However interest
rates are distorted. Interest rates tell you the right thing to do, they give you
a hint. Business people arent perfect, half of them might do a good job,
the other half might do it badly, but its all ironed out and taken care of.
But when governments fix the rate of interest, everybody, in a way, makes a
mistake. Some are lucky and make more money than the rest, but this is still
based on bad information. That is why debt is out of control, and the bubbles
keep building. If you look at the malinvestment and the amount of debt as
a consequence of the dollar being the reserve currency, I think that the
problem is gigantic. Despite the power of the central banks, especially our
Federal Reserve and the power of politicians to spend money, ornamentally,
markets are more powerful than governments. The market always reigns.
I was watching and waiting for 1971 and the breakdown of Bretton Woods
after we dumped almost 500 million ounces of gold, trying to prove that the
government is smarter than the market. I even remember Lyndon B. Johnson
in the 1960s saying I am going to mint so many Kennedy half dollars that the
people will never be able to hoard them. But it didnt work. Silver reached
USD 1.23 and people started hording them, because the silver value was
higher than the nominal value of the coins. Markets are very powerful. The
markets overwhelmed Bretton Woods! We printed money and pretended
it didnt matter. And thats why we had that breakdown. Now we have that
strange phenomenon of this unbelievable trust in the US Dollar. This could
only happen because our country is (still) wealthy, but a lot of the wealth is
superficial because its based on debt. So, the people are going to be really
shocked when the hit finally comes because this system has existed for so
long and longer than any paper currency before it. The other thing that gives
NOVEMBER 2014
some confidence is the size of the economy and the perceptions of its health,
but there is also the size of its military. If you have a very solid currency,
even if you have the strongest currency, but people anticipate you will be
defeated in a war next week, then all of a sudden that particular currency
loses value even though common sense says its a strong currency. Military
power puts some support behind the currency. That is why I dont think the
US is vulnerable economically, but I think its vulnerable militarily. We cannot
sustain what we do, even though it seems like we can. We go everywhere and
solve everybodys problems. Just recently weve been talking in the news
about what we should do in Syria and Iraq. Should we continue an 11-year
war in Iraq and go back? Some politicians have come up with this astute
idea that its our moral obligation. But somebody has to pay for it! We did
get a couple of dollars back when we went in to fight Saddam Hussein when
he invaded Kuwait, for example. The question wasnt whether it was morally
correct for us to get involved in the war, or overthrow governments and that
we should do it without following the constitution. The only point being made
was we can do it and we will but we wont pay for it. In a way, that statement
made by politicians was translated to we are the mercenaries of the world.
Well, thats not going to work for very long. When its realized what kind of
a problem we have with the currency and the debt, the military is going to
continue to shrink. I believe that, right now, the military is on the defensive.
It took a long time for Obama to really work the war propaganda to be able
to enter Syria. The day will come when the dollar will weaken and we wont
be able to afford our welfare state. The debt will be a big burden and we
wont be able to maintain our military presence around the world. And then,
believe me, the world is going to change.
Global Gold:
When you look at the Japanese economy, theyre printing money like
theres no tomorrow. And now we have a lot of countries in Europe back
in a recession and inflation in the Eurozone is non-existent. So, Mario
Draghi is trying everything to depreciate the Euro and at the same time
put more money into the system. The ECB even recently introduced a
negative interest rate for deposits at the central bank.
Dr. Paul:
When interest rates are zero or even negative, everyone wants to buy more.
Back in 1979-1980, you could buy a US government bond and earn 15%.
Nobody wanted it. Right now, of course, what people dont quite realize is
interest rates are lower because the dollar is strong, but the average person
who wants to educate their kids in 10-15 years is not actually investing in
government bonds. Its all being bought by people who are playing this big
game. Sometimes we even give money to another country just so they end up
buying our treasury bills. It is amazing that this gimmick keeps working. What
I believe is that one day we will wake up and the system will dissipate just as
fast as it has grown, maybe even faster. It has taken lots of years to build up.
It keeps getting knocked down; things have been rocky and Ive see this quite
a few times in my lifetime: in the 70s with high interest rates, asset bubble
in 2000 and then the housing bubble. And we had this horrendous bailout
and people still came back to rebuild the bubbles. They will not concede that
it is better to use a hard asset as money than pieces of paper that a couple
of people in a secret room decide how many of them there will be, and that
whatever they decide they execute it with a click on the computer.
The foreign nations are all at fault. Americas not at fault, because they keep
taking our money. Were not going to go back to work! In fact, Americans
would never have to work again, because we can just print more money and
buy everything that we need. Almost everybody knows that something will
happen at some point along the way. But thats not going to happen anytime
soon. Right now theres a lot of trust by foreign takers of our dollars, they
keep taking them. And as long as they do that, I guess, were going to limp
along and the bubble keeps getting bigger and bigger.
NOVEMBER 2014
Global Gold:
Dr. Paul:
The market is anticipating the vacuum that is building up and will come
eventually. With the Russian situation and the sanctions, were deliberately
almost pushing them out of the dollar. Theres a vacuum out there and the
BRICs or somebody else is going to come along and create a substitute.
Right now its not clear whats going to evolve, there are still some questions.
Somethings got to fill the vacuum, but right now the vacuum isnt big enough.
The dollar still does function, but there will be a day when it wont. I think its
a shift, as you say to the East, because we will keep selling gold and China is
going to keep buying gold. I think it is so ironic that our policy is to deliberately
keep the gold price down. This might be really building the case for China.
But the people who are doing this dont believe gold is money anymore,
so they pretend at least they dont care, because then they would have a
different monetary policy. They actually convinced themselves that theyre
smart enough to manage money and not to have gold. One time I asked Alan
Greenspan, because he had been pro-gold standard in the past and said:
What about this? You know, when we have a balance of payments problem
we shift back and forth and make these adjustments. He said: Well, it is
different now, because we have learned to manage paper money as if it were
gold. He said that very sincerely. And probably they do believe that they are
smart enough to substitute the market. They have to be arrogant, because
why should one person, like our Federal Reserve Chairman know how to fix
the price of every transaction. One half of every transaction depends on the
fixing of the interest rates and at the same time they decide on the level of
the money supply. And yes, they have the Federal Reserve Board, but it is one
person that makes the decision. They can fool a lot of people for a long time
but markets will eventually catch on.
Global Gold:
Dr. Paul:
I had him sign that particular article and I said Would you write a disclaimer
on it?. He said: I still support everything I wrote. To me it was like What
is going on here? Who are you kidding? He sounded serious. Maybe he
believed in what he said but felt that the world wasnt quite ready for him.
Ronald Reagan, for example, he was a loved president and he said all the
right things, but deficits exploded and lots of financial problems developed
over time. To Greenspan it was: Were not ready to do it, the conditions
arent right. Ill be a good manager, you know. If someone has to manage the
money, Ill do it. Of course history is going to show he didnt do a good job
managing it.
Global Gold:
Dr. Paul:
History will show Bernanke didnt do a good job either. When low interest
rates are the cause of the problem, what would you do? Lower them even
more to make them negative?
NOVEMBER 2014
Global Gold:
Dr. Paul:
Well, I think there is some truth to the big cycles. I dont think theyre
absolute, but the cycle is there. What if youre off ten years or so? I dont think
we need cycle theories; I think that basic fundamental laws are sufficient
to understand what is coming: The longer you print money and distort the
market, the bigger the bubble and the bigger the bust. I wanted to study
all the details of the cycles, I just know a bit about them. I know there are a
lot of variables involved, because if the charts worked perfectly, that would
mean that cycles would be predictable and the theories would be objective.
However this conflicts with the subjective theory of value. People place value
on certain things for other reasons, maybe because thereve been no wars
for a while, or maybe war breaks out and maybe somebody just dropped a
bomb - this changes things all at once. I think cycles theories are interesting,
but I wouldnt depend on them.
Global Gold:
Dr. Paul:
NOVEMBER 2014
is gone. That is a true bankruptcy but theyre even going to say: You cant let
Detroit crumble, go to the federal government print some more money and
delay the inevitable. But on the federal level, nobody gets denied a cheque.
More food stamps and more retirement benefits encourage people not
to produce. Again, its trust in our monetary system. As long as they trust
the money, it is going to go on for a while, the bubble gets bigger and the
inevitable bust gets worse.
Global Gold:
Dr. Paul:
No, I think itll continue but I think it will calm down just as the confrontation
with the Soviets did when they were spreading their empire and going into
Afghanistan. That situation calmed down because they went bankrupt and
had to go home. If people dont trust us or our money anymore, we will have
to tighten our belts. Once the trust is lost, the more money you print, the
less the trust is going to be. Right now, they have no other place to go. They
could go and beg Europe to print Euros, but they trust the dollar more. As
long as they keep doing that, these insane policies will continue. I think that
governments need to fold, they need to be blamed for what they are doing.
Central banks need to be able to defend hard asset money, gold and silver,
because it works. And yet, right now, theres just a few of us who believe that,
but I think the day will come where people will realize the truth. We have
been through similar situations before. In the 1860s, during the civil war, we
went off gold for maybe 18 years. It can be done.
Global Gold:
I personally believe that no one knows the future. Pericles once said
we cant predict the future, but we can prepare for it.
Dr. Paul:
I think one can recognize trends, but knowing the timing of events is impossible.
Thats a challenge for investors too and thats why people should be cautious.
If people listen to me talking, they could go out and sell everything they have
and buy gold. But Ive been looking at gold since it was USD35/ounce, and
my assumptions made it pretty safe, buying a little here and there wasnt
too bad, but the trends are very definite. I believe in a climactic end to our
current monetary system. So, I am convinced that we cant tell the future,
however recognizing trends is possible.
Global Gold:
Dr. Paul:
Yes, but I dont usually call it investing. I usually call it my little insurance
against those crazy people in Washington. I didnt want to pretend that I
know how the charts are going to work. If I knew gold was going to go up the
next three years, I would have bought a futures contract, gotten leveraged up
and made a ton of money. I didnt know when to get in and when to get out.
I just wanted to have an insurance policy because I believe the government
will continue to do what theyve been doing: spend too much and run up
too much debt. It was part of whats been engraved in our society. All the
politicians, news, everybody believes that deficits are good, spending is good,
printing money is good. So, it is going to last until someday all the people
rush for the exit.
NOVEMBER 2014
Global Gold:
Gold has been money for 5000 years and now we have been living on
a pure fiat money standard for 40 years. Like you, we think of gold as
a monetary insurance. China is buying gold, India is buying, Russia is
buying and Central Asian countries are also buying. Do you believe they
think of gold as money?
Dr. Paul:
The person holding the gold when the world crisis hits will likely establish the
new currency. We certainly were in the drivers seat after World War II for
various reasons, because we still had a good gold standard. People who were
safe from all the bombings and the killing, came to us to buy goods and they
paid in gold. There was more gold in the United States back in 1945 than any
one place in the world. It wouldve been a perfect time after 1945 to establish
a gold standard and live up to it, instead of saying we can print money forever
and nobody will ever notice. But the French woke up and started to take back
their gold. But we were in the drivers seat back then. Were not in the drivers
seat now, even though it looks like we are. We have military might. We have
economic wealth, still. But we are not in the drivers seat because eventually
it will be the East, mainly China, maybe Japan and Russia, India maybe too,
the BRICs.
Global Gold:
Dr. Paul:
Global Gold:
The Ron Paul Institute for Peace and Prosperity was founded in 2013 as a project of Dr. Ron
Pauls Foundation for Rational Economics and Education (F.R.E.E.). The organization is dedicated
for the purpose of education based on Dr. Pauls belief that education plays a fundamental role in
creating a peaceful and collaborative policy approach. To know more about the Ron Paul Institute
please follow this link, or to offer support to the organization, please click here.
NOVEMBER 2014
The Austrian School tells us where we went wrong in managing our economy!
NOVEMBER 2014
Denationalisation of Money
NOVEMBER 2014
OUR SCENARIOS
We dont have, nor do we claim to have, a crystal ball. What you will be reading in this section is our view about the direction
that politics and economic developments will take. We use our common sense and refrain from using complicated models,
which no one understands. In each issue we will introduce three scenarios. Each scenario will be explained and
we will discuss how probable we think each of the scenarios is and how this could impact your gold investment.
STATUS QUO
BACK TO NORMAL
CRISIS
DESCRIPTION
DESCRIPTION
DESCRIPTION
PROBABILITY: 70%
PROBABILITY: 10%
PROBABILITY: 20%
IMPACT ON GOLD
IMPACT ON GOLD
IMPACT ON GOLD
OUR CONCLUSION
Although it is possible that in the short term we continue to see some volatility in the
gold price, our long-term fundamental outlook regarding the world remains
unchanged. Gold is THE asset to hold in uncertain times!
Disclaimer: The following publication represents the opinion and analysis of Global Gold AG (GG), based on data available to the firm, at the
time of writing. This GG publication is not a recommendation, offer or solicitation to acquire or dispose of any securities, investments or any other
transaction. As trading and investing may involve serious risk of loss, GG recommends that you consult with a qualified investment advisor, one
licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a
transaction with financial ramifications. GG assumes no responsibility for the content, accuracy or completeness of the information presented.