Ron Paul: Get Back to Gold

Away from the outer margins, most mainstream gold analysts believe that central banks have simply used price rallies as a opportune moments to sell what is a nonyielding asset. It costs money to store gold, and the metal produces no dividends.

Paul wants to move away from a system of fiat money where central banks have the discretion to print currency at will, and instead move back to the gold standard in which the money supply is limited by the quantity of the metal available.

He says that the surge in bullion prices has come as a result of the steadily deteriorating value of the greenback brought on by deficit spending by the federal government in general and the Fed parceling out too many new dollars specifically.

In the interview, the congressman also said he thought different currencies backed by precious metals should be legalized and allowed to compete with each other. In particular, he suggested that the exchange-traded funds that hold inventories of bullion, streetTracks Gold Shares(GLD) and iShares Comex Gold Trust(IAU), could issue certificates that could be spent as money.

Competing currencies would also legitimize Liberty Dollar, an Evansville, Ind., company that got in trouble with the FBI and the U.S. Mint for making its own solid silver coins, some stamped with the image of Paul. The firm was raided just before Thanksgiving and all materials were confiscated, including the Paul dollars.

Paul acknowledged that competing currencies could only occur with substantial changes to the criminal law and the tax code. Currently, it's illegal to try to spend precious metals coins as if they were currency, he said. The tax code also means that the changing dollar price of gold creates taxable capital gains. That's something which would need to be repealed, he says.

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