There are few people—especially in the political system—who understand the importance of gold better than former Texas congressman Ron Paul. Fittingly, Dr. Paul once remarked that, "Because gold is honest money, it is disliked by dishonest men." Hence, central bankers and corrupt politicians have an incentive to engage in gold manipulation.
Although he no longer serves in government and has given up his presidential aspirations in favor of supporting his son, Kentucky senator Rand Paul, the wily elder Paul is still locked in to what's going on in the precious metals markets. He recently sounded the alarm on what he sees as more evidence of gold manipulation.
Picking a Fight With the Fed
Ron Paul served in Congress for more than three decades and was noteworthy for how incredibly consistent his views and positions remained over the years. Perhaps more so than any other member of Congress (or the executive branch) in recent memory, Dr. Paul has never wavered from his anti-war stances, his emphasis on small government and personal liberty, and especially his crusade against the policies of the Federal Reserve.
Despite the mainstream media's many exhortations against any sort of gold standard, Paul has walked the very path that he advocates. His investment portfolio is almost exclusively made up of gold and silver mining stocks and, of course, physical precious metals. His famous verbal battles with former Federal Reserve Chair Ben Bernanke at congressional hearings have become the stuff of legend. Dr. Paul would routinely brandish an American Silver Eagle coin at these hearings, and pepper Bernanke with questions about gold's virtue. He even got the Fed Chair to openly dismiss the notion that "gold is money." The country's policymakers, including current Fed Chair Janet Yellen, have uniformly provided no sufficient answer to Paul's question about the real value of gold.
Though his views on monetary policy and gold manipulation are often denounced as "far-right" or "ultraconservative," Ron Paul did undeniably succeed in opening up the conversation about the wisdom of the Fed's current policies of money-printing and profligate spending. His son Rand has carried on this legacy in some respects, introducing legislation to audit the Fed and suggesting a commission be established to explore the potential for returning to a gold-backed monetary system.
Uncovering Gold Manipulation
More recently, Dr. Paul has again made headlines by explaining the "strange behavior" of the markets with a familiar theme: gold manipulation.
In an effort to distort the value of the dollar to the government's favor, Paul cited the use of a New-Deal-era mechanism known as the Exchange Stabilization Fund (ESF). Essentially, this mechanism allows the government to toy with the gold price (i.e. gold manipulation) in order to support the dollar. This works because the dollar still maintains a strong inverse relationship to gold, much as it did when we were under a gold standard and under the Bretton Woods system (an arrangement in place from post-WWII to when Nixon closed the gold window in 1971 wherein other currencies were pegged to the dollar, which was convertible to gold).
According to The Street, the ESF is “an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention. The fund allows the U.S. government to influence currency exchange rates without affecting domestic money supply.” In other words, just what Dr. Paul is talking about. Without this interventionist, anti-free-market mechanism, Paul believes the markets would look very different than they do now. Moreover, he maintains a skeptical opinion of how the Fed is going to normalize monetary policy.
The idea of gold manipulation casts a wide net or culprits, but it is usually attributed to private megabanks trading on the financial markets. Here, Paul is pointing the finger at the federal government—a familiar target of his—and making the case that neither the authorities nor the market makers are committed to allowing the markets to freely operate.
If nothing else, this adds even more support to Ron Paul's long-standing motto (and book of the same title), "End the Fed," which he often characterizes as the unelected fourth branch of the U.S. government.
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