Wednesday, December 07, 2005

GOLD $500

What Do Rising Gold Prices Mean?

by Ron Paul

Gold prices historically rise when faith in paper currencies erodes, as investors seek the intrinsic value of gold to protect themselves from inflation. It’s interesting to note that while the U.S. dollar has regained some of its value relative to other paper currencies like the euro, it continues to lose value relative to gold and other hard assets. This shows the folly of using one fiat currency to value another.

Since 1971, the Federal Reserve and U.S. Treasury have employed a pure fiat money system, meaning government can create money whenever it decrees simply by printing more dollars. The "value" of each newly minted dollar is determined by the faith of the public, the money supply, and the financial markets. In other words, fiat dollars have no intrinsic value.


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