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Forbes: Why did Ron Paul say gold could go to infinity?

This week, former Congressman Ron Paul said gold could go to infinity. Many people will be tempted to buy gold based on his prediction. It’s certainly exciting to think about the upside, the profit potential. Who doesn’t want to buy whatever’s going up? However, in the case of gold, there is a serious error in this thinking.

Dr. Paul has put his finger on something very important. The government is abusing its credit, and borrowing itself into oblivion. If this continues, then the value of the government’s debt and currency will drop, probably quite rapidly. This means the price of gold will skyrocket.

Suppose you buy gold today at $1300, and then the price doubles. Should you rush out to sell the gold, to take profits? At $2600 an ounce, you have twice as many dollars for your ounce of gold.

This is a phantom profit because each dollar is worth half as much. The rise in the gold price simply reflects the falling dollar. An analogy may help clarify this key point. Imagine being on a rowboat. The boat is tossing up and down on big waves, and at the same time the tide is going out. You look up at a lighthouse on a rocky peninsula jutting out into the sea. You wonder something.

“Why is the lighthouse jerking up and down, and why is it rising?”

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I Wish These American Writers Would Learn The Difference,,,

Between a "Federal Reserve Note" and a United States Dollar !

A federal reserve "Note" is an I.O.U. note issued by the federal reserve banking cartel !

A U.S. dollar is 371.25 grains of "Silver" ! Twenty of these "Silver" dollars equals one ounce of GOLD !


So how will Gold be measured when FRN's become worthless?

Answer: In amounts of Silver it will buy, in amounts of copper it will buy, in amounts of apples it will buy, in amounts of Honey it will buy, etc. etc. etc.


SteveMT's picture

Tick, tick, tick. No errors in Ron Paul's thinking.

The reserve currency status is the only thing that is keeping the dollar afloat. When that status is removed or rendered irrelevant, TSHTF.

"Gold is the objective measure of economic value.
The dollar is the exact opposite. It is designed to be bent and twisted by our monetary central planners."

Wrong! The dollar should also be "the objective measure of economic value," just like gold. The dollar use to be "as good as gold." That is what the Founding Fathers intended and required be adhered to in the Constitution. If dollars are printed to infinity, then the price of gold as well as everything else will also go to infinity, like what happened in Weimar, Zimbabwe, Argentina, etc.

Dont forget the dinar

In Yugoslavia in the early Ninety's? One million dollar dinar bought one egg. And it wasn't a golden egg either.

Money talks and dogs bark

And if you dont then you only have 1300 left , half the value.

And if you don't buy gold at 1300 then you only have 1300 left in pocket not 2600 but the buying capacity of that 1300 is now half.

So what Ron Paul is saying in the worst case you hold on to what you've got atleast you wont lose ! So he has a point.

Preservation on wealth

Like someone else mentioned below its preservation on wealth.

How many Zimbabwe dollars buy an ounce of gold?

44.8 trillion $

It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people that pay no price for being wrong.
Thomas Sowell


US citizens hold more debt than any other nation.

This always reminds me of the drawing showing a street scene and the caption asks the viewer to find the richest guy in the picture. Turns out it was the bum because he had 3 dollars and no debt. Everyone else had nice stuff but it was all financed.

Would hyperinflation "help" these people out?

Seems you could pay off much of that debt if that happens.

As I have repeated for what

As I have repeated for what must be the millionth time, there is no correlation between the value of the dollar, the number of dollars, or the price of gold.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

To Infinity...Nah

Somewhere on the road between 1290 and infinity, there will be a dollar collapse. Infinity and the "value of gold" will intersect at some point.

Most folks don't understand that if an infintesimal amount of dollars are chasing an oz. of gold- guess what/ nobody sells because dollars are worthless.

If you came to me with a trillion Zimbabwe dollars looking for an oz. of gold- you wouldn't get it. The point being is that if dollars become complete asswipe nobody would trade them for gold.

Gold is a store of value and wealth. Owning it will help immensely if the dollar collapses, the world gets a new reserve currency, or when the world discovers that the US has no gold. I own gold as an insurance policy. I could care less what the day to day price is in artificially inflated fiat.

Well if the dollar is worth

Well if the dollar is worth nothing, then priced in dollars gold would go to infinity.

But there is a second part to this argument that some people here aren't cosnidering when saying gold is "just a store of value." What these people aren't considering is basic supply and demand.

Let's say you are walking down the street with $10,000 in your pocket and you're thirsty. You walk into a store and there's two bottles of water. One is priced at a dollar and the other $10,000. Which do you buy? Quality being equal, you buy the $1 one.

Now say you're lost in the desert and on the virge of death by dehydration and you come across the lone stand selling the same bottle of water you came across in the city except now it's $10,000. Would you now pay $10,000 for that bottle vs the alternative? Of course you would.

Right now the demand for physical gold and silver is relatively limited. People buy it to make a little money on upswings in price, or to possibly protect their wealth. Paper money is still the preferred medium of exchange. Now imagine paper money becomes worthless. What happens to the demand for physical gold and silver?

The massive demand created by such a scenario would mean much more than just "preservation of wealth" for those holdng precious metals. Only the market can dictate what that would mean, but it could mean those with the foresight to hold precious metals could end up very wealthy.

"In reality, the Constitution itself is incapable of achieving what we would like in limiting government power, no matter how well written."

~ Ron Paul, End the Fed

"Goes to infinity?"

"When gold goes to infinity" means "When there is a dollar crisis."

In that case, any physical commodity "will go to infinity," because the NUMBER OF DOLLARS it would take to buy a loaf of bread? Innumerable in/after a dollar crisis.

ANY TANGIBLE asset; land, collector items, cars, bikes, boats, atvs, guns, ammo, food, water, gold, silver, you name it...

Will "go to infinity."

This is also the same

This is also the same argument that Schiff makes in regards to the stock market. The value of stock isn't going up, it just takes more dollars to purchase the them.

A nice "for dummies" article.

A nice "for dummies" article. Boats and lighthouses and rubber bands. Monetary matters can be fuzzy.

10-15 million more voters need to believe in non-interventionism (liberty) at home and abroad to change America. Minds changed on Syria. Minds changing on privacy. "Printing money" is part of the dialogue. Win minds through focus, strategy.

How Much More Will Bullets Be Worth?


the concept is the ratio

the wealth factor of gold over the wealth factor of USD
As USD approaches 0, gold approaches infinity.

Sure... As a ratio. But, in

Sure... As a ratio. But, in reality, the dollars are losing value while the gold is not going up or down much at all in value.

Floydius's picture

Incidentally, this is also

Incidentally, this is also why you cannot divide by zero. Used to drive me crazy in grade school -- always thought X/0 should = 0. Teacher just told me you couldn't divide by zero and that it was too difficult to explain why to a 5th grader.

Then one day I had the epiphany that if you *could*, the answer would be infinity, not zero -- and that's exactly what Ron Paul is saying. If the dollar goes down to zero, gold goes to infinity (in terms of dollars). In other words, the FRN will be worthless and you cannot divide by it. Of course at least FRNs can be burned. ;)


The "dollar" goes to Minus Infinity! ;-)

Infinity and relativity

Dr. Paul is having some fun here.

Gold 's great virtues are its qualities as a store of value and a medium of trade. Holding gold will preserve your purchasing power, while paper dollars will not. But I don't expect that you'll ever be able to buy a new car for a single gold coin, no matter how long you hold onto it. Your gold coin may someday be "worth" trillions of dollars -- but on that day, new cars will be selling for tens of trillions of dollars.

One might speak of gold's price being "infinite" -- if you measure the price in (totally worthless) dollars. But if the dollar becomes worthless, ALL commodity prices will be infinite, compared to zero. I don't expect that gold's purchasing power -- measured in other commodities, not dollars -- will ever truly skyrocket. Except in the very short term: there may be dramatic price spikes in the event of a dollar panic or short squeeze, giving a temporary boost to gold's (commodity) purchasing power . . . and that would probably be a good time to trade your gold FOR those other valuable commodities. In the long run, gold is just one commodity of many, and its market price will be determined by its usefulness, scarcity, and the difficulty of mining more.

When one speaks of "infinity," one should keep "relativity" in mind. Gold may someday have infinite value relative to dollars -- but its value may be less -- or more -- relative to silver or other commodities.

Recommended reading: The Most Dangerous Superstition, http://www.amazon.com/Most-Dangerous-Superstition-Larken-Ros...

Gold is. PRESERVATION of wealth

Ron Paulo isn't flawed in this thinking. He says this all the time. It PRESERVES wealth

How can gold go to infinity

How can gold go to infinity if it is a limited resource?

Never be afraid to ask simple questions.

Infinity as priced in dollars

at some point, nobody will exchange an ounce of gold for any amount of dollars. Thus, its price is effectively infinity as measured in dollars.