Friday evening, December 4, 2009 my wife and I will be honored to hold a reception for the world’s most popular congressman, Ron Paul. The good doctor will be in the Phoenix area in support of Campaign for Liberty, an educational organization that sprang from Dr. Paul’s exhilarating 2008 campaign for the presidency.

Earlier Friday, Dr. Paul will address the Arizona State University chapter of Young Americans for Liberty at ASU’s Hayden Lawn. Following the address, he will sign copies of his bestseller, End the Fed. The reception will be held at our home 6:00 p.m. to 8:00 p.m. A $250 donation to Campaign for Liberty earns entrance. Attendance will be limited to 80 persons.

I’ve often joked about why I should support Ron Paul’s efforts when, if he were successful, his programs would effectively put me out of business. Dr. Paul believes in the gold standard, under which people could redeem their paper dollars (digital dollars nowadays) for gold at their local banks, as was the case before Roosevelt’s 1933 Executive Order # 6102, which called for all Americans to turn in their gold and gold certificates to the government.

Prior to 1933, U.S. paper currency was freely redeemable in gold coin coins, the most common of which were Double Eagles ($20 Liberties and $20 St. Gaudens), Eagles ($10 gold coins) and Quarter Eagles ($5 gold coins). Yes, that means that before Roosevelt’s dastardly deed, a $20 bill could be exchanged for a $20 gold coin. Today, a common-date circulated $20 Double Eagle carries a paper dollar price of about $1500.

Actually, though, if Ron Paul were successful and there were no need for CMI Gold & Silver Inc. to be in business, I and my staff would have to find other forms of employment. Maybe I would become a furniture maker and increase the wealth of our country (and the world) ever so little. As is it, my economic activity creates no wealth.

I’m not apologizing for making it possible for Americans to convert their dollars into gold. I see the ownership of gold (and silver) as essential to financial survival nowadays. But, if the nation were on the gold standard and banks redeemed paper money for gold, I would have to do something else, and maybe that something else would be positive, like producing something to be consumed.

Further, and obviously, Dr. Paul wants to End the Fed, as his bestseller is titled. Because the Fed is an inflation machine, ending the Fed (at least its money creation ability) would also lessen the need for gold bullion dealers to exist, thereby possibly adding more workers to the productive sector.

For those readers who live in Arizona and would like to attend the reception, I urge them to make the $250 donation ASAP. (Be sure to mark the $250 Event Ticket radio button at the bottom of the page.) I’m optimistic that we will reach the 80 person limit, and I am certain it will be an exciting evening with great conversation with a lot of good people.

In a move that the gold market did not anticipate, the IMF sold 200 tons of gold directly to India’s central. It was widely known–commented on on this blog February 12, 2008–that the IMF would be a gold seller.

Several years ago, the IMF let known its intentions to sell 400 tons of gold and announced that the sale would be in compliance with the Central Bank Gold Agreement (CBGA) so as not to disrupt the market. Instead of selling under the CBGA, the IMF sold directly to the Reserve Bank of India.

Some analysts are saying that they are surprised that the buyer was India and not China. Actually, I think they hoped that China would be a buyer as the IMF sold under the CBGA. Neither China nor India gave any indications of dealing directly with the IMF.

Now, gold market analysts are speculating that China will take the remaining 200 tons. And, it is pure speculation because no analysts have pipelines to the decidafiers at the People’s Bank of China, as China’s central bank is known. More important, though, a major precedent has been set.

The argument against central banks buying gold has been that the central banks would be cutting their own throats. Since they are major holders of dollars, any purchases of gold would be attacks on the dollar because dollars would be eschewed in favor of gold. Now, the Reserve Bank of India has set a precedent: it is acceptable for central banks to convert large quantities of dollars into gold. Who will be next?

Possibly China, but why not Taiwan or Japan, both major holders of dollars.

I have no doubts but that the bullion houses that are short huge quantities of gold on the COMEX, as discussed in Gene Arnsberg’s latest Got Gold Report, were counting on the IMF sales being dampers on the price of gold. As I speculated in my September 12 post, sometimes the big boys are on the wrong side of the market.

This remains a major bull market for gold and silver. Investors already with big positions have the luxury of waiting on price dips to buy. Investors who have not yet entered the market should consider biting the bullet and entering at these levels. The major news about gold is to be bullish, and there is no way of putting a top on this move.