Many economic/political observers ridicule the suggestion that the massive printing of Federal Reserve Notes (a.k.a. US dollars) could result in hyperinflation.  They have long viewed the hyperinflation that ravaged Germany 1919 – 1923 to have been an anomaly.  They become outraged at the suggestion that hyperinflation could happen in the United States.

Those Germans were just stupid, they reason.  We’re smarter than that, they posit. They ignore the hyperinflation that has ravaged many South American countries, again attributing it to “less sophisticated” peoples.

Hyperinflation remains a threat to financial well-being of all peoples as long as central banks exist, which is basically everywhere there are governments.  Zimbabwe is the latest example, where the central bank has just unveiled a 100 trillion dollar banknote.  The new banknote was worth about $300 US dollars when introduced; it falls daily in value.

Sophomoric analysts attribute the chaos in Zimbabwe – and the need to print a $100 trillion dollar banknote – to the political fighting between Robert Mugabe, who was elected president in one of Africa’s more famous “one man, one vote, one election” circuses in 1980 and opposition chief Morgan Tsvangirai.  Mugabe, through hook and crook, has managed to be “reelected” every since, which is common in sub-Saharan Africa.  Tsvangirai claims to have unseated Mugabe in the last election.

But, the actual causes of the destruction of Zimbabwe were Mugabe’s socialistic programs, complete with confiscation of private property to placate Mugabe’s supporters.  Now, hyperinflation has a grip on Zimbabwe as its central bank issues paper money to pay for government programs.

Will the massive printing of US dollars by our central bank, the Federal Reserve System, for the ongoing bailouts result in hyperinflation?  At this point, there is no way of knowing.  But, it is certainly reasonable to invest in anticipation of at least some inflation.

Readers who have not yet investigated investing in gold should do so.  Investing in silver also makes sense.  Everyone needs to know his options.

Among gold and silver investors there is a common cry to get rid of the Fed and return to the gold standard. However, with the Establishment having controlled our schools and universities for decades, the masses are duped into believing that the money and banking are much too complicated to be understood by anyone but those educated at our “more esteemed” universities.

Without a doubt, the masses believe that the arcane workings of the Fed and our monetary system are to be left to “the better educated,” to those who have “made a life of studying economics” and even have doctorates from Yale or Harvard. If you doubt this, try criticizing the concept of central banking (The Fed is our central bank.) in front of anyone with a college degree.

You may run across someone who is quick to criticize the Fed’s actions. “The Fed should lower (or raise) the discount rate,” is a likely comment. Those who really want to show their knowledge of our banking system may lay something like this on you: “The Fed should cut the minimum reserve requirements on CDs.” Better yet, you may get, “The Fed needs to raise the margin requirements on stock loans to cool stock market speculation.” Now you know you have a college graduate who sat through a couple of finance classes. This person has been completely indoctrinated into the world of central banking and government control of money. He (or she) is your average college graduate, and that is how the fraud of the Federal Reserve System is perpetuated. But, don’t even begin to try to get the average college graduate to discuss dumping the Fed and going back to the gold standard.

Fortunately, calls for dumping the Fed and returning to the gold standard come not just from “gold bugs” but also from economists who truly have made the study of economics lifetime endeavors. One such economist was the late, great Murray N. Rothbard.

Murray N. Rothbard was a scholar extraordinaire who made major contributions to economics, history, political philosophy, and legal theory. He developed and extended the Austrian economics of the legendary Ludwig von Mises and established himself as the principal Austrian theorist in the latter half of the twentieth century. Rothbard applied Austrian analysis to historical topics such as the Great Depression of 1929 and the history of American banking. Oh, yes, Rothbard received a PhD from Columbia University in 1956.

In 1995, Rothbard wrote a piece titled Taking Money Back, which was printed in the September and October issues of The Freeman. Taking Money Back outlined Rothbard’s reasoning and steps for dismantling the Fed and returning to the gold standard.

Lew Rockwell recently chose Taking Money Back as the lead article for his website, which has become one of – if not the most – popular free market, Libertarian websites on the Internet. Read Taking Money Back and learn that a truly learned man has called from dismantling the Fed and returning to the gold standard.

If you are interested in furthering your knowledge and understanding of money (and the flaws of our monetary system), start with a couple of Rothbard’s books. Excellent choices would be What Has Government Done to our Money?, The Case for the 100% Gold Dollar and The Case Against the Fed. All can be ordered from mises.org. If you want to learn the real cause of the Great Depression, order a copy of Rothbard’s America’s Great Depression.

These books will make you uneasy about the current financial state of affairs, but they will make you much more comfortable about investing in silver and gold.

Perhaps the fundamental fear behind every gold investment is that the paper money being gotten rid of could become worthless. In theory (probably in actuality), that fear rests with any currency not redeemable in gold or silver, which means all the world’s currencies. No world currency, not even the fabled Swiss franc can be redeemed for gold or silver at the Swiss National Bank, which is Switzerland’s central bank, the equivalent of the U.S. Federal Reserve Bank.

The destruction of paper money usually comes about after the abandonment of the gold standard and the institution of fiat money, which is money by governmental decree. The dollar is money by decree, “all debts, public and private.” However, in many cases, one fiat currency is introduced to replace another fiat currency. Brazil is famous for doing that.

Before moving on to the problems faced by the Zimbabwean gold miners, I should note that since the Bretton Woods Agreement of 1944, no country has been on the gold standard. The Bretton Woods Agreement established a gold exchange standard, under which the world’s currencies were redeemable in dollars, which were redeemable in gold. Although under the Agreement, currencies’ values were fixed relative to gold, central banks that were presented their nations’ currencies for redemption actually gave the redeemer dollars.

Zimbabwe is an economic cesspool, with government regulations of nearly every facet of economic activity. One control in Zimbabwe is that all mined gold is to be sold to the Zimbabwean central bank, the Reserve Bank of Zimbabwe (RBZ).

According to one source, gold miners are meant to be paid 35% of their production at the highly overvalued local currency and the remainder in US dollars. The RBZ pays partially in U.S. dollars because the gold mining companies need to buy equipment in foreign markets to keep operating. There is no market for Zimbabwean dollars outside Zimbabwe. Outside Zimbabwe, Zim dollars are paper.

While the official policy is for the RBZ to pay partially in U.S. dollars, the RBZ now has no U.S. dollars, or any other foreign currencies, and the gold mining companies are receiving only Zim dollars. Because Zim dollars cannot be spent outside Zimbabwe, the mining companies are unable to replace worn out equipment.

As a result, “Zimbabwe’s once proud and big gold sector could be set for a further decline,” says Tawanda Karombo, posting an article from Harare, the capital of Zimbabwe. Zimbabwe produced seven tons of gold last year compared to 11 tons in 2006, their lowest level in 90 years.

Although Zimbabwe’s gold production has never rivaled that of neighbor South Africa, for nearly a hundred years it has been a solid gold producer. Now, Zimbabwe’s gold production looks set to grind to a halt, which will be positive for gold investing.

In my December 12, 2007 article Only Ron Paul, I asserted that of the presidential candidates only Ron Paul had the economic understanding to deal with the subprime mess. Now, I present more evidence that Ron Paul is the man to deal with the impending recession. The medicine, however, would be bitter, but the results would be long-lasting. Ron Paul would call for a return to the gold standard.

In 1985, Ron Paul presented a paper to the Mises’ Institute conference on the gold standard: The Political and Economic Agenda for a Real Gold Standard. Nearly 23 years ago, Ron Paul exhibited his grasp of the Austrian Theory of Money and the need for a return to the gold standard. Since 1985, we have seen the devastating results of not being on the gold standard: inflation and the destruction of the dollar as the world’s sole reserve currency.

Because returning to the gold standard seems anachronistic to most Americans (because they do not understand the gold standard and the concept of money), implementing the ideas of Ludwig von Mises, which Paul discusses in his 1985 paper, would be next to impossible. However, Ron Paul discusses another tactic to return to the gold standard, a tactic which should be of interest to gold and silver investors.

Paul asserts that the popularity of gold coins “have shown us that it is possible to adopt another tactic, that of getting gold coins into circulation prior to setting a new par value for the dollar.” (Par value for the dollar meaning the dollar’s conversion rate into gold [and maybe silver.])

In other words, the people would lead the “leaders” in returning to the gold standard. As more and more people turn to gold as protection against inflation and its inevitable result, a declining dollar, they adopt gold as their standard investment. Eventually, our “leaders” will see the handwriting on the wall and return to gold. Returning to the gold standard would be much less painful for the nation if Ron Paul were president. The other candidates, steeped in statist economic theories, would fight returning to the gold standard.

Paul’s piece is an educating read. If you do not grasp all of it, don’t worry. Just by reading Paul’s paper you will inherently know that now is the time to invest in gold and silver.

I’ve written before that most CMIGS’ clients know more about the machinations at the Fed than the presidential candidates. That’s not exactly true, however. I would not say that most clients, nor I, know more about the workings of the Fed than GOP candidate Ron Paul.

Ron Paul has studied Austrian Economics, which is adamantly opposed to the concept of central banking, for more than thirty years. He has gone head to head with Fed chairmen during their mandatory appearances before joint congressional committees. When it comes to the Fed, Ron Paul knows of what he speaks.

Further, Ron Paul knows that gold is sound money and has called for a return to the gold standard. The other candidates, however, would prefer to ignore the issue. Actually, many so-called sophisticated columnists consider Ron Paul “a fruitcake” because of his stand on money.

Unfortunately for the other candidates, Ron Paul’s position on money is gaining a little traction, which means the other candidates may have to either join Ron Paul in calling for a return to the gold standard or start defending Keynesian economics, which has been the foundation for government intervention in the marketplace since the 1930s and are the reasons our federal government stands on the edge of bankruptcy.

Murray Sabrin has written an article for usatoday.com about Ron Paul’s position on sound money. Articles by Ron Paul can often be found at www.lewrockwell.com, a libertarian website. Here’s one I like, his Statement Before the Joint Economic Committee, November 8, 2007.