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Gingrich's proposed gold standard won't happen- Murenbeeld

Dundee Wealth's Martin Murenbeeld says GOP Presidential candidates Ron Paul's and Newt Gingrich call for a U.S. gold standard is not realistic.

RENO - 

Respected economist Martin Murenbeeld warns investors to approach GOP Presidential candidate Newt Gingrich calls for a gold commission with a degree of skepticism.

In a recent issue of the Dundee Wealth Gold Monitor Murenbeeld predicts that Gingrich's gold commission will overwhelmingly reject the idea of a gold standard  as did the 1981 Gold Commission appointed by then-President Ronald Reagan.

"...There are problems with fixing the gold price against the dollar-the base of the new gold standard, and there are inherent problems with new mine supply - which determines the growth of money supply," he observed.

"New mine supply will determine whether the gold standard will be inflationary or deflationary; historically it was deflationary," he said. "The gold fix is critical in determining whether the system starts on an inflationary or deflationary path."

If the gold fix is too high, "we have a receipt for monetary printing and inflation," Murenbeeld suggested.

"This is not what Gingrich has in mind in course. He wants a monetary system in which ‘you can't inflate away your difficulties," he noted.

"Assuming he can ‘fix' the gold price at the right price, the next problem will be whether mine supply will allow the Fed to expand money supply in tandem with GDP, which would keep US prices stable," Murenbeeld suggested. "Subpar growth in new gold supplies entering the financial system will force deflation onto the economy. To see how well that works one should study Greece...today!"

"In short, Gingrich's gold commission will likely conclude what the last one did: "[it] overwhelming rejected the idea," Murenbeeld concluded.

Nevertheless, Gingrich's gold commission idea may live on. Gingrich scored a resounding victory in the South Carolina primary, receiving 40.4% of the vote with Mitt Romney trailing in second place with 27.8% of the vote.

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