Gold Gains Luster as Issue for Politicians Amid Economic Unrest

WASHINGTON - The debate about the economy is beginning to show gilded edges as politicians mining voter uncertainty and skepticism about the nation's fiscal position are forcing gold back into the policy discussion.

The precious metal has bubbled up on a number of fronts in recent weeks, both on Capitol Hill and on the campaign trail. A trio of GOP senators this week introduced a bill aimed at making it easier to use gold coins, and a House panel recently held a hearing on "investigating the gold" to examine U.S.-held gold at Fort Knox and elsewhere.

In Iowa, meanwhile, the group behind a grass-roots "Gold Standard 2012" campaign is partnering with the Iowa tea party to promote a bus tour that is scheduled to feature appearances by a number of Republican presidential contenders.

"A lot of folks are looking at that as a stabilizing force," Rep. Blaine Luetkemeyer (R., Mo.) said of gold. "There's genuine concern about our currency, and I think that's where most of the people who are talking about the gold standard, that's their concern."

Republican Sen. Mike Lee of Utah, whose state recently recognized gold and silver coins as legal tender, said the focus on precious metals is tied in part to concerns among some vocal groups that the current monetary system encourages an ever-expanding federal government. The recent decline in the dollar has also contributed to the discussion.

"Fiat currencies are frequently manipulated in such a way to finance the large-scale expansion of national governments," Lee said. "The expanded discussion about the need for at least the option of precious metal currency systems is because of that fear."

The proper role of gold in the economy has been a popular bugbear since the U.S. moved off the gold standard under President Richard Nixon. Vocal politicians such as Rep. Ron Paul (R., Texas), who chaired the recent hearing on gold reserves, have repeatedly pushed the issue, though a groundswell of mainstream support for a return to gold has yet to materialize.

Jeff Bell, a leader of the Gold Standard 2012 campaign, hopes to change that. His group is using television commercials and voter events in Iowa to urge voters to raise the issue with candidates at campaign events as a way to boost the profile of gold in next year's elections.

"It's only going to happen if the audience of activists say, 'Hey, that's right.' If they start putting questions to the candidates when they see them, it will have an effect," Bell said.

Despite the increased chatter, there remains widespread opposition to gold from most mainstream economists. Federal Reserve Chairman Ben Bernanke, testifying to a Senate panel earlier this year, said gold isn't a panacea, noting practical problems for expanding its role such as the fact there isn't enough gold to back the current money supply.

"A return to gold would require handcuffing monetary policy in a way that neither the political class, nor the populace, would accept," said University of Wisconsin economist Menzie Chinn.

The broader economic uncertainty is contributing to the attention on gold, but the economic virtues attributed to the precious metal are often overstated, said CPM Group Managing Director Jeffrey Christian. Gold and silver make good additions to an investment portfolio, Christian said, "but it's a gigantic leap to say gold has some mystical power to stabilize currencies or prevent inflation."

"I think some of these guys truly believe; they have this visceral need to believe in the stability of something," Christian added.

Gold backers are unlikely to be deterred. Bell said he has heard the ridiculing and jokes, but points to the recent economic turmoil and sees an opportunity for change.

"There's a sense that the game is over, the magical Volcker, early-Greenspan days have long since passed and the Fed is just as baffled as anyone," he said. "It isn't just that prices are going up; it's really that the chaos in the monetary system is really holding back the entire economy."

View article on FoxBusiness.com