Could Ron Paul's Campaign Trigger a Return to the Gold Standard?

Ron Paul has scheduled a big announcement tomorrow in New Hampshire, and the speculation is that he will declare the start of his presidential campaign. According to USA Today, if Paul announces his candidacy, this will be the third time the Texas congressman has tried to win the White House. In 1988, Paul ran as a Libertarian; in the last election, Paul attempted but failed in his bid for the Republican nomination. Though Paul has largely been marginalized as a third-tier candidate, Fox News contributor Juan Williams recently characterized Paul as the Republican to beat. In the past, Paul's views on foreign policy have put him at odds with other Republicans (he has called for an immediate withdrawal of American troops from the Middle East) but some of his more archaic ideas have moved into the mainstream. Paul has long been a champion of the gold standard and an opponent of the Federal Reserve. In 1982, Paul wrote “The Case for Gold,” in which he argued that the U.S. should return to the gold standard. In 2009 Paul penned “End the Fed," in which he laid out his case against the Federal Reserve System. Though the Fed was created in 1913, the U.S. had maintained the gold standard until 1971, when Richard Nixon opted to let the dollar float. With the U.S. government running historically large budget deficits, some economic commentators have warmed up to Ron Paul's arguments. Steve Forbes recently stated that the U.S. may be forced to return to the gold standard within five years. Should the U.S. decide to return to the gold standard, it will be much harder for the federal government to borrow money and impossible for the Federal Reserve to expand the money supply ad infinitum. If the U.S. makes that move, traders may wish to consider long plays on the U.S. dollar and gold. One way to play a resurrected gold standard may be the ETFs SPDR Gold Trust GLD and PowerShares DB US Dollar Bullish Index UUP. At any rate, raising the issue of the gold standard is sure to make for an interesting presidential campaign.