I am a big fan of Dave Ramsey. I have coordinated two of his Financial Peace University classes in the past and I am currently following his baby steps. I have stated in the past that I plan on putting 100% down on the first house I buy and this is due to Dave Ramsey’s influence. His personal finance advice is top notch and I have yet to come across a financial guru that is his equal. His message is consistent, sound, and feasible. And he is a man who operates his business in the upmost integrity.
However, I did mention in a previous blog post that I believed it was hypocritical of him to support the Federal Reserve and at the same time advocate a no debt policy. In all my years of studying his teachings and listening to him on the air, I do not believe he has directly sung the praises of the Federal Reserve, however, he has made several comments that lead me to believe he supports them.
For one thing, he has never scrutinized them for their part in the housing bubble and the collapse. I have not heard him criticize the Federal Reserve Chairmen for their hand in encouraging Americans to go into debt. And he has stated in the past that increasing the supply of money in the economy is a good way to prevent economic downturns. No, Dave, that is what is called inflation.
Gold is another thing I have issues with. I am not entirely sure, but I believe that he opposes a return to the gold standard. Most of the gold questions he deals with have to do with personal investing in gold and honestly I agree with him on those points. However, he cites bad statistics when he does this. He says that gold has risen at the rate of inflation over the past 75 years or so and thus is a bad investment. Now, I am not denying this fact, but I think he fails to analyze why that is. The dollar used to be tied to the value of gold up until the Nixon Administration. Therefore, your statistics will be skewed since of course the over all average is the rate of inflation as it was essentially the base of the money supply for 30 years of that time period.
The gold standard itself is something I believe he opposes because he has said that gold is only worth whatever value you place on it. That, of course, is a true statement in economic theory. The value of a product or service is whatever an individual places on it. A man dying of thirst will pay $100 for a glass of water from a garden hose because it is more valuable to him than anything else. So yes, gold will only have the value that individuals place on it.
But when currency is backed by gold, instead of nothing, it provides a hedge against inflation, which is an indirect tax on the people. If you look at the charts for inflation, the ones that represent the increase in the supply of money, you will see that before the gold standard was completely abandoned, there was a steady increase, but nothing significant except during war. However, when the gold standard was abandoned, you see a linear line straight up from then to now. This means that without the dollar backed by some commodity, it does not retain its value and inflation becomes the normal order of business.
These are really minor points of contention I have with him and these are actually assumptions I have made based on what little he has talked about on the air and in his live events. Most of his radio show deals with answering personal finance questions and he rarely spends his time dealing with socio-economic issues that we all face. Lately, he has been pressing for people to push for Congressional term limits because Congress cannot seem to get their act together and they have contempt for the rest of us. I could not agree with him more on that point, but the best way to impose term limits is to encourage people to vote out the incumbents in the next election cycle, which probably will not happen.
All in all, though, I think Dave Ramsey is a stand up guy and I think his personal financial advice is top-notch. I would encourage him, if he has not done so already, to read books on the Austrian theory of economics, if he has not done so already. He is an avid reader and I am sure that it will give him another perspective on economics. Considering that it was the Austrians, not the Keynesians or the Monetarists, who predicted the crashes well in advance, it is well worth considering.