Ron Paul, Gold and the Reality of Moore's Law

NEW YORK (TheStreet) -- I have always been fascinated by Ron Paul, and Paul's fascination with what is called Austrian economics.

The Austrians don't hold with experiments or research. They know what they know through deduction. Their principles and policy prescriptions don't change, any more than that of a Marxist may change. They just don't accept evidence contrary to theory.

This is particularly true regarding the money supply. Paul, the Texas congressman and former Republican presidential candidate, famously insists that money can only be backed by precious metal, preferably gold. He was most upset over the "Nixon shock", which took America off the gold standard and made the dollar a "fiat currency." It's what inspired Paul to get into politics, which happened in Houston while I was at college there.

I am not an economist. I cover technology, and one of the guiding principles in the field I cover is Moore's Law.

Intel (INTC) co-founder Gordon Moore first propounded it in a 1965 magazine article as a description of progress in integrated circuits. Based on what engineers knew then, he estimated the number of circuits on a given slice of silicon might double every year or two, at the same cost, as far ahead as he could see.

The picture is a detail from Moore's article, now maintained by Intel, of a salesman selling some strange contraption called a "home computer." Moore estimated this might happen 10 years in the future, in 1975. It did.

Since then, of course, all kinds of technology have been touched by the same doubling effect. The number of bits carried by optical fibers, or transmitted by radios, keeps increasing. The number that can be stored on a hard drive keeps increasing. We sort of take this for granted.

It's all very deflationary. Computers in warehouses are like rotting fruit, losing value as they're stored. Michael Dell fought this in the 1990s by waiting until someone ordered a PC before his company, Dell (DELL) would make it. Mass customization kept prices in line with falling costs.

Most of what I have covered, throughout my career, involves the effort to deal with the natural deflation in Moore's Law. Windows "bloatware" forced people to buy new PCs to get new features. Rapid upgrade cycles in smartphones are all about making use of the abundance Moore's Law provides.