(Kitco News) -Tuesday’s mid-term election will signal the beginning of an enormous change in US politics and policy, former Speaker of the House, Newt Gingrich told Kitco News in an exclusive interview.

“It is going to be a remarkable election,” said Gingrich who is hinting at a possible 2012 presidential run. The mid-term elections approaches their end with the Republicans expected to gain control of the House of Representatives. 

Gingrich resigned as speaker in 1998 and left the House after the Bill Clinton impeachment saga and a rough election for Republicans. He has since taken to speech-making, writing books, and appearing as a political commentator. 

Under this “socialist, big government redistributionist model,” it’s very hard to create economic growth, he said on the sidelines of the New Orleans Investment Conference Saturday where he delivered the keynote address.

Rather Gingrich said he has a very simple formula, “Job killing policies, kill jobs.” Gingrich said that the real problem in this economy is not money.

“The problem in this economy is the total lack of confidence in the federal government and a belief that it is run right now by a group of very dishonest socialists who are actively opposed to the job creating Americans,” he said.

“You frighten the investor class, the entrepreneurs, you frighten small businesses. You pass things like the Obama health legislation which crushes small business. You propose tax increases on every successful small business. “

Bernanke “Misguided”

One day after the mid-term elections comes the long-anticipated move by the Federal Reserve to deliver another dose of stimulus to help the ailing U.S. economy.

Gingrich is openly critical of the Fed’s anticipated move.

“Chairman Bernanke I think is fundamentally misguided in his approach. The number one job at the Federal Reserve ought to be stable money. And if it’s not producing stable money, it’s going to produce inflation” he said.

By trying to avoid the necessary shakeout, the Fed is making the recession longer and deeper and is stopping new job creation, he said.

“This entire theory that we don’t have enough cash is based on a fundamental misunderstanding of velocity – the volume of money you have is a combination of how much money there is and how fast it turns over. In a period of really deep economic recession people don’t turn it over very fast,” he said.

A long-term inflationary build-up is in the works, which will lead to a flight to gold and other currencies, he noted.

“At a time when the Federal Reserve is determined to print more money, gold is a very rational investment. I can tell you that the current paper-based system is likely to continue to decay and gold is a very good hedge against the future,” he said.

Attention also needs to be turned to China and India’s growth stories, he noted.  As both countries get richer their desire for gold as a store of value will increase dramatically, he noted. “They will have the money to buy it; this will put continuing upward pricing pressure on gold.”

The World Gold Council says India’s demand for gold rose 22% to 755 tonnes in the year ended June 2010. The council expects India and China to be the big demand drivers for the world.

Form 1099 and US Bullion Industry

On the topic of new form 1099 rules for US gold dealers, Gingrich said that he favors a repeal of the entire health bill and not just provision 9006, which the new rule falls under. 

“I think this bill was so badly written and is so hostile to free enterprise - so hostile to individual liberty, that the whole bill should be repealed. The idea of - not just bullion dealers - but that every business in America has to report every transaction above $600 - That’s insane.”

As of January 2012, entities must file a Form 1099 with the Internal Revenue Service whenever they make transactions paying out $600 a year to another party.

The Congressional Budget Office estimates the new Section 9006 provisions would generate some $17 billion.  However, Gingrich does not think this is grounds to stop a repeal.  

“The bill itself cost a trillion dollars. So that’s a net loss of $ 983 billion dollars. I mean I think this is a dead loser.”

He noted, “That gives you a level of information at the IRS that allows you to run an effective, functional dictatorship. Because you know everything, everybody’s doing with no legal reason to do so.”

“I think the pressure to repeal is going to be overwhelming,” he added.

By Daniela Cambone of Kitco News dcambone@kitco.com

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Newt Gingrich
"Chairman Bernanke I think is fundamentally misguided in his approach. The number one job at the Federal Reserve ought to be stable money," Former House Speaker Newt Gingrich said.