Gene Wilder’s character in the movie Young Frankenstein proclaims at one point, “Hearts and kidneys are tinker toys compared to the central nervous system!” The same analogy can be applied to almost any other political issue, which are hearts and kidneys compared to monetary policy, which would be the central nervous system. Monetary policy is difficult and opaque terrain for anyone to try to understand, especially at first.
But with monetary policy, as with most things in life, the more difficult something is, the more important it tends to be. Understanding how the American and global system of money operates, and then fixing it, is one of the most pressing issues facing both the American political system and the security of the global order in the 21st century.
This column’s central premise is that the current dollar system, where the Federal Reserve determines how much money should be in the system, is doomed to fail. Not today or tomorrow, but one day, it will. The urgent need is for the United States to replace the dollar system with the gold standard. This standard has proven time and again in history to provide the most stability for currencies, and thereby play a major role in creating stability for any economy and society.
Lewis Lehrman makes the case for this very system in his book, The True Gold Standard. The book outlines why the United States should, indeed must, return to a system where a dollar is pegged to and convertible with gold, thereby insuring the stability of the dollar over the long run.
Money is required to make any economy work; without it, people are required to barter, which makes all economic activity less efficient and viable. So numerous substances have been used to measure the value of money: seashells, cocoa beans, copper, bronze and silver are just a few examples. Yet throughout the millennia of known human history, gold has been used as the most common standard by which all money is measured. Lehrman describes the qualities of gold that make it the best standard for money: “durable, homogeneous and fungible…imperishable, indestructible and malleable.”
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