Go Forward to Gold - How to Lift the Reserve Currency Curse

Finally, ending the dollar's reserve-currency "privilege," and its inflationary financing of the federal budget, would make it not only necessary to limit budget deficits — which could no longer be financed by foreign central banks — but also for the first time politically and economically practicable to do so. We joined in proposing a comprehensive (but never enacted) plan to the 1995 National Commission on Economic Growth and Tax Reform, based on the Reagan strategy of combining a low-rate, broad-based income tax with a balanced, pay-as-you-go Social Security system. The plan remains eminently feasible.

Neither reforming the international monetary system nor balancing the federal budget could be done without serious national and international discussion. But the technical problems have been long studied and are relatively straightforward. The main action item for President Obama should be to put the reserve-currency addiction on the way to extinction before — not after — its congressional and foreign monetary co-dependents irreparably harm themselves and all the innocents they have heedlessly placed in harm's way.

Doing so would require Obama to overcome objections from the dominant factions in both parties. Yet putting the common good ahead of political expediency is what distinguishes a great president from a mediocre one. The challenge is great, but so is the reward for doing the right thing.

Mr. Lehrman and Mr. Mueller are principals of the financial-markets consulting firm LBMC LLC. Mr. Lehrman is also the author, most recently, of Lincoln at Peoria: The Turning Point, and manager of an investment partnership. Mr. Mueller is also director of the Economics and Ethics Program at the Ethics and Public Policy Center.

[This version restores minor textual corrections dropped at deadline, and corrects the retail gasoline price series in the final chart: the wholesale price had inadvertently been substituted.]


Kathleen M. Packard, Publisher
Ralph J. Benko, Editor

In Memoriam
Professor Jacques Rueff

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