America and the world need monetary reform. Indeed, they need a twenty-first century, international gold standard. The gold standard -- i.e. national currency convertibility to gold -- is the simple, proven, global monetary standard by which to transmit reliable price information worldwide. Unlike manipulated, floating, paper currencies, the true gold standard -- a dollar defined in law as a specific weight of gold -- exhibits the optimum, impartial, networking effects characteristic of the electronic age of reasonably transparent, global standards.
America should lead in the age of monetary reform by unilateral resumption of its historic constitutional monetary standard -- namely, gold. Unilateral resumption of the gold standard means that the United States dollar will be defined by Congress in federal statute as a certain weight unit of gold -- as the dollar was so defined from 1792-1971. The Treasury, the Federal Reserve, and the banking system will be responsible for maintaining the statutory gold value of the United States dollar.
All financial claims on banks and government banking agencies, chartered or supervised under federal law, that are payable in dollars shall be redeemable in gold at the statutory rate without restriction. Dollar demand deposits (e.g., checking accounts) will be redeemable in gold upon demand, but other dollar claims, of course, at maturity. Along with customary bank notes and bank checking account deposits, convertible to gold at the statutory parity, Americans will be free to use gold and authorized, mint-issued, gold coins as money -- without restriction or taxation. The Treasury and authorized private mints will provide for the minting of legal tender gold coins. The Board of Governors of the Federal Reserve or any successor institution serving in a similar capacity, and all banks chartered or supervised by the United States government, or any one of its agencies, will be obliged by law to sustain the statutory dollar-gold parity and to redeem in gold, upon request, all Federal Reserve notes, all bank notes and demand deposits.
From 1792 until 1971, the dollar was defined in law as a specific weight unit of gold (and/or silver). As required by Article I, Section 8 of the U.S. Constitution, Congress will again establish by statute, after due deliberation, the sustainable gold value of the dollar; that is the convertibility price of the dollar to gold.
To facilitate termination of the unstable, dollar-based, global, reserve currency system and to mitigate the predatory mercantilism and economic disorder engendered by floating exchange rates, American authorities will invite interested nations to a conference to establish a modernized international gold standard -- not unlike the global arrangements necessary to establish worldwide telecommunications standards. By international gold standard, it is meant that gold -- not paper dollars, nor any other currency, nor Special Drawing Rights (SDR) -- would be the primary means by which nations settle their residual balance-of-payments deficits. The gold monetary standard -- a proven, impartial, non-national, universally acceptable money -- is the necessary remedy for the defect of unstable, floating, paper currencies and the currency wars they now ignite. An international agreement to implement such a monetary reform would also end the exorbitant privilege and the insupportable burden -- borne by the United States -- of the global reserve currency system based on the floating dollar.
In an imperfect world, peopled by imperfect human beings, there can be no perfect monetary system. Nor is the case for gold the case for investment in gold. Based on a prudent consideration of monetary history, it is an argument from principle by which to establish the optimum monetary standard for a stable, growing economic and social order.
By the test of centuries, the true gold standard, without reserve currencies, is the least imperfect monetary system of history.
Lewis E. Lehrman
May 21, 2012