The True Gold Standard (Second Edition)
The campaign for monetary reform is underway. “We will return to the gold standard within five years,” according to Lewis E. Lehrman during an interview with Judge Napolitano on FreedomWatch on August 18, 2011.
Mr. Lehrman should know. He is leading the charge, reminding his fellow Americans of our shared western history and the vision that our Founders set forth in the Constitution.
In a remarkably short period of time, the United States grew from thirteen ill-managed colonies into the most prosperous nation the world had ever seen. During most of this period, our monetary regime—the gold standard—inspired confidence and trust in market mechanisms, encouraging long-term savings and investment and heretofore unseen economic growth.
That is, until one hundred years ago.
With the creation of the Federal Reserve System in 1913, the Bretton Woods system of the post-Second World War era, and Nixon’s rescission of the gold standard in 1971, a century of decline in the dollar’s value ensued. At the outset of the 1980s, President Reagan inherited a suite of economic problems. Although he seriously entertained the idea of a return to the gold standard in the 1980s—even requesting and reviewing a plan on how to restore convertibility of the dollar to gold—fiscal restructuring, in the form of an overhaul of the tax code, took center stage.
The monetary reform plan was never carried out.
The wild volatility over the last forty years, especially during the economic downturn of 2007-09, provides further evidence that only a dollar as good as gold will restore long-term price stability and lay the foundation for long run economic growth.
America and the world need a true gold standard more than ever. Is America still courageous enough to lead the world in reestablishing financial order? Let’s hope so—the true gold standard is our last best hope.
The Federal Reserve System's James Narron and David Skeie, career officials with the Federal Reserve System, are two eminent historically erudite figures. Writing in the New York Federal Reserve Bank's online publication, Liberty Street Economics, they recently provided a continuation of their valuable historical "revue," Crisis Chronicles: The Collapse of the...
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Why the Gold Standard?