At a recent Presidential debate, the Republican candidates discussed a new Gold Commission much like the one to which President Reagan appointed Ron Paul and me in 1981. When asked, Jim Grant and I agreed to serve as co-chairmen of a new gold commission — proposed by Newt Gingrich if he were elected. Just weeks prior, Senator Paul was reported by the Weekly Standard as having called for just such a commission. We said at the time that we would serve on a gold commission established by any president seriously interested in monetary and Federal Reserve reform.
The next gold commission, however, must be different from the Reagan Gold Commission, the majority of which endorsed the managed paper dollar and floating exchange rates. As the two dissenting minority members of the 1981 commission Ron Paul and I filed a minority report. We called for the restoration of the gold standard — that is, a stable dollar defined by law as a certain weight of gold. The minority report, entitled “The Case for Gold,” was later republished in book form.
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It is clear that a Gold Commission II must not be an academic exercise, nor the means by which a paper money majority is enabled to deep-six serious consideration of the means by which to reestablish a stable dollar convertible to gold. The purpose of Gold Commission II should be to spell out a plan whereby Congress and the President are enabled, effectively and successfully, to restore the gold-backed dollar.
All relevant evidence and points of view must be considered, but the fundamental purpose of the Gold Commission II should be to render judgment on the era of the declining paper dollar — its consequences, and above all, the remedies for inflation.
Jim Grant and I have recommended that Gold Commission II should focus on the following agenda in order to show how a stable dollar engenders economic growth and tends toward full employment. The purpose of the agenda should be to demonstrate that a dollar convertible to gold is the missing link in presidential growth plans limited to deregulation, tax reform, and balanced budgets.
- American monetary and financial history, and its lessons for the present and the future;
- American monetary policy and the Federal Reserve System after the restoration of dollar convertibility to gold;
- A practical plan to restore convertibility of the dollar to gold; a timetable by which Congress defines the dollar in law as a certain weight unit of gold, to which bank notes and bank demand deposits would be convertible; a plan to include other major nations in a reformed international monetary system based on stable exchange rates in order to increase world trade.
When considering a practical plan to restore convertibility of the dollar to gold, we have recommended that Gold Commission II consider these specific issues:
- The procedure and transition by which we get from here to there, i.e., from the current paper dollar to the once and future gold dollar.
- The free market period of price discovery during the transition up to a date certain wherein convertibility of the dollar to gold becomes unrestricted. (Consideration of what happens during the run-up to gold convertibility.)
- How to include the international community in order effectively to end the inflationary regime of reserve currencies and how best to include other major nations in a modernized international gold standard? For example, how would America bring other countries into the new monetary system -- one in which a non-national global monetary standard, namely gold (not the dollar) is the world's reserve currency?
- Consideration of the methodology by which Congress and the president should determine the dollar convertibility price of gold (the gold-dollar parity). By using historical and empirical data, demonstrate that the existing world gold stock at the future convertibility price is more than sufficient to maintain the long term convertibility of the dollar and of all other convertible currencies. (Show also that the zero marginal cost of producing a manipulated paper currency lead to long run inflation, but the real costs of labor and capital required to produce the gold monetary standard leads to stability of the currency and long run stability of the price level.)
- Specify the timetable for restoring the convertibility of the dollar to gold at a value which should last for many generations, giving rise to a new international monetary system, free trade and economic growth over the long run.
- To ensure by law the freedom of Americans to use and to save in gold money. The resumption of gold as money in the private and public sector is warranted by the Constitution.
Only convertibility to gold can restore stability and confidence in the convenient use and holding of paper money and bank deposits without government subsidies.
Having served with Ron Paul on Reagan’s Gold Commission in 1981 and having testified recently before his monetary subcommittee, I know first hand what a hero Dr. Paul has been in the campaign for sound money. The entire nation now knows that Dr. Paul, as a presidential candidate, continues to make the case for the gold standard.
Newt Gingrich, to his credit, has added his voice to the alliance for sound money. Let us hope that Governor Romney and Senator Santorum will join the alliance and help to incorporate a restoration of a sound dollar into the Republican Platform of 2012. Who knows? Even a gold Democrat might emerge to pick up the mantle of President Grover Cleveland, a famous gold Democrat, who emphasized the centrality of a sound, stable, constitutional gold dollar.
Recent polling suggests that the American people sense the need for a dollar as good as gold. Now the Republican candidates have the opportunity to fulfill that need, win the presidential election, and restore sound money and economic growth.