THE CHOICE IS OURS. Indeed, this election may be our last chance. If American leaders embrace true monetary reform, they will reject the siren song of the reserve currency's exorbitant privilege. They will acknowledge the insupportable burden of the dollar's official reserve currency role. They will Plan now for the termination and windup of the dollar's reserve currency role. They will plan to restore dollar convertibility, defining the dollar by statute as a certain weight of gold, and then propose gold as the missing and impartial global balance wheel by which to settle residual balance-of-payments deficits among nations and currency areas. A balanced budget amendment to the American Constitution should follow.
Moreover, such a monetary order, based on convertibility of the dollar to gold, free of government manipulation, provides an indispensable rule for the conduct of the Federal Reserve System -- bringing to bear rule-based market discipline to stabilize the Fed's monetary policy. Domestically, the institutional discipline of dollar convertibility would limit the Fed's unrestrained discretion to print money, finance the government budget deficit, and bail out the cartelized banking system. Under dollar convertibility, if the Fed creates too much money, causing inflation, the people are free to redeem currency for gold at a price set by law. Too great a loss of gold would threaten the solvency of the banks. Thus, the Fed and the banking system would be forced to reduce the growth of money and credit, thereby maintaining convertibility and containing inflation. Conversely, deflationary tendencies could be contained by Federal Reserve credit -- made available at market rates on high-quality collateral -- without threatening currency convertibility.
To choose true monetary reform and balanced budgets is to embrace not only the American Constitution, but also the nation's historic financial policy that led to world leadership. Article I, Sections 8 and 10 of the United States Constitution enabled the monetary reconstruction of the American Republic at the founding on the bedrock of a gold dollar. The Constitution mandates that only Congress has the power "to coin money and regulate the value thereof." The Constitution prohibits the states from making anything but "gold and silver a legal tender." Shorn of the crushing weight of trade disadvantages caused by inflation and the accumulating debt and deficits -- originating in budgetary excess and the reserve currency role of the dollar -- America could again become Prometheus unbound.
American economic reconstruction, grounded by the true gold standard, would lead to a resurgence of rapid growth, empowered by renewed confidence born of market expectations of a stable long-term price level. With American leadership, other nations would follow. By re-establishing an effective and equitable international adjustment mechanism, international monetary convertibility to gold would end perennial deficits, manipulated currencies, and the threat of currency wars among the major nations.
The true gold standard -- that is, a dollar convertible by statute to a specific weight of gold, joined to the windup of the official reserve currency role of the dollar -- would make vast sums of money available for long-term productive investment. With a stable long-term price level, speculators worldwide would abandon unproductive inflation hedges. This dishoarding would yield immense, liquid savings for productive investment in real goods and services. Equity and true capital investment would gradually displace debt and leverage. Under conditions of stable money and stable exchange rates, savings would be redeployed by entrepreneurs and investors in new and innovative plants, technology, and equipment- minimizing unemployment, as skilled and unskilled workers are hired to work the new facilities. The export production machine of the United States would be reoriented to produce for the world market, which would engage all the positive and equitable effects of economies of scale and free trade.
This is the true road of American monetary and economic reconstruction. Let us begin the great work before us.
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