Originally published on The American Thinker and The Supply Side Blog, March 29th, 2018
Yesterday, Congressman Alexander Mooney (R-W.Va.) introduced a bill to once again make the U.S. dollar convertible to a fixed weight of gold. The legislation, H.R. 5404, was written in the spirit of Jack Kemp’s Gold Standard Act, and, as Rep. Mooney noted, it marks the first attempt since 1984 to restore a gold backing to the U.S. dollar. While the passage of this legislation is a long shot in our current political climate (which, unfortunately, overlooks the importance of monetary policy in facilitating economic growth), this is a big deal. Rep. Mooney’s gold standard act could reignite a much needed conversation about the importance of having a stable dollar to create soaring economic growth.
Currently, the Atlanta Fed estimates that the U.S. economy will expand at a sluggish 1.8% growth rate in the first quarter of 2018. Conversely, the real rate of economic growth averaged nearly 4% a year when America was on the gold standard. As Peter Ferrara noted on Forbes.com, since the United States got off the gold standard, real annual growth has slowed by roughly 25%. Is it possible that the absence of real monetary integrity is to blame for this trend? Writing for Forbes.com, Nathan Lewis reminds us that “the U.S. embraced the principle of stable money, and a currency based on gold, for 182 years, 1789-1971, and in the process became not only the most successful country of that time, but the most successful country of all time. Since 1971, it has become a country that needs to be made great again. Kemp showed us how.” As Jack Kemp well understood, the magic formula for economic prosperity is both low taxes and stable money. It worked for America for 182 years, and it will work for us again should we enact it.
Since economic growth has slowed since Nixon took us off the gold standard, it is prudent to examine whether our monetary policies bear at least partial responsibility for our relative stagnation. Has the past decade of easy money really facilitated the best possible outcome for U.S. economic growth? As Rep. Mooney wrote, the current “federal reserve note” has resulted in the U.S. seesawing “between too much and too little money in the economy. The Fed has the impossible task of guessing the market’s demand in real time. Its performance worsened in the 2000s because the Fed began to grade itself by how its money creation boosted the financial markets. Today many people are so disillusioned with the dollar’s prospects that they have embraced cryptocurrencies like bitcoin.” Rep. Mooney hit the nail right on the head.
Rep. Mooney’s gold standard act will provide policymakers and intellectual thought leaders with the opportunity to engage in a discussion on what monetary policy is the most prosperous path forward for America. Cheers to you, Rep. Mooney, for fostering this much needed conversation. With the introduction of this bill, the spirit of Jack Kemp and the original supply-side movement is once again illuminating the halls of Congress.