What is significant about [The True Gold Standard] is its aim of shifting the discussion to practical steps that could be taken to rescue the American monetary system. It comes as the value of the United States dollar has collapsed to record lows.
New York, NY (PRWEB) October 04, 2011
The True Gold Standard: A Monetary Reform Plan without Official Reserve Currencies responds to the recurrent economic crises of the last century, outlining a detailed proposal for America’s leadership on How We Get from Here to There. That is, how we get from the present unstable paper dollar to a stable dollar as good as gold.
The latest cycle of economic boom, panic, and bust is linked to the life and death of the unstable, post-World War II Bretton Woods monetary system. First came the crisis-ridden gold-dollar system from 1944 to 1971. Then came the rise of floating exchange rates and the world paper dollar standard from 1971 to the present—associated with regular booms, panics, and busts—bringing us to this very day. Lehrman writes that in order to restore confidence, economic growth, and prosperity for future generations, America and the world once again need a dollar as good as gold.
Seth Lipsky, editor of The New York Sun, writes: “What is significant about [The True Gold Standard] is its aim of shifting the discussion to practical steps that could be taken to rescue the American monetary system. It comes as the value of the United States dollar has collapsed to record lows.”
Lehrman says today’s dollar has lost 82% of its value against its value in 1971 and nearly 96% of its value compared to gold. He goes on to note, in previous centuries, world financial disintegration has often preceded civil wars, national wars of revenge, indeed catastrophic global war in certain cases, and says American national security risks are now high and rising. Lehrman says now is the time to restore monetary order, to end inflation, and to restore a stable dollar and stable exchange rates—in order to create global incentives for peaceful, equitable, growing world trade—and with these incentives recreate worldwide, rising standards of living.
"After almost a century of manipulated paper- and credit-based currencies, how do nations, which need the benefits of free trade in order to prosper, terminate the anarchy of volatile, depreciating, floating exchange rates?" asks Lehrman. "Free trade without stable exchange rates is a fantasy. Since the inauguration of Bretton Woods in 1944, so-called free trade has been maintained and subsidized by the overvalued reserve currency role of the United States dollar. Because of pegged exchange rates to the dollar under Bretton Woods, overvaluation of the dollar was an ineluctable result of the excess demand for the sole reserve currency—the dollar."
James Grant, editor of Grant’s Interest Rate Observer, says: “The stand-pat defenders of today’s paper-dollar system turn back every argument in favor of the gold standard by claiming that there’s no practical way to re-establish it. What Lehrman has done is to devise a practical and persuasive plan to do just that.”
The True Gold Standard lays out a monetary reform plan for the resumption of a true gold standard, without the escalating debt and leverage of official reserve currencies. Using market-oriented techniques, American authorities and free market participants can establish the optimum gold value of the dollar and stable exchange rates, such that the durability of the gold standard and the stability of the general price level is assured over the long run.
As John Maynard Keynes wrote in 1922, “If the gold standard could be reintroduced…, we all believe that the reform would promote trade and production like nothing else, but also stimulate international credit and transfers of capital to the places where they are most useful. One of the greatest elements of uncertainty would be suppressed.”
The True Gold Standard outlines some desirable reforms of the central and commercial banking system—to be induced by market and government adaptations to the termination of the paper dollar’s role as an official reserve currency. In truth, the Federal Reserve is the de facto central bank of the world monetary system because the paper dollar is the monetary standard of the world banking system. Fed credit policy—especially Federal Reserve and foreign financing of the U.S. balance-of-payments and federal budget deficits—has been behind almost every boom and bust cycle since 1914. One goal noted in The True Gold Standard should be to reform banking laws so as to hold more accountable the directors, managers, stockholders, and principals for the solvency of the institutions they own and manage. As the profits rightfully belong to the owners and managers, so should the losses. In a just system of laws and accountability, there is no room for government bailouts and subsidies to the banking system.
Sound monetary policy and a stable, gold dollar is America’s last best hope to restore confidence, simulating real economic growth and leading the way for rising standards of living in America and the world.
The Five Essential Steps Toward Resumption of the Gold Dollar: Dollar Convertibility to Gold and Multilateral Currency to Gold include:
1. America leads by announcing unilateral resumption of the gold monetary standard at a date certain, not more than four years in the future. Unilateral resumption means that the U.S. dollar will be defined by law as a certain weight unit of gold. The Treasury, the Federal Reserve, and the entire banking system will be obligated to maintain the gold value of the dollar.
2. On the date of congressionally authorized resumption -- that is, unrestricted dollar-gold convertibility* -- all Federal Reserve Bank notes and bank demand deposits will be redeemed in gold on demand at the statutory gold parity.
3. The Treasury and authorized private mints will provide for the minting and wide circulation of legal tender gold coin in appropriate denominations, free of any and all taxation.
4. Shortly after the announcement (step 1), the United States calls for an international monetary conference of interested nations to provide for the deliberate termination of the dollar-based official reserve currency system and the consolidation and refunding of foreign official dollar reserves. The international agreement to be negotiated will inaugurate the reformed international monetary systems, that is, multilateral currency convertibility to gold, without official reserve currencies.
5. The purpose of the conference would be to establish gold as the sole means by which nations would settle residual balance of payments deficits; and to designate gold, in place of reserve currencies, as the sole official monetary reserve asset. Official foreign currency reserves, to a specified extent, would be consolidated and refunded. By restoration of a multilateral international gold standard the convertibility agreement would effectively terminate floating and pegged undervalued exchange rates. The reformed international monetary system establishes stable exchange rates, and free and fair trade, based on mutual convertibility to gold of major currencies.
About Lewis E. Lehrman
For nearly four decades, Lewis E. Lehrman has written books and essays about economic, monetary, and financial policy as well as American history. Lehrman co-authored the book Money and the Coming World Order with renowned MIT economist Charles Kindleberger and others. He has written about economics in publications such as Harper’s, The Washington Post, The New York Times, The Wall Street Journal, The Weekly Standard, Crisis, Policy Review, The American Spectator, and National Review. His writings about monetary economics earned him appointment by President Ronald Reagan to the United States Gold Commission in 1981. Lehrman collaborated on a minority report of the commission which was published as The Case for Gold.
Lehrman has been named to the advisory board of the American Principles Project’s Gold Standard 2012 initiative. He heads The Gold Standard Now—http://www.thegoldstandardnow.org—a project of The Lehrman Institute. Established in 1972, The Lehrman Institute is a public policy foundation focused on history, economic and foreign policy, education, and local communities. He has been a trustee of the American Enterprise Institute, the Morgan Library, the Manhattan Institute, the Heritage Foundation. He is a former Chairman of the Committee on Humanities of the Yale University Council.
Lehrman received the National Humanities Medal at the White House in 2005 for his teaching and studies of American history – about which he has also written extensively, including Lincoln at Peoria: The Turning Point (Stackpole Books, 2008). In 2010, he was awarded the William E. Simon Prize for Lifetime Achievement in Social Entrepreneurship.
Lehrman earned his B.A. from Yale where he became a Carnegie Teaching Fellow on the Yale faculty and an M.A. from Harvard where he was a Woodrow Wilson Fellow. He has been awarded numerous honorary degrees.
# # #