The death certificate of the paper dollar

A view from America, previously published at Forbes.com

The world dollar standard’s death certificate arrives in the mail this week. The Bank of England — “the Old Lady of Threadneedle Street” — one of the most staid, cautious, and dignified entities in the world of monetary policy — signals that the fiduciary currency standard ushered in on August 15, 1971 is, empirically measured, far inferior to the (dilute form of the) gold standard erected at Bretton Woods. Fellow Forbes.com columnist Charles Kadlec thoroughly reprises and analyzes the facts submitted to a candid world by the Bank of England in a paper to be officially published December 20, 2011.

The Bank of England’s Financial Stability Paper No. 13, Reform of the International Monetary and Financial System, reported at Bloomberg BusinessWeek and reviewed here, is being seen by many monetary policy observers around the world as the “coroner’s report” on the death of the world dollar standard.

What’s next? Presciently, at the watershed October 5-6 Heritage Foundation Conference on a Stable Dollar: Why We Need It and How to Achieve It, Forbes’ editor-in-chief  Steve Forbes called for escalating the discourse from “whether” we should restore the gold standard to “how” to do so. The floodgates open.

In the second half of 2011 monetary policy scholars, policy virtuosi, financiers and activists have issued over half a dozen books and important monographs on the very subject heralded by Forbes whose call was seconded by Heritage’s president, Dr. Ed Feulner in an influential Washington Times op-ed:

That’s why we should welcome a debate about the role of the Fed and what our monetary policy should be. But we have to ask the right questions. … Should we fix the dollar price of gold? … ‘If the defect is inflation and an unstable dollar,’ asks Lewis Lehrman of the Lehrman Institute, ‘what is the remedy?’ We can’t answer that without a robust and full discussion. Let’s hope the hard questions being asked now about the Fed touch off a much-needed debate.

This, together with ongoing efforts by The Lehrman Institute and by its strategic partner, the American Principles Project (with both of which this writer has a professional association) laid the groundwork for another critical development: putting monetary reform at the core of the agenda of the conservative movement. The largest and most influential umbrella group of conservativism is the Conservative Action Project. This convened 100 leading conservatives at a summit this month. President Reagan’s Counselor and the 75th Attorney General of the United States, Edwin Meese, III, presided and the Project issued, last week, A Conservative Consensus for 2012.

This, which fairly may be considered the consensus conservative platform, calls for Growth, Family, Strength and Accountability. The first element of the very first item on the agenda includes a call to “encourage sound monetary policy, thereby helping the economy grow and create more jobs.” Many conservatives take these words to mean going forward to gold.

But how?

Earlier this autumn, Lewis E. Lehrman published the fruit of 40 years of study and thought, study that began with his tutelage by French monetary statesman Jacques Rueff, of The True Gold Standard — A Monetary Reform Plan Without Official Reserve Currencies. It was lauded by TV journalist Lou Dobbs as “a compelling read and a compelling architecture for a way forward,” by Federalist Society co-founder and Bradley Foundation “Genius Award” winner David McIntosh as “a must read for policy makers,” by financial journalist James Grant as “The answer, brilliantly expounded….” The New York Sun’s Seth Lipsky summarized its essence:

… a transition in which, on the date that Congress authorizes the resumption of unrestricted convertibility between dollars and gold, Federal Reserve Bank notes and American dollar bank demand deposits would be ‘redeemable in gold on demand at the statutory gold parity,’ … the minting by the Treasury and authorized private mints of what Mr. Lehrman calls ‘legal tender gold coin in appropriate denominations, free of any and all taxation,’ … an international monetary conference ‘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 establishment by the conference of gold as ‘the sole means by which nations would settle residual balance of payments deficits,’ … and steps to ‘uphold stable exchange rates and free and fair trade — based on the mutual convertibility to gold of major currencies.’

Other noteworthy works on how to restore the gold standard promptly followed. These include monographs by George Mason University’s Prof. Lawrence H. White recently presented at the 29th Annual Monetary Conference of the Cato Institute, entitled Making the Transition to a New Gold Standard, and extensive and erudite testimony shortly preceding Lehrman’s book by Dr. Lawrence Parks, executive director of the Foundation for the Advancement of Monetary Education, at a September 13 hearing of Dr. Ron Paul’s subcommittee on Domestic Monetary Policy entitled “Road Map to Sound Money.”

Continue reading at Forbes.com.

6 Comments

  • Paul Marks says:

    Actually the Bank of England is not very good – it is dominated by people who believe in the same crazy “monetary expanision” ideology that the people who dominate the Federal Reserve do.

    So is the European Central Bank and, contrary to its reputation, the Bank of Switzerland also.

    There is an international ideology (taught in the schools and universities) and the “good students” (the people who go on to such positions as Governors of Central Banks) are taught it and BELIEVE in it.

    In a way the fiat money system is not getting a fair death.

    I do not believe in the system – but someone who did support it could say “it could have worked – if only they had not endless increased the money supply”.

    Be that as it may – modern “cheap money” ideology (whether one calls it “Keynesian” or “monetarist” makes little difference – as, modern, Chicago and Cambrige are in agreement on monetary policy in a bust) is killing the fiat money system.

    We, the people who oppose the system, are not killing it – it is being killed by its strongest supporters.

    • They don’t ‘believe’ in monetary expansion – it is the financial instrument for their political and empirical ambitions. Greed, counterfeiting and fraud are the bywords for this system. When will it all end is the question I have?

  • Paul Marks: “We, the people who oppose the system, are not killing it – it is being killed by its strongest supporters.”

    Couldn’t say it any better.

    I’m not sure exactly what you mean in your usage of the word, “fiat.” “Fiat” means “decree” or ” an order having the force of law.” So even “gold coin” can be construed as having been “fiat money” as gold was “coined” into money via “the force of law,” i.e. the Constitution. So “gold coins” are just as “fiat” as paper is. The real question is whether people accepted “gold coins” because of it being “fiat” or in spite of it.

  • J Cuttance says:

    Great to read about obviously erudite papers getting to see the light of day, but…

    “gold as ‘the sole means by which nations would settle residual balance of payments deficits,’”

    …faces the huge hurdle of a power landscape dominated by parasitic tax-receivers who are, in turn, dependent on the offending funny money.

  • Carax says:

    In the fake world of finance, banks, and speculation, here we have another “crisis” in the making, a part of the strategical and financial planning by a vast think-tank network financed by the global corporate and banking structure for the coming excuse for World Government.

  • Paul Marks says:

    A-Capitalist – true.

    However, people were using gold and silver coins in what is now the United States long before the Consitution was written (what became known as the “Dollar” for instance is a Hapsburg silver coin – I have one).

    These coins were often not British – so it was not the “force of law” that gave them value. But then you know that.

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