After roughly 50 years of experimenting with a purely fiat currency, Rep. Mooney wants to once again back our currency with gold.
Perpetually Losing Purchasing Power
The use of a gold standard hasn’t been used since 1971, when President Nixon formally severed the link between the U.S. dollar and gold.
Dollars were no longer convertible, or redeemable, for gold in international trade.
However, the convertibility policy had been dead domestically since 1933, when the federal government hoovered up all of the privately-held gold in the country pursuant to Executive Order 6102.
In fact, the “beginning of the end” of the gold standard arrived when Congress handed over control of the U.S. monetary system to the Federal Reserve in 1913.
Throughout much of the country’s history, a significant portion (usually 25% to 40%) of the circulating money supply was legally required to be backed up by gold held by the Treasury. This constrained the ability of the government to simply inflate the supply of money without adding to its gold reserves.
The same argument can be made for silver, given that the United States actually operated on a bimetallic standard for most of its history. Earlier laws even define the dollar as a weight of 371.25 grains of fine silver.
The dollar’s loss of purchasing power since 1913 has been enormous. In terms of silver, it has depreciated by 96%. In terms of gold, the greenback has depreciated 98% over that span.
House Resolution (H.R.) 5404 Is a Return to Sanity
This aforementioned depreciation of the dollar’s purchasing power is covertly robbing Americans of their wealth. It also threatens the USD’s status as the world’s reserve currency.
Representative Mooney’s bill, H.R. 5404, proposes once again defining the dollar by a discrete amount of gold. The New American correctly calls the proposal a “sound money bill.”
According to the bill, the power over the money supply would be back in the hands of the market rather than the Federal Reserve, a central bank that is not accountable to the public.
It includes provisions for determining a fixed amount of gold for each dollar within 30 days of enactment, and an additional 30-month period for the federal government to then the necessary changes to support a gold-backed dollar.
The odds are overwhelmingly against the measure passing.
At this stage, the bill will be considered and debated by the House Financial Services Committee.
There have been other failed attempts since the early 1980s to bring back the gold standard.
However unlikely its passage is, H.R. 5404 moves the conversation closer toward a truly sound monetary system.
It follows successful efforts by the majority of U.S. states that have taken the initiative of passing laws exempting precious metals from sales tax.
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