Money, Gold, and History

by Lewis E. Lehrman

The authentic and effective American solution is neither esoteric nor complicated. It is simple and straightforward. The solution is authorized by the United States Constitution in Article I, Sections 8 and 10 whereby the control of the quantity of dollars in circulation is entrusted to the hands of the people because the definition of the dollar was entrusted to Congress. In 1792, Congress defined by statute the dollar as a specific weight unit of precious metal.

There it remained for most of American history, especially from 1792 to 1914 because the dollar was precisely defined by congressional statute as a weight unit of gold or silver. This gold standard economic era was America s longest period of rapid, non-inflationary, economic growth almost four percent annually with the budget under control, except during major wars.

Congress need only mobilize its unique, constitutional power under Article I "to coin money and regulate the value thereof." Until 1971 U.S. law defined the gold value of American currency such that paper dollars and bank demand deposits were convertible to their gold equivalent by the people (1792-1914) and/or by governments (1933-1971). The last vestige of convertibility was terminated by President Richard Nixon s Executive Order of August 15, 1971.

Congress should now exercise its constitutional power to restore discipline in the Federal Reserve System by dollar-gold convertibility, especially because of the proven, budgetary, and economic growth benefits of a dollar as good as gold.