Nearly half the Republican presidential field has hinted at endorsing a return to the gold-backed dollar, a monetary policy abandoned 40 years ago.
That wouldn’t mean trading in paper bills for gold coins, said Rich Danker, director of economic for American Principles Project, a Washington, D.C.-based conservative public policy organization pushing for the change.
But tying federal money to gold would force Congress to balance the budget, make the global financial system simpler and more transparent and end inflation, he said.
Under the gold standard, a piece of paper currency represents a real amount of gold held in a vault by that government. Between 1933 and 1971, the United States pegged its currency to gold at a rate of $35 per ounce.
Due to the inflationary effects of the Vietnam War and a rapidly declining supply of gold, President Richard Nixon abandoned the system, according to the University of Iowa’s Center for International Finance and Development.
Now the value of the dollar is backed by the faith in the U.S. government. Returning to the gold standard would stabilize the value of money, but it would not weaken purchasing power, supporters say.
“The U.S. government wouldn’t be able to print money to do government deficit spending, or bailouts,” Danker said. “It would instill automatic fiscal discipline on Congress and on the president, so you don’t have experiments in printing money and spending it on all kinds of projects have no voter support.”
Under the gold standard, if the nation did not hold the gold to back the dollar, it could not print the money.
Rep. Ron Paul, R-TX, has been a long-time advocate for the gold standard as the solution to America’s economic woes.
The American Principles Project applauded former U.S. House Speaker Newt Gingrich for supporting the gold standard, when he called for “hard money with a very limited Federal Reserve,” during the Republican presidential debate last week.
The Federal Reserve sets the nation’s monetary policy, supervises central banking operations and imposes reserve requirements. It can increase or decrease the supply of money in circulation.
Former Godfather’s Pizza CEO Herman Cain has blamed runaway inflation and spending on Nixon’s decision to abandon the gold standard.
With jobs and the economy at the forefront of Iowa voter concerns, monetary policy has emerged as a hot topic.
“Right now we have a Federal Reserve printing money that’s not backed by anything — it’s just paper,” said Iowa Sen. Kent Sorenson, R-Indianola, referring to the market-based value of the dollar. He has proposed a measure legalizing gold and silver coins as currency in Iowa.
Sorenson is backing Minnesota U.S. Rep. Michele Bachmann, who has not taken an official stance on the gold standard.
However, Bachmann has said she supports the balanced budget amendment, an idea popular in the Republican-controlled U.S. House that would require Congress to approve a balanced budget.
“The gold standard really is a more eloquent and automatic way to produce a balanced budget,” Danker said, “rather than having to do it through the kind of rules and technicalities and even loopholes that a balanced budget amendment might be riddled with.”
For the United States to move back to the gold standard, the president would need to ask Congress to pass a law codifying the change and set a date for implementation, then call an international monetary conference to work out the framework, he said.
Hannah Hess covers government and politics for IowaPolitics,com, which is owned by the Franklin Center for Government and Public Integrity.
