President Donald Trump has indicated he’ll appoint Kevin Warsh to be the next Chairman of the Federal Reserve. Despite what some supporters say, that alone will not fix what’s wrong with our economy.
Much of the general prosperity Americans have become accustomed to is courtesy of the fact that the U.S. dollar is the world’s reserve currency. Washington assumes this status is guaranteed. That’s wrong. Confidence in the dollar is sustained by credibility, not inertia or military might. The way to anchor credibility, impose fiscal discipline in DC, and protect Americans from the slow erosion of purchasing power is to return the dollar to the gold standard.
The price of gold jumped to a record-shattering $5,500 per ounce but has since come down to below $5,000 per ounce and bounced back above, as of this writing. Silver also experienced a great run, reaching a high of over $121 per ounce before tumbling at the end of January. These wild price swings are warning signals of a weaker dollar. While this doesn’t guarantee the end of the dollar’s reserve currency status, it’s a cause for concern.
Reserve status is earned and maintained in the trust that the dollar will hold its value, the U.S. government will honor its obligations, and that investors will trust that the dollar will not be weaponized for short-term political gains. This trust is starting to fray.
As lawmakers on Capitol Hill scramble to avoid another partial government shutdown, expect to see more spendthrift policies that create record levels of debt. The national debt is closing in on $38.6 trillion and Social Security and Medicare are facing tens of trillions in additional unfunded obligations.
Persistent deficits signal that the U.S. could inflate away obligations rather than confront them honestly, placing monetary credibility under strain.
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Monetary credibility is the Fed’s job. Unfortunately, the Fed has never been immune from political influence. Members of Congress and presidents from both parties have placed great pressure on the Fed to accommodate fiscal goals, especially after the gold window was closed in 1971.
Fast forward to 2026, and decades of fiscal accommodation at the Fed can no longer be ignored. When monetary policy is perceived as a blatant tool of electoral or fiscal convenience, confidence in the currency and other U.S. assets inevitably suffers.
The recent sell-off of Treasury notes by AkademikerPension is modest in scale but symbolically important. It reflects an emerging awareness among allies and adversaries that dollar-based payment systems can be leveraged as instruments of financial control. As sanctions and financial exclusions become regular tools of U.S. foreign policy, other nations will naturally seek ways to diversify away from the dollar to reduce exposure to political risk.
This is how reserve currencies decline: a slow bleed as confidence wanes.
A return to a gold standard helps reverse that trajectory, placing external discipline on fiscal and monetary policy. Deficits are no longer financed indefinitely by monetary expansion. The dollar’s value is anchored to something beyond political discretion. While gold doesn’t eliminate business cycles, it helps prevent policymakers from amplifying them through unchecked monetary expansion.
Of course, there are concerns about a destabilizing run on gold and that the U.S. government does not have enough gold. Convertibility, however, means paper money and banknotes are credibly redeemable on demand at the established parity and that market agents believe this to be enforceable. It does not mean that all redemption claims can be paid at once.
Additionally, economist Judy Shelton recommends the U.S. government issue new Treasury Trust Bonds (TTB), which would be redeemed for gold at maturity. In her book Good as Gold, she elaborates that these TTBs would also serve as “an observable barometer of fiscal prudence” by using the dollar’s convertibility to gold to assess whether the Fed is maintaining stable prices. Redeeming the gold through TTBs helps assuage fears of a run on gold and prevents the government from opening and closing the gold window at its discretion.
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Most importantly, a gold standard restores affordability for ordinary Americans. A stable dollar means price stability, wages hold their value, and savings that don’t require speculative risk just to keep pace with inflation.
The rise of gold and silver to record highs is a market verdict on current policy. The world is hedging against America’s recklessness. If D.C. wants to preserve dollar dominance, and its benefits, it needs to start taking credibility seriously. A dollar redeemable in gold would speak louder than any press release or policy framework ever could.
Thomas Savidge is a Research Fellow at the American Institute for Economic Research. Follow on Twitter/X: @thomas_savidge.
