Gold Standard Reintroduced to Congress
In a world growing with millennials who don’t know what the gold standard was, and who rely on bitcoin and apps like STASH for their financial investments, I am left to discuss Congress’s new bill to re-establish the gold-backed dollar with you: the prudent reader and investor.
Quoted in the Wall Street Journal on March 22, Congressman Alex Mooney said, “I introduced a bill that would return the dollar to the gold standard—the first such attempt since Jack Kemp’s Gold Standard Act of 1984. Under this legislation the Fed would still exist, but it would administer the money supply rather than dictate it. Instead the market would be in charge, the supply and demand for money would match up, and prices would be shaped by economics rather than the instincts of bureaucrats.”
Regardless of the outcome his findings are thought provoking. For instance, the bill states, “The U.S. dollar has lost 30% of its purchasing power since 2000, and 96% of its purchasing power since the end of the gold standard in 1913.”
I have made note of this many times and explained to investors and their clients how gold and silver preserve wealth and purchasing power.
Mooney continued his thought, saying that even under the Federal Reserve’s goal of 2% annual inflation, the dollar will still lose half of its purchasing power for every generation (35 years) that follows. That is a track to quick ruin and collapse.
Mooney’s bill goes on to say, “The Federal Reserve policy of long-term inflation has made American manufacturing uncompetitive, raising the cost of United States manufactured goods by more than 40% since 2000, compared to less than 20% in Germany and France.”
Going further, this also ties directly into the pending trade wars with China. The Trump administration may just be facing off with China in an effort to stay relevant on the world stage of manufacturing and commerce; or the quarrel could be tied to the petro-yuan launch this year. You decide.
Another point Mooney made was that the U.S. economy needs both a stable dollar and a money supply that is controlled by the market, not the government. I agree – the only thing that is more out of control than the Federal Reserve’s money printing is the ability of our government to spend it. As the U.S. continues to sink deeper into debt that it cannot repay, the dollar will continue its freefall, losing purchasing power day by day.
Keith Weiner, Founder of Gold Standard Institute USA, wrote a letter in response to Mooney’s proposal noting his agreement that inflation undermines jobs and retirement. But he suggested that returning to a gold-backed dollar would ultimately be nothing more than a price-fixing scheme.
I tend to agree that a government-orchestrated mandate returning to a gold standard could end up in a price-fixing scheme. However, when the dollar is revalued, it will be revalued against the most historically-proven monetary constant – gold. Whether by “scheme” or solid economic principles, the revaluation will not end in a gold-backed dollar but rather, gold priced in revalued dollars, marking a monumental wealth transfer.
Though I think the bill that Mooney has introduced will fall flat, I believe that it’s still important to point more eyes in this direction. Investors and clients need to be informed and strategic in preparation for this impending wealth transfer.
Gold and silver are the best vehicles to protect other market-exposed assets against falling equity markets or a failing dollar. Contact my team so we can assist you in helping your clients today. We are here to help you market to, educate and position your clients into gold and silver that will protect and preserve their wealth.