H.R. 1176: A Step We Need to Take
April 5, 2013
(This item originally appeared in Forbes.com on April 5, 2013.)
On March 14, H.R. 1176, the “Centennial Monetary Commission Act of 2013,” was presented in Congress. It has thirteen sponsors.
Thirteen is a good number. We are already beyond the days of Ron Paul’s lonely crusades, of only a few years ago.
The bill aims to “establish a commission to examine the United States monetary policy, evaluate alternative monetary regimes, and recommend a course for monetary policy going forward.”
Some will complain that committee-establishing is pretty weak tea. What about real action? But, I think it is very appropriate for the present time. We have to know what we are doing and why before we just start flailing around with ill-conceived “solutions.”
We are still at a time, in the United States, when we need “more intellectual gasoline.” Action is the expression of shared ideas. We need the ideas first. Clean, clear, functioning and actionable ideas.
The Commission is purposefully open-ended. What alternatives are there to the present situation, of a Federal Reserve monopoly floating fiat currency? Just start with that. Before deciding what should be done, we have to get an idea of what can be done. Let everyone have their say.
Eventually, I think such a commission would come to the conclusion that there are really only two alternatives. One is a “Mercantilist” floating fiat currency. This is a reflection of a certain idea — the idea that an economy should be “managed” by way of a secretive group of bureaucrats engaging in monetary distortion of economic relationships.
In other words, by manipulating the money, the manipulators can induce people to do things — hire the unemployed, borrow money, buy stocks, etc. — that they would not otherwise do. That’s the idea, anyway. Sometimes it doesn’t quite work out as intended.
The other idea is the “Classical” notion of a currency that is as stable, neutral, and free of human intervention as possible. A currency, it is said, should be like a kilogram or meter, a universal constant of commerce, absolutely free of all the human meddling that the Mercantilists say is the solution to all of our problems.
We start with those two ideals. Which is better? Which will form the basis of U.S. economic policy for the next hundred years? Maybe the commission will come to a conclusion on that. I think the Classical ideal is better.
Once you have a conclusion about what you are trying to achieve, then — and only then! — you can make some decisions on how to accomplish your now-clarified goals.
The present Federal Reserve floating fiat monopoly currency is a certain type of tool to achieve a certain type of goal — the goal of prosperity-through-currency manipulation.
But what if you decided that the Classical approach, of a currency as stable and neutral as possible, is your ideal? In that case, you need a different tool. The tool that all governments have used, in this case, is a gold standard system. It is the best tool for that specific job.
I suppose people will argue that this, that, or another tool is better. So what. Talk is cheap. We now have centuries of experience with gold standard systems, from 1700 (and earlier) to 1971, so we don’t have to talk about it, we can just go look at the results. Even Alan Greenspan now agrees that the world gold standard of the late 19th century was the Most Perfect Monetary System Ever Created.
On the one hand, we have the collective experience of dozens of governments (practically the whole world) over two centuries and more. On the other hand, we have some goofy idea that some junior academic (or unusually creative “gold bug”) thought up while sitting on the potty.
Let’s have a (short) discussion about which is better.
These are all steps we have to take, to our better, possibly Federal-Reserve-less future. H.R. 1176 is the next step in the process.
Let’s do it.
