(This item originally appeared at Forbes.com on December 1, 2016.)
A few years ago, I was involved in a project to introduce a bill into Congress to require the Federal Reserve to return to the monetary principle that made America great – a dollar linked to gold.
One of the difficulties we ran into was the actual details of the bill itself. In practical terms, what would such a thing look like?
It can be hard to find the original text of this bill. So, here it is:
To resume a stable monetary standard in the United States
Section 1: This Act may be cited as the “Gold Standard Act of 1984”.
Reestablishment of the Gold Standard
Sec. 2. (a) Not later than one year after the date of the enactment of this Act, the Secretary of the Treasury shall establish a permanent definition of the dollar, expressed as a fixed weight of gold, nine-tenths fine.
(b) the dollar defined as such fixed weight of gold shall be the standard and unit of value of the United States, and all forms of money issued or coined by the United States shall be maintained at a parity of value with this standard.
Resumption of Gold Convertibility
Sec. 3. (a) Beginning one year after the date of the enactment of this Act, any person may, on demand, redeem for gold at any Federal Reserve bank any currency or coin of the United States, or any demand note or demand liability of a Federal Reserve bank.
(b) Such redemptions shall be made either in gold coins or in an equivalent value of gold bullion.
Provision for Coinage
Sec. 4. (a) The Secretary of the Treasury shall cause gold coins to be minted in such weights, denominations, and forms as the Secretary determines will best serve the maintenance of gold payments and the needs of commerce.
(b) Coins minted under this section shall be legal tender for all debts, public charges, taxes, and dues.
(c) Beginning one year after the date of the enactment of this Act, upon presentation of gold bullion to the Secretary of the Treasury at locations to be designated by the Secretary, the Secretary shall exchange such gold bullion for gold coins which contain an equal weight of fine gold, minus a charge which shall not exceed mint costs and related expenses.
Sec. 5. The Secretary of the Treasury and the Board of Governors of the Federal Reserve System shall prescribe such rules and regulations as are necessary to carry out the provisions of this Act.
Repeal of Restrictions on Gold Payments and Ownership
Sec. 6. (a) The first sentence of section 5118(b) of title 31, United States Code, is hereby repealed.
(b) Section 5119(a) of title 31, United States Code, is amended—
(1) in the second sentence, by striking out “However, the” and inserting in lieu thereof “The”; and
(2) by striking out the first sentence and the third sentence thereof.
(c) Section 5111(d)(1) of title 31, United States Code, is amended by inserting “, other than gold coins,” after “treatment of United States coins”.
(d) Section 11(n) of the Federal Reserve Act (12 U.S.C. 248(n)) is hereby repealed.
Jack Kemp’s vision included both parts of what I call the Magic Formula: Low Taxes and Stable Money. The Low Taxes part was of course the Reagan tax cuts; but that was only the beginning. Kemp later proposed a “flat tax” with a sub-20% rate, which Steve Forbes championed in his 1996 and 2000 presidential campaigns.
Since 2000, over 30 governments worldwide have adopted the Kemp/Forbes flat tax; unfortunately, the U.S. is still not among them.
A gold standard was always the other half of the strategy, the Stable Money part of the Magic Formula.
Does the Magic Formula work? U.S. history is practically the story of it working. The U.S. embraced the principle of Stable Money, and a currency based on gold, for 182 years, 1789-1971, and in the process became not only the most successful country of that time, but the most successful country of all time. Since 1971, it has become a country that needs to be made great again. Kemp showed us how.
Some economists now call the gold standard “crazy.” Oh really? Crazy good, I’d say.