Jack Kemp says the economy would be as
good as gold and stay that way if the U.S. would go back
on the gold standard.
Writing in today's Wall Street Journal, the former
GOP vice presidential candidate and top executive at
Empower America claims that returning to the gold
standard would not only stabilize the dollar but also
avoid a future economic meltdown.
In his article, "Our Economy Needs a Golden Anchor,"
Kemp cited a number of drawbacks that come from not
having our currency backed by gold, as it once was: When
the U.S. ceased redeeming gold at $35 an ounce, its
price quadrupled on world markets to $140 - followed in
1973 by a hiking of OPEC oil prices fourfold. This, he
said, resulted in so-called stagflation, brought on wage
and price controls, and raised marginal tax rates.
Kemp wrote that the current energy price hikes are
being mistaken as inflation by the Federal Reserve and
charges that central bank errors in the discretionary
management of floating fiat currencies have put the
entire world economy at risk.
Without gold backing for our currency, Kemp warns,
the Fed has no way of determining how large a money
supply (liquidity) markets demand - and all it does by
manipulating interest rates is guess how much liquidity
to inject or withdraw to counteract mistakes it made
Under a gold standard, he suggests, the Fed could
stop playing with interest rates and begin honing in on
gold directly - not by fixing the price of gold by
administrative fiat, but by calibrating the level of
liquidity in the economy to keep the market price of
gold stable within a narrow band closer to $325 than
The Fed would then add liquidity by buying bonds when
the price of gold tries to fall and subtract liquidity
by selling bonds when the price of gold tries to rise.
Kemp is not alone in pushing for a gold standard. The
Journal cited others who believe the nation needs to
back the currency with gold. The paper quoted President
Reagan as saying that he knew of no nation that went off
the gold standard and remained great. The Journal also
quoted famed economist Milton Friedman as saying that
the world "needs a long-term anchor of some kind."
When the U.S. stopped redeeming dollars held by
foreign governments, Friedman called the situation
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