A new gold standard is crucial. The disasters that the Federal Reserve and
other central banks are inflicting on us with their funny-money policies are
enormous and underappreciated. An
unstable dollar is wreaking havoc on our capital markets, depriving us of money
for productive enterprises and future enterprises while subsidizing government debt
on a scale never before seen in U.S. history.
The zero-interest-rate policy destroys capital by punishing savers and
enabling the central bank to allocate where capital goes. By definition, such central planning means
subpar or negative returns. No one
believes, given the finances of the U.S. government, that a ten-year Treasury
bond should yield only 1.8%.
The promiscuous printing of money in the U.S., Europe and
elsewhere is enabling governments to put off pro-growth structural reforms and
giving them incentive to increase the burdens on the private sector. The poster child here, of course, is France,
raising its maximum income tax rate to 75%.
Not since the early 1930’s have governments of major countries
collectively acted so destructively. The
only difference between then and today-and it is a gargantuan one-is that we
haven’t destroyed the global trading and capital systems. Bet even they are facing increasing strains
and will continue to do so unless policies are changed.
What the Fed is doing through its binge buying of bonds is
enabling Washington to consume our national wealth. Instead of creating new wealth we are
beginning to destroy that which exists. No wonder tens of millions of people
feel-rightly-that their real incomes are declining and their financial
situations are coming under more pressure.
In real terms that stock market is lower today than it was in the late
1990’s, and even in absolute terms is still isn’t where it was in 2007.
Can we move forward on a gold standard before real
catastrophe a al the 1930’s results?
A big part of the problem is that economics classes no
longer teach the fundamental importance of stable money. The gold standard, if mentioned at all, is
derisively dismissed as a relic, like the Egyptian pyramids or the Ford Model
T. Unless Mitt Romney educates himself quickly on the need for monetary reform
(yes, he will win this election, despite all the claptrap to the contrary), we
are going to have to seriously and deliberately begin the process of education
and experimentation.
The gold commission advocated by the Republican platform
would be an excellent start. There is
something big that could be done simultaneously to get the golden ball
rolling: remove legal barriers to
alternative, nongovernment currencies in the U.S. We are allowed to use pounds, yen, Euros and
any other currency to carry out a transaction.
Why not allow metal-based or –backed currencies to be used?
The need for such legislation is crucial. As noted monetary expert Nathan Lewis told
Congress this summer in testimony on the desirability of allowing alternative
domestic currencies, “If a house were purchased using U.S. Mint gold coins, the
transfer of the coins to the seller would be regarded as a ‘sale’ of gold
bullion for tax purposes, and subject to capital gains taxes. If the same transactions were done in Euros,
no such taxes would apply. In addition,
purchases or sales of small quantities of gold are subject to sales taxes in
many states.
To that end, when he takes office, President Romney should urge Congress to pass a bill similar to
that proposed by Ron Paul, the Free Competition in Currency Act, which would
abolish all federal taxes on gold and silver bullion, as well as ban state and
local taxes on them. It would explicitly
allow gold-based monetary transactions and would remove the onerous reporting
rules that now afflict gold and silver bullion buyers.
Currently, the Federal government wages a virtual jihad
against any attempt by individuals or companies to create gold-based monetary
instruments for commercial transactions.
Several years ago, Bernard von NotHaus started a company to do just
that, issuing coins and paper bills called Liberty Dollars. They were receipts for gold and silver
bullion. He now faces massive jail time.
The tide is turning on this issue. On the national level we should do so as Utah
did in 2011: eliminate all taxes on transactions
in gold and silver bullion. When you
“purchase” a $20 bill for two $10 bills, you don’t pay sales tax. When you exchange dollars for Euros, you
don’t pay a government tax on the transaction.
Utah decreed that U.S.-minted gold and silver coins are legal as
currency.
An interesting historical fact is that until 1933 the U.S.
government itself issued gold-based dollars that floated freely with currencies
issued by numerous national banks. The
combination of getting a serious debate on the gold standard going and sweeping
away our legal tender laws barring competitive domestic currency would hasten
the day that we’ll once again have a gold-based currency like that which did
our country so much measurable good for 180 years.
Steve Forbes
Editor-In-Chief
Forbes
Magazine
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