Congressman Alex Mooney's Bill Defines the Dollar as a Unit of Gold

This story came out in March, but I just now caught it. I salute Mooney for wording the legislation correctly.

Please consider House Bill HR5404 Defines New Dollar Gold Standard.

HR 5404 A bill to define the dollar as a fixed weight of gold was introduced to the Committee on Financial Services on 22nd March 2018 by congressman Alex Mooney.

Here is the actual HR5404 Bill.

Key Item

"Effective 30 months after the date of enactment of this Act – (1) the secretary of the Treasury shall define the dollar in terms of a fixed weight of gold, based on that day's closing market price of gold; and (2) Federal Reserve Banks shall make the Federal Reserve notes exchangeable with gold at the statutory gold definition for the dollar."

That is how it must work. Mooney did not make the mistake of setting a price for gold. He correctly defined the dollar as a unit of weight.

Thoughts

Supposing HR5404 gets signed into law in 6 months, that would mean that the US would need to transfer to a gold standard by Spring 2021. The mere passing of this bill would send gold rocketing over the next few years and, assuming the US gold stocks are intact, it would neutralise the national debt. While there is no mention of the national debt in the bill, this is clearly a major benefit of a gold standard to the US administration. However, as the gold price rises against federal reserve notes, so does everything else, which means the public worldwide would suffer crippling inflation if they hold FRN dollars and other fiat currencies.

The price of gold would certainly skyrocket, but it is not necessarily so that national debt would be extinguished. However, it is clear that any countries that do not have gold reserves would be severely punished.

Let's Talk About Gold

Congressman Mooney wrote this Op-Ed for the WSJ: Steel and Aluminum? Let’s Talk About Gold.

I believe in free trade, but I still understand why President Trump is imposing tariffs on steel, aluminum and a range of Chinese products. America’s industrial workers have suffered for a long time, and Mr. Trump is fighting to create middle-class jobs.

President Trump has rightly blamed bad trade deals, particularly those with Mexico and China, for contributing to this meltdown. But the Federal Reserve deserves a share of the blame, too, since its inflationary policies priced out U.S. manufacturers from global trade. Since 2000, their prices have risen nearly 50%, compared with about 25% for German competitors—mirroring the domestic inflation rates in each country. As a result, manufacturers fled the U.S., much the way American families have fled high-tax states.

My constituents in West Virginia get little of the upside from the Fed’s money creation and most of the downside. They don’t benefit from speculative investment returns, but they do lose their jobs and homes when the local plant decides to close because it’s too expensive to compete from the U.S.

The current Federal Reserve system benefits elites. The gold standard is equitable and puts “we the people” in control of the money supply. That’s why it was part of America’s founding and has been a key to the country’s long economic success.

On Thursday 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.

Like President Trump, I believe that success is again possible for Americans who go to work every day and build things. Mr. Trump’s vision of how the American economy could and should work resonated with voters in 2016. Returning to the gold standard is a way for the president to deliver on his promise of American working-class prosperity.

Backwards But Correct

Mooney has the trade story wrong, yet, his solution is correct.

Bad trade deals are not at the heart of the problem. Rather, severe problems began the moment Nixon closed the gold window, ending convertibility of dollars for gold.

That is the source of the trade deficit, not bad deals.

Explaining Balance of Trade

“Our Currency but Your Problem”

The source of global trading imbalances, soaring debt, declining real wages, and the massive rise of the 1% at the expense of the bottom 90% is Nixon closing the gold window.

At that time, Nixon’s treasury secretary John Connally famously told a group of European finance ministers worried about the export of American inflation that the “dollaris our currency, but your problem.”

Balance of trade issues, soaring debt, declining real wages, and the demise of the US middle class are now our problem.

The Fed, ECB, Larry Summers, Paul Krugman, Donald Trump, and economists in general, cannot figure out what caused the problem. Instead, Bernanke, proposes a “savings glut”, and Larry Summers proposes “secular stagnation”.

For further discussion, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Mike “Mish” Shedlock

Comments (19)
No. 1-19
shamrock
shamrock

The US has about $20B worth of gold. The money supply is between $4 and $15T. How in fucks name could they ever meet that obligation? Gold would need to be worth between $300,000 and $400,000 per ounce on the magical day in question.

CCR
CCR

Probably DOA.

Brian1
Brian1

As Mish points out the key part of the bill is that a dollar would be worth a fixed weight of gold, not a value in gold. I'm curious as to who/how determines what that weight is and what tiny fraction of a gram it would be.

Brian1
Brian1

Rep. Mooney or his bill? :)

Tengen
Tengen

Where are you getting the $20B figure? Officially (as of 2017) the gold in Ft Knox is worth north of $100B, but there hasn't been a proper audit since Eisenhower was president! The public last got a glimpse of any gold there was in 1974.

Of course Mnuchin and his trophy wife took a peek recently and assured us all is well, and I think I speak for all of us when I say his trustworthiness is beyond reproach. In fact I can't think of a single Goldman Sachs partner I would doubt in that situation!