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“GOLD ISN'T A WACKO IDEA” mentioning the Federal Reserve System was published in the Extensions of Remarks section on pages E1730-E1731 on Sept. 27, 1996.
The publication is reproduced in full below:
GOLD ISN'T A WACKO IDEA
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HON. PHILIP M. CRANE
of illinois
in the house of representatives
Thursday, September 26, 1996
Mr. CRANE. Mr. Speaker, an old friend, Owen Frisby brought to my attention an August 19, 1996 article featured in The Detroit News, pertaining to the gold standard.
I have contended for years that in order to revitalize our Nation's economy, we must remove from Government the temptation and the ability to produce chronic budget deficits. Restoration of a dependable monetary standard based on a commodity with fixed value would, by making monetization impossible, accomplish this. It is for this reason that I have introduced legislation in previous Congresses reestablishing the Gold Standard.
The author of the article emphasizes that the Gold Standard has been tested, and proven over the centuries as the best mechanism to protect against destructive inflation and deflation. I commend to the attention of my colleagues, ``Gold Isn't a Wacko Idea.''
Gold Isn't a Wacko Idea
Even before Jack Kemp had been named as Robert Dole's running partner, the Clinton White House was on the attack. In addition to bashing his tax-cutting ideas, aides to the president cited Mr. Kemp's affinity for a return to the gold standard as further proof that he's an economic wacko. Should he choose to pursue the issue, however, we have little doubt that's an argument Messrs. Dole and Kemp would win.
The gold standard has pretty good history, after all. Alexander Hamilton placed America on a gold standard as part of his effort to refinance the young country's debt following the Revolution. The link with gold was broken temporarily during the Civil War and in the early 1930s, but it was soon reestablished in both cases. And for good reason: The gold standard proved a durable and politically potent means of ensuring the value of the dollar.
After the remaining links to gold established under the postwar Bretton Woods agreement were finally broken by Richard Nixon in the early 1970s, inflation soared. The market price of gold itself vaulted from $35 an ounce to $850 an ounce. It's still selling for more than $380 an ounce--more than 10 times its price only 25 years ago.
If you wonder why the American middle class is still feeling ``anxious'' about its living standards, you need look little further than at the massive expropriation of wealth and income that this represents. Little wonder it is so tough to wean people from such ``middle-class entitlements'' as Medicare, Social Security benefits, day-care and college tuition subsidies.
Many conservative ``monetarists'' share the belief of liberals that gold is ``a barbarous relic,'' in the words of the late, great British economist, John Maynard Keynes.
They prefer allowing the dollar to ``float'' in value, letting its price be determined in world markets by supply and demand. And the Federal Reserve System, under Chairman Alan Greenspan, appears to be doing a credible job of wringing inflation out of the economy and keeping the dollar stable against other currencies.
But it's no secret that one reason for Mr. Greenspan's success is that he keeps a close informal eye on gold prices. Before he became Fed chairman, he openly expressed support for a gold standard on grounds that gold is an excellent barometer of the supply and demand for paper money.
But Mr. Greenspan may not be around forever. And interest rates remain stubbornly high by historical standards, imposing a huge cost not only on the federal budget but on the average American. These higher interest rates reflect the premium charged by lenders who must worry about the future course of the dollar. When gold was the standard, long-term rates seldom rose above 4-5 percent, compared with at least 6-8 percent today.
Few ordinary citizens can comprehend the Federal Reserve's money-market manipulations. They must guess at what's going on behind the doors at the Fed. The result is they demand a premium as a hedge against future inflation.
But even ordinary citizens can understand a gold standard. When the price of gold rises, they know that inflation may be in the offing. When it falls, they know it's time for the Fed to print more dollars in order to fend of deflation. A gold standard gives voters a practical reality check on the performance of the elites in Washington.
In short, the gold standard is no wacko idea. It's been tested over centuries. It may not be perfect, but is has provided a better hedge against the ravages of inflation and deflation than most other systems. And it is a fundamentally democratic mechanism that enhances the ability of the ordinary citizen to control his or her destiny. What's wacko is the notion the folks in Washington have done such a swell job maintaining the value of the dollar.
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