Former Bush economic adviser and Federal Reserve Governor Larry Lindsey said that the weight of history leaned toward a gold standard. Many other conservatives are also calling for a return to a gold standard in order to protect the wealth of America.
Is gold the answer?
With the nation smothered in debt, crippled by unemployment and financed by dollar bills backed by nothing more than the faith of the public, some conservatives are calling for a return to the gold standard.
At The Heritage Foundation’s Conference on a Stable Dollar last week, former Bush economic adviser and Federal Reserve Governor Larry Lindsey said the weight of history leaned toward gold.
The country moved to a fiat currency during the Civil War and then restored the gold standard years later, he noted, pointing out that this kind of back-and-forth is natural.
“I’m sure we’ll do it again,” Lindsey said. “Probably in the next 10 years.”
His reason for the reversal is both disturbing and unsurprising.
American families took on too much debt during the housing bubble. The government responded to the ensuing meltdown by leveraging up its own balance sheet by trillions of dollars. And the strain of navigating through the debt is more than the Fed’s Open Market Committee, which controls the money supply, can endure.
While Lindsey believes the Fed has done an admirable job, he doubts the 19-member committee can resolve the competing pressures better than a dollar pegged to gold.
“None of these guys are gods,” he said. “Nineteen men trying to adjudicate these demands will disappoint society.”
President Richard M. Nixon officially ended the gold standard more than 30 years ago. While the precious metal can foster a stable currency, it can also have downsides. A reliance on gold limits how much money could be flushed into the economy during a downturn, one of the key strategies for combating a recession.
Reintroducing the gold standard, though, has yet to catch fire with most Republican presidential candidates.
Most of them have called for the resignation of Federal Reserve Chairman Ben Bernanke, but only the former CEO of Godfather’s Pizza, Herman Cain, has endorsed the gold standard, according to the American Principles Project.
Still, Americans are increasingly enthralled by gold’s luster, even if some presidential candidates are not.
An August survey by Gallup Poll found that 34 percent of those questioned considered gold to be the best long-term investment, beating out real estate, stocks, conventional savings accounts and bonds.
It’s not that big a surprise, given that the precious metal has increased in recent years to more than $1,600 an ounce on Comex.
Gallup suggested two explanations for gold’s popularity: Either it’s caught in an investment bubble, or it reflects a “growing lack of confidence in the U.S. economy.”
Longtime gold standard advocate Lewis Lehrman said the current crisis could change the opinion of political leaders.
“Everything,” he said, “depends on the extent of the disintegration and the desperation of American voters.”
To see original article CLICK HERE