gold standard

The boss, who’s something of a gold standard enthusiast, is excited: Newt Gingrich called this morning for a Gold Commission, like the one Ronald Reagan set up in 1981, to consider how to get back to hard money (and perhaps to gold). Here’s video of Gingrich speaking in Columbia, S.C., at a foreign policy forum sponsored by the U.S. Global Leadership Coalition. (The text is below.)

“We need to get our house in order. And we need to vaccinate ourselves against foreign contagion. The correct answer to the Euro is not to spend more American money propping up the Germans who prop up Southern Europe. The correct answer is to figure how we seal our banks off; how we make sure we protect ourselves and then say to the Europeans: you have a problem and you need to solve it.

“Part of our approach ought to be to reestablish something Ronald Reagan did in 1981 and that is to have a Commission on Gold to look at the whole concept of how do we get back to hard money.

“We need to repeal the Humphrey-Hawkins Act. We need to say to the Federal Reserve: your only job is to maintain the stability of the dollar because we want a dollar to be worth thirty years from now what it is worth now because that optimizes saving and investment because people know what they are going to back.

“The very purpose of founding the Constitution was landowners and property owners who did not want inflation. And they felt that under the Articles of Confederation they were increasingly getting inflated paper money.

“Hard money is a discipline.  It means you can’t just hide from your problems; you’ve got to solve them.  And you can’t inflate away your difficulties; you actually have to work them away.  But I think it is very important for us to understand in finance that the entire contraption that has been built up over the last thirty or forty years has so much paper in it, so much debt, so much leverage, that we probably have a fifteen or twenty year period of working our way out of it.

“And yet, the alternative is to get sicker and sicker and sicker.”