The world’s stock markets continue to plunge. Why?
And what are the political implications?
The Wall Street Journal, recently, in The Return of the Greenback, observed that “the resurgent dollar has logged its longest winning streak in 17 years, rising against a broad basket of currencies for nine straight weeks.” This has led to, perhaps irrational, exuberance from supply side titans Larry Kudlow and Steve Moore.
Cheapening the dollar is a bad thing, unequivocally. It does not necessarily follow that making the dollar dearer is a good thing.
As the dollar rises to dizzying heights, at a dizzying pace — strongly implying an overly tight Fed policy — commodities prices, predictably followed by equities, are plummeting.
It does not have to be this way. What is needed is a “Goldilocks” monetary policy: “not too hot, not too cold, just right.”
The classical gold standard worked just that Goldilocks way. It beautifully, rather consistently, over many decades, and under vastly differing conditions, worked to keep currency value, very much including the dollar, on an even keel. There is every reason to believe that, properly implemented, it would work beautifully into the future.
The gold standard did not, and would not, constrain the amount of money in circulation. It is a qualitative, not quantitative, mechanism simply and elegantly signalling the monetary authorities when to start and stop the printing presses. The gold standard correlates very well with a steady climate of across-the-board equitable prosperity, what President Kennedy called “a rising tide lifts all boats.”
Many GOP presidential contenders have spoken sympathetically of the gold standard. One, Ted Cruz, now in the top tier of GOP candidates, has outright advocated its restoration. The gold standard is not a counsel of austerity but, rather, of prosperity. Dow 25,000 anybody?
The surest, and fastest, and possibly only, way to fight the plunge in stock and commodities prices, and restore robust economic growth and job creation, is to restore the definition of the dollar by, and legal convertibility to, a fixed weight of gold. Rep. Jack Kemp recognized the value of the gold standard to working families, advocated it, and introduced impeccable legislation to restore it with the Gold Standard Act of 1984, legislation deserving to be re-introduced and enacted.
Forbes Media’s chairman and editor-in-chief Steve Forbes has called for the restoration of the gold standard, spelled out in his 2014 book, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It. APP advisor businessman-philanthropist Lewis E. Lehrman has defined exactly how to go about it in his 2012 classic, The True Gold Standard – A Monetary Reform Plan without Official Reserve Currencies.
In this time of falling stocks, commodities, and foreign exchange — and growing fears of recession — Ted Cruz is offering the most potent, credible solution for restoring economic prosperity. His proposal of the gold standard is something worth his emphasizing and something for the other candidates, of both parties, to emulate, as the presidential primary contest begins to crescendo.
Ralph Benko, internationally published weekly columnist, co-author of The 21st Century Gold Standard, lead co-editor of the Gerald Malsbary translation from Latin to English of Copernicus’s Essay on Money, is American Principles Project’s Senior Advisor, Economics.