By: Mike Hammer
We all know inflation makes things more expensive. And we think one purpose of the Federal Reserve is to stabilize prices. You’re right, and sorta-right. Inflation does make things more expensive; thanks to inflation, the US Dollar has lost a third of its purchasing power since the century started in 2000. Today in gold news, someone’s come forward with a plan to change that.
The interesting result of this is that while the Federal Reserve is legally charged to “maintain stable prices”, the Fed has set a target of 2% as being the correct amount of inflation for a stable economy. With a 2% inflation rate, the dollar loses half its value every generation. That’s right – the Fed’s plan is to devalue the dollar by over 50% every generation. This explains why your parents bought their house for half of what you paid for yours, or much less than half if you live in a high-growth area. And why all those VW Bug ads from the late Sixties touting a price of $1999 and “two pennies per mile” seem just so… well, Sixties, in these days of $24,000 small cars and 10 cents per mile operating costs (if you’re lucky).
If your college years came after 1965, you probably took an Economics class that showed math saying this is all fine. After all, in a modern economy, wages would rise as fast as prices, keeping everything relatively the same.
Congressman Alex Mooney (R-W.V.) introduced HR 5404 to address these issues. The bill, currently titled “To define the dollar as a fixed weight of gold”, intends to do just that. Or, in simple terms, bring back the gold standard.
Congressman Mooney laid out his case in an op-ed published in the Wall Street Journal. Along with poor monetary policy, Mooney states that “bad trade deals” with Mexico and China were major factors in the decline of America’s manufacturing class. He notes that employment in manufacturing shrank by a third in just 10 years, between 2000 and 2010, after holding steady for the previous 30 years.
In the op-ed Mooney states that fixing all this isn’t complicated. “The solution is to take control of the money supply away from the Fed and give it back to the American people — in other words, to return to the gold standard…Gold gets a bad rap in some history books because of its misuse during the 20th century. This ignores its peacetime record of high growth and nil inflation between 1834 and 1913.”
“My constituents in West Virginia get little of the upside from the Fed’s money creation and most of the downside,” Mooney states. “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.”