The True Gold Standard (Second Edition)
In Washington, D.C., the saga of the Federal debt ceiling, resulting from ever growing budget deficits, continues. Unfortunately, the story that fiscal policy alone is not enough to solve this problem remains largely untold.
On March 16, 2006, freshman Senator Obama pointed out, “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.” And, as Democratic Senate leader Reid said just a short while before Obama spoke that same day, “President Thomas Jefferson said: I place economy among the first and most important government virtues, and public debt as the greatest of the dangers to be feared.”
As we near yet another vote on increasing the debt ceiling, we should keep in mind 2 facts: (1) not increasing the ceiling does not equate to a default, and (2) it is a myth that the Federal government has never defaulted in the past.
On the fiscal policy front, a number of serious proposals have been made to address the budget and debt problems, such as Dr. Ron Paul’s Plan to Restore America and Dr. Rand Paul’s bill S.162 introduced in 2011. (There are a number of other proposals, e.g., the Paul/DeMint/Lee budget, the Tea Party Debt Commission budget, the Cato Institute budget, and the proposals published by the Heritage Foundation mentioned in my earlier article.) Also see Congressman Broun’s bill H.R. 2409 from 2011 to lower the debt ceiling.
But that of course leaves out the monetary policy. Previously, I have pointed out that we cannot honestly address the debt problem unless we follow the 3 part solution offered by Warren T. Brookes in the 1986 Heritage Foundation symposium on cutting the budget:
Congressman Paul Broun has introduced legislative proposals in the House that would address these issues by following most of the solutions proposed by Brookes.
An additional measure would be the passage of a modified version of Dr. Paul’s bill from 2011, H.R. 2768 -- the Debt Crisis Resolution Act, which would “cancel public debt held by the Federal Reserve System and ... lower the public debt limit by an equal amount.” I would modify the original bill to make sure that the second part of its stated purpose is carried out. My addition to the original bill would be a new section:
We will soon see who the true “deficit hawks” are.
The Federal Reserve System's James Narron and David Skeie, career officials with the Federal Reserve System, are two eminent historically erudite figures. Writing in the New York Federal Reserve Bank's online publication, Liberty Street Economics, they recently provided a continuation of their valuable historical "revue," Crisis Chronicles: The Collapse of the...
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Why the Gold Standard?