The Case For Gold: A Minority Report of the U.S. Gold Commission

The United States is now in the most serious recession since the 1930s. The most staid and sober magazines and newspapers are writing openly about the possibility of depression. Sectors of the economy have already entered the depression stage; more are threatening to follow. The number of personal and business failures more than doubled from 1971 to 1981, and the early figures for 1982 indicate that failures are up 50 percent over 1981. Interest rates remain near record highs; unemployment has reached nine percent and is moving upward. The only sign of improvement is a slower rate of increase—but still an increase—in the cost-of-living. Annualized increases in the Consumer Price Index are now down near the levels that prompted President Nixon to impose price and wage controls in 1971.

How did the economy get into such a poor condition? Can it be blamed on the Reagan administration’s new policies, as some would like to do? Or is there a more fundamental reason for our present crisis?

It is the conclusion of the signers of this report that there is a more fundamental reason. Our present crisis has not developed in the past year; it has been growing for at least a decade. When President Nixon imposed price and wage controls on August 15, 1971, he also, ironically enough, severed the last link between the dollar and gold. The process begun in 1913 with the formation of the Federal Reserve System, accelerated by President Franklin Roosevelt through a confiscation of privately owned gold and a devaluation of the dollar, nearly completed in the 1960s by the withdrawing of silver certificates from circulation and the end of silver coinage, was finally completed when the international convertibility of the dollar into gold was ended in 1971.

The entire process is a catalogue of broken promises and outright theft on the part of the federal government as it sought to substitute a managed, irredeemable paper money system for a gold standard. For the past 10 years we have had a monetary system unique in our national history: no circulating silver or gold coinage, but a government monopoly of politically managed paper money. The present crisis is a result of this fundamental change in our monetary arrangements, and it will not—indeed cannot—be ended permanently unless fundamental reforms are made.

Our 10-year experiment with paper money has failed; it is time that the Congress recognize that failure. Congress has violated both the principles of sound economics and the requirements of our supreme law, the Constitution.

The Constitution forbids that anything except gold and silver coin should be made a tender in payment of debt—yet Congress has made inconvertible paper a legal tender. Economics requires a recognition that there is no such thing as a free lunch, but Congress has institutionalized the money-creating powers of the Federal Reserve in its efforts to perform the miracle of turning stones into bread.

Chapter one of this report presents an economic overview of the last 10 years, a decade of paper money. Chapters two and three detail the process by which we arrived at our present state. The fourth chapter presents the case for monetary freedom; chapter five argues the case for a gold standard, and chapter six outlines the specific reforms that will be needed to correct the blunders of the past. Finally, chapter seven will offer two views of the next 10 years, a decade with gold and a decade without.

Now Congress faces a crisis and an opportunity. We hope the arguments presented here are persuasive, and the Congress acts in a timely fashion to avert an economic calamity. For too long the federal government has been playing with Monopoly money; we must move forward to a real money system, gold.