Gold and the Dollar Congressman
U.S. House of Representatives
June 5, 2002
Mr. Speaker, I have for several years come
to the House floor to express my concern for the value of
the dollar. It has been, and is, my concern that we in the
Congress have not met our responsibility in this regard. The
constitutional mandate for Congress should only permit silver
and gold to be used as legal tender and has been ignored for
decades and has caused much economic pain for many innocent
Americans. Instead of maintaining a sound dollar, Congress
has by both default and deliberate action promoted a policy
that systematically depreciates the dollar. The financial
markets are keenly aware of the minute-by-minute fluctuations
of all the fiat currencies and look to these swings in value
for an investment advantage. This type of anticipation and
speculation does not exist in a sound monetary system.
But Congress should be interested in the dollar fluctuation
not as an investment but because of our responsibility for
maintaining a sound and stable currency, a requirement for
sustained economic growth.
The consensus now is that the dollar is weakening and the
hope is that the drop in its value will be neither too much
nor occur too quickly; but no matter what the spin is, a depreciating
currency, one that is losing its value against goods, services,
other currencies and gold, cannot be beneficial and may well
be dangerous. A sharply dropping dollar, especially since
it is the reserve currency of the world, can play havoc with
the entire world economy.
Gold is history's oldest and most stable currency. Central
bankers and politicians hate gold because it restrains spending
and denies them the power to create money and credit out of
thin air. Those who promote big government, whether to wage
war and promote foreign expansionism or to finance the welfare
state here at home, cherish this power.
History and economic law are on the side of the gold. Paper
money always fails. Unfortunately, though, this occurs only
after many innocent people have suffered the consequences
of the fraud that paper money represents. Monetary inflation
is a hidden tax levied more on the poor and those on fixed
incomes than the wealthy, the bankers, or the corporations.
In the past 2 years, gold has been the strongest currency
throughout the world in spite of persistent central bank selling
designed to suppress the gold price in hopes of hiding the
evil caused by the inflationary policies that all central
bankers follow. This type of depreciation only works for short
periods; economic law always rules over the astounding power
and influence of central bankers.
That is what is starting to happen, and trust in the dollar
is being lost. The value of the dollar this year is down 18
percent compared to gold. This drop in value should not be
ignored by Congress. We should never have permitted this policy
that was deliberately designed to undermine the value of the
There are a lot of reasons the market is pushing down the
value of the dollar at this time. But only one is foremost.
Current world economic and political conditions lead to less
trust in the dollar's value. Economic strength here at home
is questionable and causes concerns. Our huge foreign debt
is more than $2 trillion, and our current account deficit
is now 4 percent of GDP and growing. Financing this debt requires
borrowing $1.3 billion per day from overseas. But these problems
are ancillary to the real reason that the dollar must go down
in value. For nearly 7 years the U.S. has had the privilege
of creating unlimited amounts of dollars with foreigners only
too eager to accept them to satisfy our ravenous appetite
for consumer items. The markets have yet to discount most
of this monetary inflation. But they are doing so now; and
for us to ignore what is happening, we do so at the Nation's
peril. Price inflation and much higher interest rates are
around the corner.
Misplaced confidence in a currency can lead money managers
and investors astray, but eventually the piper must be paid.
Last year's record interest rate drop by the Federal Reserve
was like pouring gasoline on a fire. Now the policy of the
past decade is being recognized as being weak for the dollar;
and trust and confidence in it is justifiably being questioned.
Trust in paper is difficult to measure and anticipate, but
long-term value in gold is dependable and more reliably assessed.
Printing money and creating artificial credit may temporarily
lower interest rates, but it also causes the distortions of
malinvestment, overcapacity, excessive debt and speculation.
These conditions cause instability, and market forces eventually
overrule the intentions of the central bankers. That is when
the apparent benefits of the easy money disappear, such as
we dramatically have seen with the crash of the dot-coms and
the Enrons and many other stocks.
Now it is back to reality. This is serious business, and
the correction that must come to adjust for the Federal Reserve's
mischief of the past 30 years has only begun. Congress must
soon consider significant changes in our monetary system.
Congress must soon consider significant changes in our monetary
system if we hope to preserve a system of sound growth and
wealth preservation. Paper money managed by the Federal Reserve
System cannot accomplish this. In fact, it does the opposite.