[Congressional Record Volume 142, Number 136 (Friday, September 27, 1996)]
[Extensions of Remarks]
[Pages E1730-E1731]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        GOLD ISN'T A WACKO IDEA

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                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                      Thursday, September 26, 1996

  Mr. CRANE. Mr. Speaker, an old friend, Owen Frisby brought to my 
attention an August 19, 1996 article featured in The Detroit News, 
pertaining to the gold standard.
  I have contended for years that in order to revitalize our Nation's 
economy, we must remove from Government the temptation and the ability 
to produce chronic budget deficits. Restoration of a dependable 
monetary standard based on a commodity with fixed value would, by 
making monetization impossible, accomplish this. It is for this reason 
that I have introduced legislation in previous Congresses 
reestablishing the Gold Standard.
  The author of the article emphasizes that the Gold Standard has been 
tested, and proven over the centuries as the best mechanism to protect 
against destructive inflation and deflation. I commend to the attention 
of my colleagues, ``Gold Isn't a Wacko Idea.''

                  [The Detroit News, August 19, 1996]

                        Gold Isn't a Wacko Idea

       Even before Jack Kemp had been named as Robert Dole's 
     running partner, the Clinton White House was on the attack. 
     In addition to bashing his tax-cutting ideas, aides to the 
     president cited Mr. Kemp's affinity for a return to the gold 
     standard as further proof that he's an economic wacko. Should 
     he choose to pursue the issue, however, we have little doubt 
     that's an argument Messrs. Dole and Kemp would win.
       The gold standard has pretty good history, after all. 
     Alexander Hamilton placed America on a gold standard as part 
     of his effort to refinance the young country's debt following 
     the Revolution. The link with gold was broken temporarily 
     during the Civil War and in the early 1930s, but it was soon 
     reestablished in both cases. And for good reason: The gold 
     standard proved a durable and politically potent means of 
     ensuring the value of the dollar.
       After the remaining links to gold established under the 
     postwar Bretton Woods agreement were finally broken by 
     Richard Nixon in the early 1970s, inflation soared. The 
     market price of gold itself vaulted from $35 an ounce to $850 
     an ounce. It's still selling for more than $380 an ounce--
     more than 10 times its price only 25 years ago.
       If you wonder why the American middle class is still 
     feeling ``anxious'' about its living standards, you need look 
     little further than at the massive expropriation of wealth 
     and income that this represents. Little wonder it is so tough 
     to wean people from such ``middle-class entitlements'' as 
     Medicare, Social Security benefits, day-care and college 
     tuition subsidies.

[[Page E1731]]

       Many conservative ``monetarists'' share the belief of 
     liberals that gold is ``a barbarous relic,'' in the words of 
     the late, great British economist, John Maynard Keynes.
       They prefer allowing the dollar to ``float'' in value, 
     letting its price be determined in world markets by supply 
     and demand. And the Federal Reserve System, under Chairman 
     Alan Greenspan, appears to be doing a credible job of 
     wringing inflation out of the economy and keeping the 
     dollar stable against other currencies.
       But it's no secret that one reason for Mr. Greenspan's 
     success is that he keeps a close informal eye on gold prices. 
     Before he became Fed chairman, he openly expressed support 
     for a gold standard on grounds that gold is an excellent 
     barometer of the supply and demand for paper money.
       But Mr. Greenspan may not be around forever. And interest 
     rates remain stubbornly high by historical standards, 
     imposing a huge cost not only on the federal budget but on 
     the average American. These higher interest rates reflect the 
     premium charged by lenders who must worry about the future 
     course of the dollar. When gold was the standard, long-term 
     rates seldom rose above 4-5 percent, compared with at least 
     6-8 percent today.
       Few ordinary citizens can comprehend the Federal Reserve's 
     money-market manipulations. They must guess at what's going 
     on behind the doors at the Fed. The result is they demand a 
     premium as a hedge against future inflation.
       But even ordinary citizens can understand a gold standard. 
     When the price of gold rises, they know that inflation may be 
     in the offing. When it falls, they know it's time for the Fed 
     to print more dollars in order to fend of deflation. A gold 
     standard gives voters a practical reality check on the 
     performance of the elites in Washington.
       In short, the gold standard is no wacko idea. It's been 
     tested over centuries. It may not be perfect, but is has 
     provided a better hedge against the ravages of inflation and 
     deflation than most other systems. And it is a fundamentally 
     democratic mechanism that enhances the ability of the 
     ordinary citizen to control his or her destiny. What's wacko 
     is the notion the folks in Washington have done such a swell 
     job maintaining the value of the dollar.

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