By SETH LIPSKY
An under-reported development of this campaign season is the Republican Party’s decision this week to send Gov. Mitt Romney into the presidential race on a platform effectively calling for a new gold commission. The realization that America’s system of fiat money is part of its economic problem is moving from the fringes of political discussion to the center.
This is a sharp contrast from the last time a gold commission was convened, in 1981, a decade after President Nixon abandoned the Bretton Woods system and opened the era of a fiat dollar. The 1981 commission recommended against restoring a gold basis to the dollar. But two members—Congressman Ron Paul and businessman-scholar Lewis Lehrman—dissented and outlined the case for gold.
The new platform doesn’t use the word “gold,” describing the 1981 United States Gold Commission as looking at a “metallic basis” for the dollar. But the metal was gold, and the new platform calls for a similar commission to investigate ways “to set a fixed value for the dollar.”
What has stayed with me from 1981—I covered the commission as a young editorial writer for this newspaper—is how momentum for a new gold standard faded amid the successes of the supply-side revolution. President Reagan pushed through his tax reductions and Federal Reserve Chairman Paul Volcker maintained tight money. Inflation was defeated. The value of the dollar, which had sunk below 1/800th of an ounce of gold during President Carter’s last year in office, soared.
The 1981 commission was also stacked against a gold-backed dollar from the start. The ruling philosophy was monetarism—which, as propounded by Milton Friedman, seeks to keep prices steady by adjusting the money supply. The commission’s executive director was Anna Schwartz, co-author of Friedman’s “Monetary History of the United States,” and the Democratic-controlled House held firm to monetarist orthodoxy.
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