arly this month, Congressman Alex Mooney of West Virginia introduced the Gold Standard Restoration Act (H.R. 9157). If enacted into law, it would require public disclosure of the federal government’s gold holdings and eventually define the dollar as a weight of gold.
For the moment, the bill’s chances of passage are as nil as nil gets. Sound money, whether it’s gold or silver or paper that is “backed” by one or both metals, may not acquire a sizable constituency again until a monetary disaster demands it. That’s a sad commentary on the general state of economic knowledge. In the meantime, we can at least hope that Mr. Mooney’s bill may stimulate a long overdue discussion.
America is a nation whose very independence was first jeopardized by unbacked paper money only to be purchased later by precious metal. That’s a story often left out of history classes but I summarized it in The Times That Tried Men’s Economic Souls. After the runaway inflation of continental dollars, I explained,
A currency reform in 1780 asked everyone to turn in the old money for a new one at the ratio of 20 to 1. Congress offered to redeem the paper in gold in 1786, but this didn’t wash with a citizenry already burned by paper promises. The new currency plummeted in value until Congress was forced to get honest. By 1781 it abandoned its legal-tender laws and started paying for supplies in whatever gold and silver it could muster from the states or convince a friend (like France) to lend it. Not by coincidence, supplies and morale improved, which helped to bring the war to a successful end just two years later.
