Will H.R. 9157 Put America Back on the Gold Standard?
On October 7, 2022, West Virginia Representative Alexander Mooney [R] submitted bill H.R. 9157 to the House Committee on Financial Services.
The bill’s official title is “To define the dollar as a fixed weight of gold, and for other purposes.” The unofficial title is the “Gold Standard Restoration Act.” The Congressional summary states, “This bill requires the Department of the Treasury to define the Federal Reserve note dollar in terms of a fixed weight of gold, based on that day's closing market price of gold. Federal Reserve Banks must exchange Federal Reserve notes with gold at this price.
Suppose a Federal Reserve Bank does not do this. In that case, Treasury must make the exchange and place a corresponding lien on the assets of that bank.” At the time of writing, no formal discussion or debates have happened.
Reasons Stated for the Bill
Rep. Mooney presented more than a dozen findings of economic harm since Nixon “temporarily suspended” the gold backing of the American monetary supply. Most of the findings point the finger at the Federal Reserve. The Federal Reserve Note has lost more than 97% of its purchasing power since the Fed’s creation in 1913. 86% of that loss happened since Nixon ended the gold window in 1971. Actions of the Federal Reserve are responsible for high inflation.
The Fed’s policy made American Manufacturing uncompetitive and decreased American manufacturing jobs by 4.5 million since 2000. “The American economy needs a stable dollar, fixed exchange rates, and money supply controlled by the market, not the government. The gold standard puts control of the money supply with the market instead of the Federal Reserve, discourages excessive deficit spending, and encourages balancing federal budgets. Mooney finished his argument by citing Article 1, Section 8, Clause 5 of the Constitution. The citation grants Congress the power to coin money, regulate the value thereof and foreign coins, and fix the standard of weights and measures.
What Does the Bill Require?
The bill requires the Federal Reserve Note to be defined in terms of gold and a disclosure of gold holdings/transactions. If the bill is passed, the Federal Reserve and U.S. Treasury must comply within 30 months of the enactment.
Defining the Dollar in terms of gold has three parts.
1. The Secretary of the Treasury shall define the Federal Reserve Note Dollar in terms of gold based on the day's closing market price of gold.
2. Federal Reserve banks shall make Federal Reserve Notes redeemable for gold determined by the Treasury Secretary. The redemption and exchanges must be available between banks and the public.
3. The Treasury shall act as guarantor if a bank fails to redeem for gold. If a bank fails to redeem for gold, then the Treasury should place a first and paramount lien on all assets at the bank.
Disclosure of holdings consists of two parts.
1. The Secretary and the Board of Governors of the Federal Reserve shall each make publicly available, in both electronic and published format, all holdings of gold, with a report of any purchases, sales, swaps, leases, and any other financial transactions involving gold, since the temporary suspension on August 15, 1971, of gold redeemability obligations under the Bretton Woods Agreement of 1944.
2. The Secretary and the Board of Governors of the Federal Reserve shall make publicly available, in both electronic and published formats, all records of redemptions and transfers of United States gold in the ten years preceding the temporary suspension on August 15, 1971, of gold redeemability obligations under the Bretton Woods Agreement of 1944.
For more about the Bretton Woods Agreement or President Nixon ending the gold window, click here.
What Does it Mean?
Rep. Mooney made a perfect argument. “The gold standard would protect against Washington’s irresponsible spending habits and the creation of money out of thin air. Prices would be shaped by economics rather than the instincts of bureaucrats. No longer would our economy be at the mercy of the Federal Reserve and reckless Washington spenders.” (It should be noted that his argument is also a good reason individuals should own physical gold).
The bill is well-researched and written. It is still preliminary, and despite the good sense approach to fixing our economy, it probably will fail to pass as written. The Federal Reserve, an unelected group of private bankers, has a stranglehold monopoly on U.S. money creation. It has armies of politicians fighting their battles whenever its monopoly is challenged. During President Trump’s tenure, he nominated a strong supporter of the gold standard for the Federal Reserve Board of Governors, the honorable Judy Shelton. The Senate determined she was “unqualified” in less than 30 minutes. She thought the power of the Fed should be limited and the government should back the dollar with gold. Apparently, her ideas were considered controversial. The powerful don’t like giving up power, and gold threatens the total printing free-for-all.
Suppose the new Congress supports the bill, and it passes. What would happen? At current gold prices, there is not enough gold on earth to support a one-to-one ratio between the dollars in circulation and gold (link-. At best, it would be a fractional ratio. However, one thing is sure. A massive revaluation would need to be higher to support a healthy ratio. The price of gold would need to be $5,808 per Troy ounce to support a dollar-to-gold in-circulation ratio. At the time of writing, the price of gold is $1685 per Troy ounce. The truth is that eventually, gold will be revalued higher and central banks will start playing accounting games to handle their debt. Politicians in the Netherlands are already talking about revaluing gold to strengthen their balance sheets and reduce debt. Government debt creates a unique opportunity. If you think governments will try to do some magic pencil accounting to solve their debt, owning physical gold is a no-brainer.
I prefer to avoid talking about bullion products for investment purposes. The investment grade and vintage coins perform much better in that role. However, it makes perfect sense to load up on bullion products while the prices are low. Eventually, there will be a steep revaluation higher. It may make sense to sell to lock in significant gains when that happens. It may make sense to continue to hold it. The choice will be yours. The investment growth will be frosting, but the cake will be gold, protecting your purchasing power.
Call the U.S. Gold Bureau Today. Let us educate you for free on how this works.