Former White House Advisor Calls for Return to Gold Standard

Peter Ferrara, who served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush has called for a return to the gold standard in a new op-ed piece for Forbes this week.

He cites the declining purchasing power of the dollar and rampant inflation as the main reasons for why we should return to the gold-backed dollar.

"Tying the dollar to gold... meant that the dollar maintained its stable value, without inflation." writes Ferrara. "Since America abandoned the gold standard in 1971, the purchasing power of the dollar has declined by 85 percent. A dollar saved in 1971 was worth only 15 cents by 2012."

Ferrara asserts that a return to the gold standard would once again return "power to the people" as the value of the dollar and inflation rates would no longer be tied to the number of dollars printed by the Federal Reserve. "If the Fed increased the supply of dollars beyond the people’s demand for dollars, people would exchange dollars for gold. The people would consequently stop the Fed before it could create inflation."

He also dispels the commonly held myth that a return to the gold standard would mean that the amount of dollars in circulation would be directly tied to the amount of gold held in reserves. "The Fed could increase the supply of dollars to meet the demand for dollars, providing the money needed to service economic growth. As long as the supply did not exceed the demand, there would be no increased draw on the Fed’s holdings of gold due to the increased supply of dollars."

Ferrara believes that reinstating the gold standard would be simple. With legislation, Congress could instruct the Federal Reserve to tie the amount of dollars it was printing to the rising or falling price of gold. He also thinks that if the U.S. readopted the standard, other economies around the world would have to follow suit.

He may or may not realize that many of them are already secretly doing just that.