Sound Dollar and Economic Stimulus Act of 2008 proposes return to gold standard
Republican Congressman Fed Poe of Texas has introduced H. R. 6690, the Sound Dollar and Economic Stimulus Act of 2008, to the House of Representatives "to stimulate the economy and provide for a sound United States dollar by defining a value for the dollar, and for other purposes." The difficulty of enacting this legislation highlights the key weaknesses in the US economy today.
The bill begins as follows.
SECTION 1. SHORT TITLE.The good Congressman's solution? A return to the gold standard at $500 per oz.
This Act may be cited as the ‘Sound Dollar and Economic Stimulus Act of 2008’.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Article I, section 8 of the Constitution of the United States provides that the Congress shall have Power to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.
(2) Congress effectively delegated the power to regulate the value of United States money and foreign money to the Federal Reserve System via the Federal Reserve Act of 1913.
(3) The value of the United States dollar has fallen dramatically relative to gold, crude oil, other real commodities and major foreign currencies.
(4) The value of the United States dollar has become unstable and uncertain.
(5) The Board of Governors of the Federal Reserve System has not produced a stable and reliable value for the United States dollar.
(6) The Board of Governors of the Federal Reserve System cannot reasonably be expected to produce a stable and reliable value for the United States dollar.
(7) An unstable dollar slows the growth of the economy by increasing the cost of capital, increasing the risks attendant to long-term capital investment, and increasing the effective rate of the corporate income tax.
(8) An unstable dollar reduces the real earnings of American workers.
(9) An unstable dollar reduces the real value of financial assets held by the public.
(10) An unstable dollar reduces the real value of pension plans and retirement accounts upon which Americans depend for their security.
(11) An unstable dollar damages the economic and political standing of the United States in the world community.
(12) An unstable dollar gives rise to anxiety, uncertainty, and risk among the financial markets and the public.
SEC. 3. DIRECTIVES TO THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
Currently dollars are valued at approximately $750 per oz. Setting the price of gold to $500 represents a 33% revaluation of the dollar against gold and, indirectly, other currencies.
- (a) In General- Before the end of the 90-day period beginning on the date of the enactment of this Act, the Board of Governors of the Federal Reserve System shall make the value of the U.S. dollar equal to the market value of 0.05 of a troy ounce of gold and maintain the value of the United States dollar at this level.
(b) Target- In regulating the value of the United States dollar, the Board of Governors of the Federal Reserve System shall--
- (1) conduct open market operations against an explicit target for the price of gold on the exchange operated by the Commodities Exchange, Inc (COMEX) of the New York Mercantile Exchange, Inc.; and
(2) shall not conduct open market operations indirectly, as in the current practice of targeting the Federal Funds rate.
(c) Promotion of Stable and Effective Financial Markets- The Board of Governors of the Federal Reserve System shall use the banking and bank regulatory powers of the Board to maintain and promote stable and effective financial markets during and after the transition to a defined value for the United States dollar.
US exports will become 33% more expensive.
As exports are the only bright spot in the US economic picture, this part of the act will have a negative impact on the US economy. The next section of the bill addresses this.
SEC. 4. TAX DEPRECIATION.By allowing businesses to expense all of the depreciation of capital expenses frees up money to buy new equipment. If the stimulus is big enough, this will create an incentive for US businesses to make further capital investments. However, there is no guarantee that they will not use the tax windfall to purchase imported goods, which will be relatively cheap due to the 33% appreciation of the dollar, or use it to pay down debt or some other purpose.
Effective January 1, 2008, all entities that depreciate capital assets for tax purposes shall be entitled to 100 percent expensing of all capital investment for tax purposes in the year that the investment is made.
On the other hand, a return to the gold standard may create a flood of foreign investment in the world's only gold -backed currency.
We appreciate the spirit of the legislation even if the letter of the bill leaves a lot to be desired. It's more of a statement than a serious piece of legislation.
Hat tip to iTulip Select Premium Member, New Energy Era Expert phirang for locating the legislation.
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