The dollar—that thing the Federal Reserve has been printing like mad the last few years—is in one of the worst spells in its history, short, medium, and long-term. Against the world’s major currencies, the dollar’s rate of exchange is down 5% since the Great Recession started, 32% from the 2001 peak, and 15% from the stability achieved in the late 1980s and early 1990s.

This is not to imply that the world’s other major currencies are themselves paragons of value. Against gold, all currencies have suffered mightily. But the dollar is especially bleak. It’s devalued 80% against gold since the 1980s, most of that in the last ten years. All of this has basically shown up in the consumer price index. The cost of living is double what it was twenty-five years ago.

And yet for all this weakness, the Federal Reserve has plowed ahead with increasing the dollar’s supply without reference to any anchor of value. It has gotten so upsetting to other countries, whose currencies appreciate as the dollar falls, that there is talk around the globe of a “currency war” by which everyone will try to devalue their currency, just like the United States has. The G-20 meeting that just concluded tried to suppress these urges. We’ll see.

When a country’s currency remorselessly appreciates because of no action of its own managers, but that of the U.S. Fed., unappealing things result. That country’s assets become overvalued, loans get hard to pay off, and exports are imperiled. Japan at last had enough after the yen-dollar rate went up by a third over the series of Fed quantitative easings that it has announced its intentions to hammer the yen back down.

It is conceivable that at some point, foreign countries will forsake leadership of the dollar and strive to anchor their currencies in something more stable. Invariably this will be gold. As James Rickards outlined in his imperative 2011 book Currency Wars, it is not hard to imagine a scenario in which, say, China, Russia, and Japan (if not certain Gulf states) announce that their currencies are convertible to gold at a fixed rate.

We know that China cares deeply about a fixed exchange rate and wants its price level to be stable. We know that Russia is officially leery of dollar-dominance, and that Japan is too. We also know that these nations have accumulated gold in their reserve accounts, surely as a hedge against all the dollars in those same accounts. Therefore, it is a short step to suppose that a major consortium of powers could declare a gold standard with respect to their currencies.

In such a scenario, it is likely that international demand for the dollar will shrink unless it too joins the group and becomes convertible to gold at a fixed rate. This would mean big things for the United States. The Fed could not print money to its heart’s content as now.

Then there are the states here at home. Currently, Utah and Virginia are considering legislation that would restore the currency status of silver and gold. Utah’s proposal is particularly intriguing, in that it seems quite clearly the law—it is in the U.S. code—for the United States “to maintain the equal purchasing power of each kind of United States currency.” The United States mints gold and silver coins, yet imposes capital gains taxes when these are sold for a profit. Must not the United States ensure that gold and silver coins are worth as much as paper dollars?

Coming and going, there is pressure gathering on the dollar. Foreigners are getting sick of its devaluation and are preparing action in the direction of gold, as are legislatures here at home. One way for this pressure to be relieved is for the Fed (and Treasury) to get serious about a dollar stable in exchange and anchored in value. Another is for the pressure to play itself out. Which may well be the currency drama of the upcoming years.

Books on the topic discussed in this essay may be found in The Imaginative Conservative BookstoreOriginally published at the essay is reprinted here with gracious permission of Brian Domitrovic.

The Imaginative Conservative applies the principle of appreciation to the discussion of culture and politics—we approach dialogue with magnanimity rather than with mere civility.

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