Congress Must Regulate the Dollar's Value

This is the text of a speech given by Congressman Ted Poe (TX-02) on the floor of the U.S. House of Representatives on May 13, 2010.

Madame Speaker, how long is Congress going to sit idly by while the Federal Reserve destroys the value of the U.S. dollar? On Friday, May 7, our dollar was worth only one twelve-hundredth of an ounce of gold. In 2001, it was worth one two-hundred-and-fiftieth of an ounce of gold. This means that the dollar has lost more than three quarters of its value in just nine years.

Let's not kid ourselves and think that the value of our dollar in terms of gold doesn't matter. Where gold prices go, other prices follow. We are either going to see the dollar price of gold fall, or we are in for a blast of inflation that will crush the middle class and lead to yet another terrible recession. If you think that this can't happen, let me remind you that this is exactly what did happen in the 1970s and early 1980s. Do we want to go back to the 1970s? Do we want years of double-digit inflation, followed by double-digit unemployment? Well, that is what we are going to get unless we stabilize the dollar.

And let's not kid ourselves and think that because the dollar is rising against the euro, all must be well. The Euro and the Dollar are both headed off the financial cliff. The Euro is just jumping first.

Madame Speaker, how can we expect to have a stable economy or stable financial markets without a stable currency? The dollar is involved in every single transaction we do. If it moves around, it takes everything with it. We have seen in the past two years just how high the cost of an unstable dollar can be.

Robert Mundell, the Nobel Prize-winning economist and advisor to President Reagan, says that it was the Federal Reserve that caused the real estate bubble and bust. He says that the Fed is responsible for the economic crisis we are in. This makes sense. It takes a lot of power to do this much damage, and there is no economic power greater than money.

Here is what happened. People aren't stupid. When the price of gold heads up, they sense that inflation is on the way. The way you protect yourself from inflation is to buy real assets with borrowed money. The longer the inflation goes on, the more leverage builds up and the bigger the ultimate crash. Well, we got the bubble in real assets in 2001 to 2007 and the crash in 2008. Do we want another one? Isn't 9.9% unemployment high enough?

Madame Speaker, I have here in my hand a copy of the Constitution of the United States. Article I, Section 8 says 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..." What this means is that Congress is supposed to set the value of the dollar. It is a constitutional duty for congress to regulate the value of money. But Congress ignores its legal obligation and does not regulate the value of money. What Congress does is that it gives the Fed the responsibility to regulate interest rates. But, the Constitution does not give the Fed or any government agency the power to regulate interest rates.

There is a lot of talk about how important it is that the Federal Reserve be "independent". Well, Madame Speaker, I do not believe that any part of government should be independent of the Constitution. All that Fed's vaunted independence has produced is two boom-bust cycles in ten years, the second worse than the first.

Madame Speaker, there is wisdom in the Constitution . This is why I have introduced H.R. 835, which I call the "Dollar Bill". This bill would fulfill Congress' Constitutional responsibility to define the value of the dollar. By doing so we can stabilize the value of the dollar and better stabilize our economy.

Madame Speaker, we need to hold hearings on this bill. The American people want a stable economy and stable financial markets, and for this we need a stable U.S. dollar.

It is time for Congress to buck it up and fulfill its Constitutional duty and regulate the value of the dollar.

And that's just the way it is.