In Dubai last week, actor Tom Cruise ran around the outside of the world's tallest building suspended by a cable 2,700 feet in the air while shooting a scene for his fourth Mission Impossible film. The stunt was Cruise's "most dangerous yet," reported London's Daily Mail. Also last week, the Federal Reserve announced it would create another $600 billion dollars out of thin air to stimulate the economy. Another dangerous stunt. Talking with a former Fed official last week, I speculated that the U.S. dollar has 24 months until it crashes, unless Congress acts quickly. He thinks it may take just six months. This isn't a job for Ethan Hunt (Cruise). Call the Tea Party for this mission impossible.
Prognosticating when the dollar will crash is like trying to predict when the world will end. Nobody really knows when it will happen. But it is highly likely to happen as long as the dollar is backed by . . . itself. President Nixon ended the days of the gold-backed dollar in 1971. Without gold as a financial restraint, the Federal Reserve has grossly devalued the dollar by printing massive amounts of currency to stimulate the economy and to finance our deficit.
The Tea Party's mission-if it chooses to accept it-is to rescue the dollar before it becomes a financial pariah. We can find a plan recommended by my college economics professor Hans Sennholz in his book Age of Inflation.
First, as Dr. Sennholz wrote in 1979, we must embark on a "giant educational task." With the advent of the internet, this task is more realistic today than it was 30 years ago. By educating the public, the Tea Party movement will be empowered to pressure Congress to do what is needed.
Congress will have to make massive cuts in spending (including entitlements). This will lead to higher unemployment and an economic depression. People will need private sector jobs to get back to work. Therefore, Congress will have to cut business taxes significantly to create jobs.
And, because there will be massive shifts in labor markets, Congress will need to cut red tape. Specifically, Congress should weaken or repeal the Davis-Bacon, Norris-LaGuardia, and National Labor Relations acts from the 1930s, get out of the business of setting a minimum wage, and make unemployment compensation less appealing.
With the budget under control and the economy poised for success, the Tea Partiers should encourage Congress to gradually move toward a gold standard to restore monetary freedom and slow the Federal Reserve's printing press.
Congress should give citizens and financial institutions total freedom to make contracts payable in either gold or dollars (without suffering taxation on gold gains). In other words, as Sennholz recommended, create a "parallel standard" between dollars and gold. He also encouraged further monetary freedom by allowing citizens to mint coins. If people would choose not to use these coins in financial exchanges, they could use Federal Reserve money. If these things were to happen, Sennholz speculated that an enlightened Federal Reserve would possibly make dollars convertible to gold again. We'd then be back on a gold standard, and the Federal Reserve would have restraints established on printing money. Once again, there would be a fixed ratio between dollars and gold.
Sound impossible? Tom Cruise ran around the outside of the world's tallest building last week and the Tea Party overhauled Congress. We can rescue the dollar with the help of the Tea Party movement. If we ignore this message, America will self-destruct in . . .