Public Law 99-185
Background to the American Eagle
Gold Bullion Coin Act of 1985
by Joe Cobb
This is the only legislation Ron Paul has introduced that has become law. It was drafted and introduced initially in 1983, when I was serving as his aide on the Coinage Subcommittee of the Banking Committee, in the 98th Congress.
He hired me in 1983 because we shared a common idea about the future role of gold in the international monetary system. He still believes in this ideal, that gold - only gold (by weight) - can be the natural unit of “money.”
I want to tell you the story of how the coin bill became law, after Ron Paul departed from Congress (it was enacted the following year, because I was still there working in Congress).
Ron Paul had served on the U.S. Gold Commission, appointed by Secretary of Treasury Donald T. Regan in June 1981, to examine the role of gold in the national and international economy. The Report of that Commission was published in March 1982 and it basically said gold had no role to play in monetary policy.
No role for gold: This has been the orthodox British Neo-Classical School opinion, both Keynesians and Monetarists, for about 150 years. The majority of the Gold Commission believed they had driven a stake into the heart of gold standard advocacy, which was strong at the end of the 1970s due to high inflation under Jimmy Carter.
Senator Jesse Helms had gotten authorizing legislation to study the role of gold as part of a compromise to give more U.S. dollars to the International Monetary Fund in 1978. Carter had never bothered to appoint members of this temporary study group. The Reagan Administration responded to Helms’ request to move forward. (I was a close friend of Howard Segermark, who was Jesse Helms’ aide on gold and economic issues. Segermark was the person who drafted Helms’ amendment to the IMF funding legislation in 1978.)
The U.S. Gold Commission also reported, and recommended, in favor of a different idea.
Milton Friedman had proposed: a real gold standard, in which gold actually circulated as money. This was published in The Journal of Law and Economics, vol.4 (1961), “Real and Pseudo Gold Standards.” This article by Friedman had orginated as his half of a debate at the international society of classical liberals, the Mont Pelerin Society. Friedman favored floating exchange rates among currencies, and gold (by weight) was just another “currency” in his floating exchange rate system.
The gold commission recommended a non-legal tender gold bullion coinage. When the Gold Commission was announced by Secretary Regan, I saw an opportunity. The idea for a specific U.S. Mint coinage was my version of Milton Friedman’s idea, combined with F.A. Hayek’s writings on the denationalization of currency. I incorporated a 501(c)(3) educational group, which I named “U.S. Choice in Currency Commission,” playing on the name of the U.S. Gold Commission. My idea was to put a bullion coinage at the center of a Hayekian scheme for parallel currencies.
The example of the South African Krugerrand had been around since the early 1960s, when the parliament there created a legal tender bullion coin, denominated only by its weight: one troy ounce of gold in a 22 carat alloy. The paper monetary units of South Africa are known as “rand” (ZAR) but there has never been a fixed price of the gold coin in terms of those paper rand units. The Krugerrand had become in the 1970s the most popular and widely owned gold bullion coin on the market. Many other governments had also gotten into the bullion coin minting business. Canada’s Maple Leaf bullion coin was very popular because of its .999 purity. The United States Treasury bureaucrats were strongly opposed to any kind of gold coinage in the U.S. monetary system.
[ to be continued ]