Is it a coincidence that Bitcoin is at a high when the dollar is at a new low? That’s a question the solons on Capitol Hill might want to pose to the Federal Reserve chairman, Jerome Powell, when he deigns to pay a visit Wednesday and Thursday. While markets are likely to focus on the future course of interest rates, it would surely be nice to hear Mr. Powell’s explanation as to the state of the dollar, the value of which the Fed is tasked with protecting.
All the more so because of the absurdity of President Biden’s latest scheme of prestidigitation — naming an anti-inflation “Strike Force” to blame rising prices on corporations, meaning, American working men and women. This back-door attempt at price controls overlooks the root causes of inflation, which is always a monetary phenomenon, and has been ignited by the same Mr. Biden who blames working Americans.
Mr. Powell and the Fed, meantime, are presiding over what amounts to a collapse, to a nadir, in the value of the Federal Reserve Notes known as greenbacks. As measured in gold, the historic basis of monetary value, the dollar has plunged below a 2,100th of an ounce. That represents a fall of more than 98 percent compared to the 35th of an ounce of gold that defined a dollar before America abandoned the last vestiges of the gold standard in 1971.
The dollar’s plummet in terms of gold represents a vote of no-confidence in America’s fiat money. The new high for Bitcoin, which briefly exceeded $68,800 today before settling in at $62,000, also suggests that investors and others are more desperate than ever to find alternative stores of value, and units of account, beyond the debased dollar. Yet if Mr. Powell is concerned about the dollar’s value — in gold or Bitcoin — you wouldn’t know it.
The Fed’s most recent Monetary Policy Report, weighing in at a dense 71 pages, makes no mention at all of the dollar as a currency, per se. The word currency itself is mentioned but once, in passing, in a chart on foreign exchange rates. There’s no mention of Bitcoin, or cryptocurrency generally, or even digital currencies, despite the Fed’s reported consideration of the Central Bank Digital Currency — which appears at first glance to be a bad idea in the making.
Need it be said, in light of the Fed’s abandonment of the sound money that the central bank was, ab ovo, tasked with defending, that the monetary report makes no mention of gold whatsoever? Such a turnabout no doubt would have the creators of the Fed, like Senator Glass, fuming from the great monetary beyond. Glass, after all, had insisted on amending the Federal Reserve Act to protect convertibility of the dollar per the Gold Standard Act of 1900.
When the Fed was created, Congress went so far as to require the central bank set aside a gold reserve of 40 percent against any paper money it emitted. “We have provided against inflation in almost every conceivable way,” Glass averred then. Well, not quite, as seen in the recent inflation spiral, and the dollar’s new low against gold. Yet the pledges of sound money written into the Fed’s enabling legislation are a reminder of Congress’ role in monetary policy.
That role, to be sure, has been honored in recent decades more in the breach than the observance. Yet the Fed’s monetary failures are ultimately the responsibility of the Congress that created the central bank — a reflection of the fact that the founders granted to the legislature all of the federal government’s monetary powers. Mr. Powell’s appearance is a moment for the Congress to retake the initiative — before the dollar sinks, in gold or Bitcoin, even lower.