Former president Donald Trump has talked a lot about inflation in his presidential campaign. Moreover, his campaign has spoken about the importance of keeping the US dollar as the world’s primary reserve currency.
Yet he has said nothing about reforming the US Federal Reserve and the American monetary system. Surprisingly, the most fundamental of all reforms – returning the US to the gold standard – would likely be within his executive authority if he is elected president again.
Wrongly, gold has been subject to years of criticism. Under the classical, pre-1914 gold standard, the US became an economic colossus.
By the turn of the 20th century, the US economy was bigger than the next three economies – Germany, France and Britain – combined. Economic growth was higher and inflation was practically non-existent.
Similarly, the quarter century under the Bretton Woods gold exchange standard – despite much higher marginal tax rates – saw higher growth with lower inflation. If the post-1971 economy had continued to grow at the rate it grew under Bretton Woods, it would be 20% larger (about $5 trillion) today.

The previous gold systems broke down due to mismanagement. World War I saw nations suspend the classical gold standard. During the war, many financed their spending by printing money, creating inflation.
After the war, some experienced hyperinflation. Others returned to their pre-war exchange rates, requiring sharp deflations. The international nature of the gold standard spread deflations across countries.
The resulting economic contractions were so severe that almost all countries on gold, including the US (in 1933, under Franklin Roosevelt) devalued against it.
Recoveries generally began soon after devaluation. The US was an exception: the high tariffs, tax increases and heavy regulation of the Hoover and Roosevelt administrations crushed recovery and brought on the Great Depression.
The Bretton Woods version of the gold standard (1945-1971) had rules intended to avoid the extremes of hyperinflation and deflation. Unfortunately, the US, the key country in the system, created inflation at levels incompatible with the gold price.
After a decade of such inflation, the US government faced a choice: tighten monetary policy, devalue the dollar against gold as Roosevelt had done or abandon gold entirely.
President Richard Nixon abandoned gold, resulting in a decade of stagflation and a half-century of higher inflation, lower growth and greater financial volatility in the US and around the world.
Both Roosevelt and Nixon used executive orders or proclamations to alter or amend the dollar’s value in terms of gold. A re-elected Trump could do the same.
The US president has the authority to set the exchange rate of the dollar. The Treasury Department’s Exchange Stabilization Fund gives the president a vehicle for doing so: Title 31, section 5302(b) of the US Code specifically authorizes dealings in gold.
However, a 1976 amendment to the International Monetary Fund’s articles of agreement, ratified by the US government and currently in Title 22, section 286e–5 of the US Code prohibits member countries from tying their currencies to gold.
Legal workarounds might include using the gold price as a target without actual redemption at that rate or employing gold-denominated securities until the IMF agreement can be amended.
A re-elected president Trump could announce that he will set a price for gold at the market price after a brief adjustment period, say 45 days, to shake out gold speculators. Central banks could buy up gold on the way down as many investors would likely sell it to capture the highest possible price.
At the current market rate of approximately $2,500 per troy ounce, the value of the US gold reserve of 260 million troy ounces is more than $650 billion, about 12% of the $5.6 trillion monetary base.
While adding to the gold stock over time would be healthy, this cover ratio should be acceptable. The gold standard is a commitment to redeem any dollar for gold, not every dollar all at once.
If redemptions run high, monetary authorities can buy gold on world markets as needed and tighten monetary policy. As long as the system is credible, markets generally prefer to hold convenient paper cash (or its electronic equivalent) rather than clunky physical gold.
To bolster the plan, Trump could make the announcement in coordination with the other major global currency areas, including the Eurozone and China.
A tripartite gold fix would have the advantage of locking the three big exchange rates and spreading monetary responsibility more evenly.
Because all three areas are giant economies with large gold reserves, no member of the trio would be able to easily cheat or dominate the system. The rest of the world would be free to fix to gold, fix their exchange rates to one of the trio, or continue to manage their currencies as they do today.
A new gold standard would help address key issues Trump cares about. Crucially, it would lock in low inflation. There would be no more complaints about currency manipulation – exchange rates would be fixed.
The US trade deficit would likely decline, as multiple currencies would be “good as gold,” reducing the world’s need to hoard dollars. It would take a great deal of speculation and volatility out of financial markets and commodity prices, enhancing commerce and smoothing trade.
The financial bubbles and busts of the last 25 years would diminish. Gold would help reimpose budget discipline on member governments. Lastly, such a system would help poor nations become more financially stable, potentially reducing migrant outflows.
Fundamental monetary reform is a tough row to hoe when it means a long march through the Washington, DC swamp. President Trump could make history by using executive authority to restore a better system.
Sean Rushton is adjunct fellow at the Jack Kemp Foundation, a US-based charitable organization.