James Grant: A Solid Gold Fix for US Debt Woes

Washington needs a debit card, not a credit card, and no debit card would better serve the U.S. economy more than a return to the gold standard, says James Grant, editor of investment newsletter Grant’s Interest Rate Observer.

The gold standard would force the government to live within its means and get the economy back on its feet again.

"No other reform would accomplish so much to hasten the return both of growth and fiscal balance," Grant tells The Fiscal Times.

"The reserve currency franchise, which America uniquely possesses, is a kind of global credit card on which the outstanding balance never seems to come due and payable. This country needs a debit card--and the gold standard is that debit card.”

(Associated Press)

A gold standard pegs the amount of currency in circulation to a fixed amount of gold, and supporters say it would prevent the government's ability to print money and spend excessively.

"Congress might begin by brushing up on the Constitution and recalling its duty to 'coin money and regulate the value thereof.' Specifically, it should take steps to restore a dollar convertible into gold," Grant says.

Calls for a return to the gold standard — scrapped in the U.S. in the 20th Century — are growing, with Republican presidential hopeful Ron Paul arguing for such a policy shift.

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"Why does paper make sense as money? They literally just put numbers on paper and that represents wealth," Paul says, according to the Omaha World-Herald.

"But there are many signs on the horizon it will not last, it’s going to change."