How the President Can Fight the Fed

There's a weapon the Trump Administration should unleash to begin a huge, much-needed overhaul of the Federal Reserve. The Treasury should issue government bonds linked to gold. These securities would provide a simple everyday metric as to whether Washington is undermining or maintaining the value of the dollar.

- Steve Forbes

Noted economist Judy Shelton, in her seminal book Good as Gold: How to Unleash the Power of Sound Money, provides a model for how this would work. Washington would sell a zero-coupon bond with a maturity of, say, five years. The profoundly positive kicker: At bond maturity the investor would make a choiceto get the principal back in either dollars or in gold.

For example, if you bought a five-year gold bond for $1 million, at maturity the bond would permit you to receive cash or a specific amount of gold, in this case, around 280 ounces. If Washington and the Fed misbehaved, as they have in the recent past, you might collect gold worth $1.5 million.

Washington would set aside a certain amount of the 261 million ounces of gold it holds to cover its potential liabilities.