This article originally was published by Forbes.com on May 7, 2012

Mike Lee, U.S. Senator from Utah, recently sponsored a bill entitled the “Federal ReserveModernization Act.” It is the counterpart toRep. Kevin Brady’s Sound Dollar Act of 2012 (which enjoys 35 House cosponsors and, of equal note, already is drawing liberal fire). The Brady/Lee legislation represents an important first step forward to restoring good money to America: money that can provide a foundation for prosperity with equity, security, and, of at least equal importance, constitutional integrity.

The Sound Dollar Act/Federal Reserve Modernization Act directs America’s central bank to monitor the prices of major asset classes including gold and the value of the dollar relative to gold. Gold is the only asset twice specified. One of its three broad categories is entirely devoted to gold. Gold thereby emerges designated as a more important factor in monetary policy than it has played in two generations.

Mr. Brady and Mr. Lee thereby offer a first step toward Constitutional money, which is a dollar defined as a fixed weight of gold. Constitutional money was the good money, conceived by the Founders and installed by George Washington and his Treasury Secretary Alexander Hamilton, which gave the impetus to America to prosper. Both Lee and Brady demonstrate astute awareness of Constitutional history and performance.

Mr. Lee’s official blog notes: “As for monetary policy, the American experience from the First Bank in 1791 to the modern Fed is that the economy operates more efficiently when the central bank, managed by competent individuals, operates independently with a rules-based approach. …. For too long, Congress has abdicated its responsibility of ensuring that the Fed’s mandate properly reflects the lessons of history while building toward the future.”

Key words? “The lessons of history.”

Mr. Brady, too, draws on history in a recent speech before the Shadow Open Market Committee:

“Not far from here on West 141st Street stands the Grange, the recently restored home of Alexander Hamilton, our first Secretary of the Treasury. After careful consideration, Hamilton devised a monetary system that revived a moribund American economy and fostered rapid economic growth. As Hamilton did in his day, we must thoughtfully and clearly define the role of the Federal Reserve going forward.
….
“Learning from the past and looking to the future, Congress must select the right monetary policy mandate, maintain a Fed independent of political pressure, and hold the Fed accountable for the results.

“So let us examine what monetary policy should be going forward.” Continue reading »