The classic supply-side agenda for unleashing productive economic growth seeks to achieve lower taxes, reduced regulation, and a stable dollar. The first two goals were pursued successfully under the Trump administration by passing the Tax Cuts and Jobs Act, which reduced corporate and individual tax rates, and by implementing Executive Order 13771, which required that for every new regulation added, two regulations had to be cut.

Achieving a stable dollar has become a more urgent goal in the wake of inflationary pressures unleashed by governments and central banks around the world. Republican presidential candidate Donald Trump and his running mate, J.D. Vance, have rightly focused on the negative impact of currency movements on the ability of U.S. manufacturers to compete in foreign markets.

The solution, though, is not to pursue a “weak” dollar versus a “strong” dollar. What we need is a stable dollar and a level international monetary playing field. This should start by clarifying the definition of a stable dollar both in terms of domestic monetary policy and with reference to the exchange rate of the dollar against the currencies of America’s trading partners.

On the home front, the scourge of inflation and punitive interest rates is still taking its toll on households and businesses — even as the United States government hardly blinks at the cost of financing its deficit spending. Federal Reserve officials are dangling the prospect of lower interest rates as their 2 percent inflation target comes into view. Still, they cling unabashedly to a monetary policy framework that deliberately embraces perpetual dollar debasement as their working definition of “stable prices.”

Meanwhile, the exchange rate of the dollar against other major currencies is a variable that can be exploited by our trade partners to gain an unfair price advantage over American competitors. Currency manipulation is carried out these days through central banks under the guise of pursuing economic policy goals that serve the needs of their own nations or regions; lower interest rates decrease a currency’s relative value.

Yet so-called “competitive depreciation” to reduce the price of goods sold in foreign markets is not competing — it’s cheating. This is the essence of the message from President Trump and Senator Vance that has struck a chord with working Americans who feel victimized by cheap imports. Instead of compounding the distortions of currency manipulation, they should be extolling the importance of a stable monetary platform for international trade and investment.       

Lost in the heated debate over tariffs is the fact that America became a champion for free trade only after the practice of obtaining an unfair trade advantage through currency depreciation was disallowed under the Bretton Woods agreement, which was forged by America and 43 allied nations in July 1944; it was passed by the Congress in July 1945. The General Agreement on Tariffs and Trade was signed in October 1947 by 23 countries, including ours, to reduce tariffs and other trade barriers on a reciprocal basis. 

The Bretton Woods international monetary system was anchored by an American dollar convertible into gold at the fixed rate of $35 an ounce of gold. Participating nations were required to maintain their own currencies at a fixed exchange rate — within a 1 percent band — against the dollar. While the Bretton Woods fixed exchange rate system was abandoned in March 1973, leaving floating exchange rates to fill the vacuum, the effort to reduce tariffs was continued by the World Trade Organization established in January 1995; in December 2001, the People’s Republic of China officially became a member. 

Today there are no rules governing the value of the dollar. Federal Reserve officials abide by no restrictions in conducting monetary policy with regard to maintaining a stable dollar, nor do trade agreements contain enforceable measures to prevent currency depreciation from favoring other nations to the detriment of American manufacturers.

A trustworthy dollar is vital to preserving the basic principles of free-market capitalism and rule of law. That is why bold leadership in the White House is needed to 1) reaffirm the domestic reliability of the dollar as a store of value and 2) reestablish the United States as the monetary standard for international trade and investment.

Restoring faith in the dollar for inflation-weary Americans should begin by calling on Congress to reexamine the language of the Constitution, which grants to Congress the power “to coin money, regulate the value thereof, and of foreign coin” in the context of establishing an unvarying standard. How can this enumerated power to fix the value of the nation’s medium of exchange be reconciled with the Fed’s calculated pursuit of an eroding unit of account? Zero inflation would seem the more appropriate target for achieving price stability.   

Apologists for the Fed’s subtle skimming of the dollar’s value will counter with arguments based on money illusion; workers are presumed to be mollified by a nominal increase in wages that is more than offset by inflation. Fed officials will also plead that nominal interest rates must be scaled up by inflation to provide them with policy space to maneuver interest rates downward. Yet has such monetary “stimulus” actually been proven to deliver better long-run economic outcomes than allowing market forces of demand and supply to determine the real cost of capital?

Beyond our borders, we should be prepared to confront our trade partners with evidence that their currencies have depreciated more than the dollar. Using gold as a neutral common reference point, it is a straightforward calculation to display the relative debasement of the dollar over the last decade compared to the currencies of major trade partners.

Since July 21, 2014, the price per ounce of gold has increased 89 percent in American dollars, 134 percent in euros, 157 percent in Mexican pesos, 139 percent in Canadian dollars, 120 percent in Chinese yuan, and 190 percent in Japanese yen. Leverage in trade negotiations should be based on such monetary valuations. To put it  in terms of the true measure of monetary value, the value of the dollar has, since July 21, 2014, collapsed 45 percent to less than a 2,384th of an ounce of gold.

Gold provides the most meaningful benchmark for evaluating the performance of central bankers. It has served to define the value of the United States dollar across centuries and validated the stable monetary platform of the postwar rules-based system as the only appropriate foundation for free trade. It’s time to restore the integrity of the world’s reserve currency as the key to prosperity at home and abroad.