The Federal Reserve needs to stabilize the value of the U.S. dollar.

Former Federal Reserve Chairman Paul Volcker echoed these sentiments in a Wall Street Journal article dated November 13, 2014, where he claimed: “The Fed’s main goal should be to defend the dollar’s stability.”

This is one of the goals of Put Growth First, an organization that advises on and advocates for pro-growth economic policies. By stabilizing the dollar, real income for the masses will once again increase tremendously, thereby reversing a 40-year trend of income stagnation for the bottom 90 percent (aka. the “striving majority”), according to Rich Lowrie, co-founder and senior economic adviser of Put Growth First.

(Disclaimer: Mr. Lowrie was the senior economic adviser to the 2012 Herman Cain presidential campaign, where I served as economic adviser and a member of the economic policy advisory committee.)

Annual inflation-adjusted GDP growth from 1790 to 1971 averaged nearly 4 percent. However, since 1971 – the advent of the floating paper dollar backed only by empty political promises, but no real intrinsic value – yearly growth slid to 2.8 percent, and since 2000, it fell further to 1.7 percent per annum. Moreover, the future prospects are dismal: the Congressional Budget Office and Social Security Trustees now project real economic growth of slightly more than 2 percent.

From 1948 through 1971, the bottom 90 percent experienced a cumulative rise in real income of 85 percent according to the 2012 World Income Database.

Why was this happening?

During this time, the value of the dollar was stable and the Fed did not employ a single labor market variable on its dashboard of indicators. It was up to business to invest so productivity kept pace with wage growth. A stable dollar permitted more stable material costs for businesses and less demand for expensive financial hedging - allowing capital to flow toward more productive investments that generated employment and income for the many. The result was faster economic growth. Despite strong income growth for the striving majority, business profits relative to GDP remained strong and steady.

This type of investment is much more effective at creating value than exotic financial products that rely on arbitrage and speculation: those tend to extract equity rather than enhance wealth.

The situation changed drastically in 1971 when the U.S. dollar lost its intrinsic value anchor and began floating. Since then, real income for the bottom 90 percent stagnated while that for the top 10 percent grew an additional 140 percent.

Lost economic activity due to the lower growth rate since 1971 totals $104 trillion: $75 trillion since 2000 and nearly $9.2 trillion in 2013 alone. The total inflation-adjusted cost of all U.S. military wars is $7.7 trillion, according to the Congressional Research Service and Stephen Daggett, a specialist in Defense Policy and Budgets. In other words, stagnation has caused more destruction than all wars combined.

Had the 1948-1971 trend for real income of the striving majority continued, the bottom 90 percent would be earning 2½ times more than they do now. If income for the striving majority was 2½ times greater today, how many of our current problems would still be problems?

What happened?

Since the dollar was no longer stable, the Fed surreptitiously began targeting wage growth as an indicator of inflation that needed to be curtailed. This is because inflation was redefined to mean an increase in a price index rather than a decline in the value of the dollar. To keep the index from going up, they have raised interest rates every time we’ve had decent wage growth in the last 30 years. This squelched the growth along with wages and employment opportunities, causing volatile business cycles and stagnation.

This theory was promoted in the 1970’s, which suggested there was a tradeoff between unemployment and money wage inflation as depicted in the Phillips Curve. However, empirical evidence has contradicted this model over several decades and it has become more apparent that inflation is a function of the supply and velocity of money relative to the total quantity of goods and services provided in the general economy.

Also, the Fed was given a dual mandate by Congress in the late 1970s, to minimize and stabilize unemployment in addition to inflation. Unfortunately, the Fed lacks proper tools to deal with unemployment, since it involves fiscal policy to a large degree.

In essence, the Fed was acting in a reactionary manner, since inflation and unemployment are lagging indicators, have subjective measurements and are constantly revised. Moreover, the policy intervention has lag built into it; by the time it became operational, the underlying conditions that were being addressed may have changed. Therefore, too often we were treating the wrong problem with the wrong solution at the wrong time.

During Senate testimony, Janet Yellen (now Federal Reserve Chairwoman) said, “A key lesson of the 1970s is the critical importance of maintaining well-anchored inflation expectations so that a wage-price spiral like we saw back then does not break out again.” There have been numerous times that Yellen has referenced strong labor market conditions as a potential source of inflation, which the Fed needs to keep in check – primarily via increased interest rates.

The goal of the Fed should be to maintain the stability of the dollar as a unit of measure. Real time, market based prices of commodities, foreign currencies and future investment opportunities (bond yields) provide better signals for altering the money supply.

Less intervention by centralized authorities would be required when the creation of money is coupled with the production of real assets. Most pricing will occur in the global private marketplace, which is less susceptible to a few ill-informed or ill-intentioned actors. The market would set interest rates and determine the money supply.

Direct domestic investment has been weak over the past few decades as a result of this misguided monetary policy. This is the worst economic recovery precisely because this is the worst recovery in business investment. A volatile dollar inhibits business investment.

Rich Lowrie describes business investment as the fuel for the train engine that drives economic growth. Consumption is the caboose that follows: it does not push the train. You can only consume what has already been produced.

How do we go from 2 percent growth to 4 percent growth?

With a stable dollar, Lowrie estimates economic growth can be increased by 1 percent with $358 billion of business investment. He believes this would put the chain back on the bike; otherwise, the bottom 90 percent will continue to slide down the pole of economic prosperity.

With the chain on, we peddle forward without heating up. More robust, sustainable income with stable purchasing power for the “striving majority” would result.

With economic growth comes an increase in tax revenues and lower growth in government spending and debt levels. Lowering debt relative to GDP can be accomplished 27 times more effectively by increasing economic growth by 1 percent of GDP instead of reducing spending by 1 percent of GDP.

Currently, Put Growth First is actively working with members of Congress, including the House Freedom Caucus led by Rep. Jim Jordan, R-Ohio, and will soon launch a Growth Task Force with input from caucus members such as Rep. David Schweikert, R - Arizona.

They were involved in helping to advance House of Representatives bill 1176 in the previous 113th Congress, sponsored by Rep. Kevin Brady, R.-Texas, that would establish a Centennial Monetary Commission to examine United States monetary policy, evaluate alternative monetary regimes, and recommend a course of monetary policy going forward. It is likely to be reintroduced in this session of congress.

In addition, they intend to advise the 2016 field of presidential candidates on the connection between a stable dollar and robust income growth for the striving majority.

By linking money creation to real asset production, we can increase direct business investment, productivity, income and purchasing power over the long term for the "striving majority."

It’s time to Put Growth First.