Originally posted Thursday, July 12, 2012
Gold doesn’t change in value. Currencies change in value. Gold is Polaris. — Steve Forbes
Steve Forbes recently provided an extended and erudite interview to Hera Research Newsletter. Forbes, as Chairman and Editor-in-Chief of Forbes Media, which reaches 6 million readers worldwide and whose website is visited by 30 million unique visitors each month, and author of Freedom Manifesto: Why Free Markets Are Moral and Big Government Isn’t, co-authored by Elizabeth Ames (Random House, 2012) to be released August 21. Forbes is is one of gold’s most distinguished proponents.
Photo under Creative Commons by Justin Hoch
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Hera Research Newsletter (HRN): Thank you for joining us today. With the US economy struggling to recover from recession and financial crisis, what policies would you recommend?
Steve Forbes: The only way to recover is to stabilize our money, have a gold-backed dollar, simplified tax code and return to a free market.
HRN: You advocate the gold standard?
Steve Forbes: If there’s any better system to ensure a stable value for money, it’s yet to be found. For nearly all of America’s first 200 years, the dollar was linked to gold. Since we went off the gold standard, we’ve had more and more financial, economic and banking crises. For example, if the Federal Reserve hadn’t started to print so much money 10 years ago, we wouldn’t have experienced the housing bust or the commodities boom or the sovereign debt crisis in Europe. Eventually, events become a persuasive teacher.
HRN: Don’t we need a flexible money supply?
Steve Forbes: That’s like saying that changing the number of minutes in an hour would be a great tool to increase productivity in the economy. Manipulating weights and measures, whether it’s the number of ounces in a pound or minutes in an hour, is a false way to think that you can achieve prosperity. All gold does is serve as a yardstick to measure the value of your currency.
HRN: Doesn’t increasing the money supply help to stimulate the economy?
Steve Forbes: The only way to increase prosperity is through innovation and productivity. Attempts to manipulate the value of money invariably fail. We’ve had numerous devaluations, and not once has it created lasting prosperity.
HRN: Under the gold standard, would there still be a lender of last resort to backstop the banking system?
Steve Forbes: The gold standard doesn’t prevent lending during a panic. The Bank of England pioneered acting as a lender of last resort in the 1860s under the gold standard.
HRN: Wouldn’t the gold standard prevent financial innovation?
Steve Forbes: No. Financial innovation has been with us for hundreds of years in terms of new financial instruments to meet expanding needs as the global economy becomes more complex. Many of the innovations of recent years, however, have come about in response to the instability of the dollar and other currencies, which has increased volatility in currency and commodity markets. New instruments have been designed either as insurance against volatility or to take advantage of it. If you had stable money, there would be much less hedging and financial speculation.
HRN: Can governments function under the gold standard?
Steve Forbes: Certain countries feel free to spend money whether they have it or not. Fiat money, which can just be printed up, has disguised the real cost. We would never have experienced the kind of government borrowing we’ve had in recent years if we’d had stable money. The gold standard would keep the government honest.
HRN: Doesn’t government deficit spending smooth over recessions?
Steve Forbes: The bottom line for the US is that a weak dollar means a weak recovery. Stability is good for the economy. The simplest thing to do is to re-link the US dollar to gold.
HRN: Wouldn’t that tie the hands of the Federal Reserve?
Steve Forbes: Tie their hands to do what, further harm to the economy? I don’t think that’s such a bad thing.
HRN: Isn’t the price of gold volatile like other commodities?
Steve Forbes: The reason to return to the gold standard is that gold maintains a stable, intrinsic value over time. Stable money meets all conditions. Gold doesn’t change in value. Currencies change in value. Gold is Polaris.
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