Steve Forbes: Return to Gold Standard Would Give Dollar 'Stable Value'

Thursday, 31 Jul 2014 06:34 PM

By Bill Hoffmann

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A return to the gold standard would stabilize and strengthen the U.S. economy, says Steve Forbes, chairman and editor-in-chief of Forbes Media and a former GOP presidential candidate.

"All it would mean is that the dollar would have a stable value, which it had for 180 years from the time of George Washington through the early 1970s,'' Forbes said Thursday on "The Steve Malzberg Show'' on Newsmax TV.

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"It's similar to having a fixed number of minutes in an hour. Imagine what life would be like if the Federal Reserve … did to clocks what it does to the dollar.

"You have 60 minutes an hour one day, 42 minutes the next, 74 the day after. Life would be chaotic. ... So a stable dollar just makes it easier to invest, easier to do transactions. When the government constantly changes the value of the dollar, it makes it suspect.''

The gold standard, a system in which a country's currency is backed by gold, was dropped by President Franklin Roosevelt in 1933.

The government continued to convert dollars into gold at the rate of $35 an ounce until President Richard Nixon ended the practice in 1971.

Forbes is author of the new book, "Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It," written with Elizabeth Ames and published by McGraw-Hill.

On Wednesday, the Bureau of Economic Analysis issued its estimate of real gross domestic product for the second quarter of 2014.

Covering April, May, and June, it showed output in the United States increasing at an annual rate of 4 percent — a dramatic spike compared to the first quarter when real GDP declined 2.1 percent.

Forbes said that despite the uptick, he remains concerned.

"It’s nice to have the snap back, but it's still a very punk recovery, and I'm not sure in the latter part of this year we're going to get much above or even close to 3 percent real growth,'' Forbes said.

"So this still ranks as the worst recovery in American history from a sharp downturn. It's like a baseball player who was hitting .150. Now he's got it up to .220 or .230. Very nice, but it ain't going to get you to the World Series.''

Forbes agreed with CNBC economist Larry Kudlow that a strong U.S. economy is vital to world security.

"Anytime the United States is weak — as happened in the 1930s during the Depression, and the 1970s, a terrible malaise decade [with] high inflation — the world starts to unravel.

"A strong U.S. is critical and when [President Ronald] Reagan came in and made the needed reforms and America once again was seen as an innovative, fast-growing nation, we won the Cold War.

"The world became a much safer place. But when people perceive weakness, the bad actors start to misbehave. We see it with [Russian President Vladimir] Putin most notably.''

Forbes' company, Forbes Media LLC, is one of the world's leading financial information companies and publishes Forbes Magazine, an online version, and newsletters.

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