Steve Forbes has had enough of the Federal Reserve and its “sinning” policies to undermine the dollar. In this brief interview with Birch Gold Group, the publisher and CEO of Forbes, Inc. exposes the damage that the central bank has created, “Bernanke was a disaster…has totally mucked up the credit markets.” Blasting Janet Yellen “who needs to go to re-education camp,” Forbes explains why he believes so strongly in the gold standard, and the one single scenario under which he would ever sell his gold.
Rachel Mills for Birch Gold Group (BGG): I am so glad to be talking with Steve Forbes, here at FreedomFest. My name is Rachel with Birch Gold Group. Can you talk a little bit about the Federal Reserve printing money these days. And the Federal Reserve recently announced that they have decided to stop printing money by October. Do you think that will actually happen, the Quantitative Easing, anyway?
Steve Forbes: The Fed will stop the Quantitative Easing, but what is disturbing is that they are going to still keep all the bonds that they bought. They’re not going to let them run down, which is now going to be about, when October rolls around, four and a half trillion dollars. So the Fed is still sinning, and those excess reserves are still an overhang and they’re still working to undermine the dollar, openly.
BGG: Do you think they’re going to be using any kind of back door vehicle to basically effectively do the same thing but just sort of under the radar?
Steve Forbes: Well the overhang is so huge, it’s unprecedented. They don’t have to do anything, it’s already there. And they just have to hope that the flood doesn’t sweep away the town.
BGG: Right, you also said that you believe in gold and owning gold, not as an investment but as insurance against economic malpractice. Tell me more about your thoughts on gold these days.
Steve Forbes: Well gold maintains its intrinsic value better than anything else on Earth, and that’s for 4,000 years. And when you see the dollar price fluctuate around gold, that means the dollar is either weakening or peoples’ perceptions about the dollar are changing. So for 180 years this country, the United States, had the dollar fixed to gold, worked pretty well. Certainly has worked better than the floundering we’ve had since. And in the ’80s and ’90s, we had a semi-stable monetary policy, so instead of an F, we’d give it a C, maybe a C+. But we had a terrible decade in the ’70s and we’ve had a terrible time since the early part of the last decade. And this is all unnecessary.
BGG: What do you think about the performance of Bernanke and now Janet Yellen at the Fed?
Steve Forbes: Bernanke was a disaster. He put in Quantitative Easing, he put in Operation Twist. He suppressed interest rates across the board, which has totally mucked up the credit markets. He hurt the economic recovery, this is the first time we’ve had a recovery that didn’t have a sharp snap back, at least initially. And before he became the head of the Fed, he bought into weakening the dollar and bought into the idea that there are excess savings around the world. So he’s got a pretty bad record.
BGG: And do you think Janet Yellen is simply continuing that?
Steve Forbes: Janet Yellen has shown that she needs to go to re-education camp. She has learned nothing and won’t because she has a PhD, spare her a lot of years in the system. So she is a devotee of the Kool-Aid.
BGG: I would agree. You said something really interesting about the gold standard that I wanted to ask you about. You said that a way to sort of peg the dollar back to gold would be to peg it to the price of gold. We would print more dollars based on the price of gold, we would print or stop printing. Can you elaborate?
Steve Forbes: Yes, let’s say we fix the ratio at $1,300 to an ounce of gold. So if it went above $1,300, the Fed would stop the printing. If it goes below $1,300, it would print to keep it, keep it within range.
Steve Forbes: It is. That’s what the high priests of funny money don’t want you to know. The gold standard is very simple to do.
BGG: That’s amazing. But we’re not going to do that, why?
Steve Forbes: One is the economics profession knows less about money than it did a hundred years ago. And they and others have a vested interest in currency instability. Currency trading, now the volume on a daily basis, is over three trillion dollars.
BGG: Currency trading?
Steve Forbes: Currency trading.
BGG: Wow. Just people changing money back and forth trying to get an edge. It’s a huge, huge business. But it’s not really a business.
Steve Forbes: No, gold would put it out of business. They could do something useful, like medical research.
BGG: Do you think interest rates are going to actually go up any time soon?
Steve Forbes: Not a lot. The Fed is determined to suppress them, which means you won’t get good functioning credit markets. So that’s another example of Janet Yellen, she’s misbehaving like Mr. Bernanke.
BGG: They would much rather have people spending and borrowing rather than saving.
Steve Forbes: Well they buy into the notion that saving money is putting it in a black hole instead of realizing that’s capital to create a more prosperous economy. They think people buying stuff is the way to wealth. Well, people produce to buy. But they believe in counterfeiting.
BGG: So do you sell gold often? What would it take for you, personally, to sell your gold?
Steve Forbes: When we’re on a gold standard. Then you wouldn’t need the insurance.
BGG: Right, well thank you so much for talking with me.
Steve Forbes: Thank you, thank you.
Under the gold standard, working people would control the money supply, not elitist bureaucrats. If the Fed increased the supply of dollars beyond the people’s demand for dollars, people would exchange dollars for gold. The people would consequently stop the Fed before it could create inflation.
But the people could also increase the money supply if needed to support economic growth. Under the gold standard, banks and other financial institutions would be empowered to mint their own gold coins as long as the amount of gold in the coins was correctly denominated. Banks could consequently increase the money supply to meet the demand for business loans or other unsatisfied demand for money. That increased demand for gold would induce mining companies to increase their supply of gold.
But they could not increase the money supply faster than the demand for money. If the people did not want to hold more gold coin, there would be no takers for the newly minted coins.
Contrary to myth, and intellectual confusion, under the gold standard the money supply would not be limited to the government’s holdings or supply of gold. The Fed could increase the supply of dollars to meet the demand for dollars, providing the money needed to service economic growth. As long as the supply did not exceed the demand, there would be no increased draw on the Fed’s holdings of gold due to the increased supply of dollars. So if the economy demanded more money to support the level of economic growth, under the gold standard, there would be no limitation on the Fed supplying it. This is why any country could operate a gold standard on any reserve of gold the government holds to support it. (The government could also print more of its currency to buy more gold in the marketplace if it thought holding more gold was necessary. That is fully consistent with the gold standard as well.).
Reestablishing the Gold Standard
The gold standard could be restored first by legislation simply instructing the Fed to follow a price rule in conducting its monetary policy that would maintain a stable dollar price for gold. If gold’s price was rising, the Fed would then tighten the money supply to stop this budding inflation. If gold’s price was falling, the Fed would increase the money supply to stop that budding deflation. Once the price of gold was thus stabilized for a sufficient period, Congress could then enact legislation exercising its constitutional power to define the dollar as equal to that stabilized value of gold.
If America restored its gold standard, other countries would quickly follow. Otherwise, their economies would fall behind. The Chinese and the Russians could be expected to do the same immediately, especially as the Chinese are already ardently seeking restored stability for the dollar. Indeed, if America does not act, nothing would stop the Chinese from adopting their own gold standard for their currency, with Russia to quickly follow. This very column, in fact, could easily be translated into Chinese.