LAS VEGAS--The absence of a gold standard in the United States is hindering economic growth and leading to ill-fated monetary policies, former Republican presidential candidate Steve Forbes told more than 1,000 attendees during his keynote speech at the FreedomFest conference here.
Forbes confidently reinforced his past advocacy for a return to the gold standard to help stabilize the falling U.S. dollar, reassure foreign investors of the value of U.S. government bonds and spur federal spending discipline. He pointed blame directly at the U.S. government by telling attendees that such intervention is needed because “Big Brother” is “destroying the dollar.”
“The weaker the dollar, the bigger the government,” Forbes said.
Since 1971 when the United States left the gold standard completely, the value of the dollar has gone down 80%, Forbes said. The U.S. government maintained a gold price of $35 per ounce until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed price.
That move followed a U.S. government retreat from the gold standard on June 5, 1933, when it ceased backing the value of the U.S. dollar with gold. Creditors previously could demand gold as payment starting in 1879 when the U.S. government first adopted the gold standard. The one exception occurred during World War I when the U.S. government imposed an embargo on gold exports.
Right now, the Federal Reserve Bank is one of the “least accountable” agencies in the world, Forbes said. The reality is that monetary policy “intimidates” people or just “bores” them,” he added.
“If you want out of a date, start talking about monetary policy,” Forbes said.
If the United States had maintained the average rate of economic growth that it had with the gold standard, the U.S. economy would be $7-$8 trillion dollars larger than it is now, Forbes said.
“It is very easy to spend when you can conjure money out of thin air,” Forbes said.
“Money is simply a measure of value,” making transactions easier than in the old days when society used barter arrangements to conduct business, Forbes told the attendees.
Without the gold standard, the United States is suffering from “crony capitalism,” Forbes said. An estimated $1 trillion dollars has been “wasted” by the U.S. government on subsidies, he added.
For example, electricity in Germany is three times what it is here in the United States, Forbes said.
“People feel that the link between effort and reward has been eroded,” Forbes said.
Inflation, which is nudging upward in the United States, is a “tax,” Forbes said. He questioned how Fed policies that are causing rising inflation and boosting the cost of living for a typical American by $1,000 a year are helping the economy.
With the current quantitative-easing policies, the Fed will keep its bloated balance sheet, Forbes said. The Fed’s action is taking money out of economy and giving it to a wasteful federal government – hurting small businesses that need to be healthy to create jobs, he added.
“The big banks are now simply hand maidens of the federal government,” Forbes said.
“When we had a gold standard, there was little currency trading,” Forbes said. “Now, volume in currency trading is high.”
Gold’s fixed measure of value is “impervious to Washington’s manipulation,” Forbes said.
Governments would need to spend “more responsibly” with the gold standard, Forbes said. Reinstatement of the gold standard would create an economically “healthier society,” he added.
Paul Dykewicz is the editorial director of Eagle Financial Publications and a columnist for Townhall and Townhall Finance.