Forbes’ Gold Fix for the U.S. Economy
-
REUTERS
Just take a look at the warning signs already in the headlines around the globe below.
Forbes advises a return to a “gold standard” as the only way to avoid disaster in his new, must-read book, Money: How the Destruction of the Dollar Threatens the Global Economy -- and What We Can Do About It
, co-authored by the always sharp Elizabeth Ames (McGraw Hill, May 2014).The U.S. central bank’s "vastly misguided monetary policies are now setting the stage for a new economic and social catastrophe -- one that could rival the financial crisis and horrors of the 1930s,” Forbes wrote, adding that U.S. economic success and prosperity will come only if the dollar is fixed to gold and not subject to the Fed’s arbitrary liquidity hydrants.
A gold standard would “lower interest rates,” provide for “cheaper capital” and lead to “gangbuster growth,” Forbes says, adding: “If the American economy had the growth rates it once achieved under a gold standard, it would be three times -- instead of two times -- the size of the Chinese economy today.”
And it would make government spenders more accountable, instead of today’s Fed which is now abetting the reckless spendthrifts in government by buying and monetizing U.S. debt.
Could the U.S. keep prices from spinning out of control if the Fed stopped printing money and instead returned to the gold standard? Are central bankers more secretive and powerful than ever before?
Recent headlines sound the warning:
*“The wide consensus entering the year of Fed tapering equaling a stronger US dollar has not come to fruition because on the stage of QE, the Fed’s balance sheet is only exceeded by the Bank of Japan as a percent of GDP.”
*”In 2000, the U.S. dollar made up 71% of all reserves held by governments around the world. Today it accounts for just 62%.”
“”Today, 56% of the world economy has zero-interest-rate policies.”
*"Central banks have doubled their reserves since 2006 and are crucial participants in currency markets, but some traders say their activities are opaque and unaccountable.”
*“The $4-trillion-a-day forex market is the largest in the world, but covert activities by central bank reserve managers have the clout to move it.”
*The International Monetary Fund estimates that central banks held $10.8 trillion in assets at the end of September, more than four times as much as global hedge funds.
*”The dollar has been weak against the Aussie dollar after the central bank there continues to leave rates unchanged and reaffirm that rates are not going any lower. Even the New Zealand currency is at a three-year high vs the U.S. dollar, the South Korean Won is close to a six-year high vs the U.S. dollar and the Chinese yuan has been posting sharp gains.”
Could the Fed’s easy money policies be the black swan event market players have been worried about? For decades now, interest rate spikes and inflation hikes have always triggered economic crises. Currently, economists note inflation is not a problem, but once the trillions in bank reserves (created by the Fed) come pouring into the U.S. economy, that could change.
Higher commodity prices are the canary in the cole mine for inflation, notably food-price spikes. It is a striking irony that the U.S. is consumed by fights over raising the minimum wage, while that very same minimum wage would be undercut by a devalued dollar.
The Fed’s boomerang could come back to hit it in the head in another way besides inflation -- at the banks it oversees.
It is noteworthy that even the Financial Times has reported that the Fed’s easy money has disconnected markets from the real economy, as the Fed’s wind beneath the wings of the market has helped drive the stock markets to historic highs and the 10-year Treasury yield to an historic low of 2.58%.
Continue Reading at .... http://www.foxbusiness.com/economy-policy/2014/06/06/forbes-gold-fix-for-us-economy/
