Steve Forbes’ Key to a Stable Dollar

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July 22 (Bloomberg) -- Forbes Media Chairman and Editor-In-Chief Steve Forbes discusses the gold standard and the stability of the U.S. dollar. He speaks on “Street Smart.” (Source: Bloomberg)

Welcome back, everyone, to "street smart." high-end trish regan.

Still -- i am trish regan.

Still with me, steve forbes, who came out with a new book.

I have it right here.

In the book, you and your co-author talk about the 2008 financial crisis and you say it could have been prevented if in fact it had happened under a true gold standard.

What you mean by that, and is that something we need to be looking at today?

We had a gold standard in this country for the first 180 years of our existence, and what brought on -- was brought online the fed started weakening the dollar -- we had been through tough times before when you talk about the 1930's. that was not caused by the gold standard.

Massive tax increases and a series of evaluations would cook any economy.

The last part of the decade, the u.s. senate deliberately weakening the dollar, taken that would improve exports, but when you weaken the dollar, money goes into hard assets like housing, commodities.

Oil goes from $20, $25 a barrel to $100 a barrel today.

You saw housing prices shoot up.

People thought, like a virus corrupting information, housing prices go up forever.

Everyone went into housing.

You never could have had the housing bubble if you had a stable dollar.

A stable dollar is one thing, but you see the key for a stable dollar is returning to the gold standard.

Yes, because gold keeps its intrinsic value higher than anything else.

If you are not a fixed value for currency -- remember, money is created by you doing transactions in the marketplace.

If you muck it up, you get arbitrary winners and losers.

Let me play devil's advocate here.

There are those that say we need the ability to intervene in tough times, and by creating a gold standard, the fed would not have the ability to do that, they would not have the ability to bring more liquidity to the marketplace, thereby hopefully ironing out the volatility in the economy.

Well, economies are inherently volatile.

Look at the railroad industry, what that has been through.

High-tech companies come and go.

You always get changes in the economy, but in terms of the fed requiring liquidity during the panic, the british showed in the 1860's you have a discount window.

You have a short-term loan above market interest rate, see you not get money at the expense of taxpayers, and you deal with a short-term liquidity crisis.

That has been around for 150 years.

The fed has the tools to respond, even under gold standards, as we did many times to panics in the marketplace.

What about the argument there is not enough gold, it is a scarce resource?

That is exactly what gives it value.

It does not restrict the money supply.

It is like a ruler.

12 inches in a ford does not restrict the number of square feet you want to build than a house.

It just means you have a stable measure of value.

You not even need to own an ounce of gold to have a gold standard.

Just keep the price stable.

If it is above $1500, you stop creating money, under $1300, you

This text has been automatically generated. It may not be 100% accurate.


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