Steve Forbes Pulls No Punches in Exclusive Interview with Money Metals Exchange
Mike Gleason, Director, Money Metals Exchange: It is my great privilege to welcome Steve Forbes, Editor-in-Chief of Forbes Magazine, CEO of Forbes, Inc. to our Money Metals Exchange podcast. Steve is also author of many fabulous books, including Flat Tax Revolution, How Capitalism Will Save Us, and his latest work, Reviving America: How Repealing Obamacare, Replacing the Tax Code and Reforming the Fed Will Restore Hope and Prosperity. He’s also a two-time Presidential candidate, having run in the Republican primaries in both 1996 and 2000. It’s a tremendous honor to have him with us today. Mr. Forbes, thank you so much for joining us and welcome.
Steve Forbes, CEO of Forbes, Inc.: Good to be with you, Mike. Thank you.
Mike Gleason: I want to start out by getting your take on the 2016 Presidential election cycle, especially given your first-hand experience in the whole process. We’re seeing an anti-Washington voter revolt of sorts… it’s the anti-establishment candidates that have been getting all the momentum. This is especially true on the Republican side, where we see an outsider like Donald Trump currently leading and guys like Ted Cruz, Ben Carson and others having garnered a lot of support. But also on the Democratic side we’re seeing admitted Socialist Bernie Sanders starting to overtake Hillary Clinton with his outsider bid. What’s driving this phenomenon, and is this a good thing or a bad thing?
Steve Forbes: What it demonstrates is the intense, deep voter dissatisfaction with where the country is and fears about the future. There’s contempt for the political class for not being able to handle things. There’s the feeling that those who are in charge either don’t know what to do, or if they do they don’t know how to do it, so people are looking for outsiders for a fresh perspective. Just as in business where incumbents get too comfortable, you always find the entrepreneurial outsiders to challenge the status quo and upend things, and you’re seeing the same thing happening on the political side.
So who knows if Trump will go all the way, how far Bernie Sanders will go, but it’s a way of (at least for now) voters expressing dissatisfaction, unhappiness, and saying we want positive change. You cannot continue doing what you’re doing.
Mike Gleason: The issue of sound money has been getting more attention during the GOP debates than it has in several decades. It’s quite encouraging to us at Money Metals Exchange, as proponents of precious metals ownership, to hear Cruz, Paul, Carson, and even Trump bring up issues related to sound money such as reigning in the Federal Reserve, returning to some sort of a gold standard, and adoption of other measures to get America’s fiscal house back in order. I’m guessing you probably felt like a lone voice in the wilderness when you raised these subjects during your Presidential runs. So among the current candidates, who do you think best understands the problems created by our current monetary policy and might actually do something about it if elected President?
Steve Forbes: I think it’s encouraging that a growing number are recognizing there is a problem. Even before you get to solutions you’ve got to recognize and acknowledge that the way things are being done is not working and that the Federal Reserve has been a huge factor in the sluggishness of the U.S. economy; very, very destructive actions they’ve taken. I was delighted that Ted Cruz in one of the debates brought up the idea of a gold standard. Rand Paul of course was suckled on the idea of safe and sound money. Ben Carson has made reference to it. Donald Trump has made noises about the Federal Reserve. I think that’s a good sign.
One of the things that really most of the economics profession doesn’t seem to get is that money is simply a means for us to buy and sell with each other. It’s like a claim check. You go to a restaurant, check your coat, the claim check has no intrinsic value, but it’s a claim on the coat. Money is a claim on products and services. It has no intrinsic value. What it does, it’s like a claim check on products and services. It works best when it has a fixed value.
Money measures value the way scales measure weight or clocks measure time or rulers measure space and length, and it works best when it’s stable. The best way to get stable money, as we explained in our book Reviving America, is precisely to link it to gold the way we did for a hundred and eighty years. It works. Gold is like a ruler. It has a stable value. When you see the price fluctuate, that means that it’s the dollar’s value that’s fluctuating, people’s feeling about it for the present and for the future. But gold is like Polaris. It’s the North Star. It’s fixed.
Mike Gleason: That leads me right into my next question here. About a year ago you and Elizabeth Ames co-wrote the book titled Money: How the Destruction of the Dollar Threatens the Global Economy and What We Can Do About It. You proposed a modified gold standard… and I’ll quote here, and then I’d like to get your comments.
The twenty-first century gold standard would fix the dollar to gold at a particular price. The Federal Reserve would use its tools, primarily open market operations, to keep the value of the dollar tied at that rate of gold.
What would be the main benefits of such a reform? And also I’m curious why you stopped short of calling for an end to the Fed all together and a return to true free markets when it comes to gold and the rate of interest?
Steve Forbes: In terms of the role of the Federal Reserve, I think you’ve got to take one step at a time. One of the fears is that if you didn’t have the Fed you get a panic, which happens for whatever reason every few years, the thing would spin out of control. I think the key thing now is to get the dollar fixed in value, which we propose in that book, whether it’s a thousand dollars an ounce or eleven hundred dollars an ounce.
I think the best way to understand this is to imagine what would happen if the Federal Reserve was in charge of the time bureau, and the Fed decides to float the clock, sixty minutes to an hour one day, thirty-five minutes the day after, ninety minutes the day after that. Everyone would know that if you had a fluctuating clock, if your timepieces couldn’t keep accurate time, life would be chaotic. The same is true of money when it has a floating value. If you had the floating clock, imagine baking a cake. It says bake the batter thirty minutes. Is that inflation adjusted minutes, nominal minutes, a New York minute, a Mexican minute?