American Consequences - March 2018

Steve Forbes

A CONVERSATION WITH...

Mao’s China or the central banks today. And the only question with a central bank today, since they don’t keep currencies stable much anymore, is: How much harm will they do? Now, in the ‘80s and ‘90s after Reagan got in office, we had a period of semi-decent monetary policy – give it grade of C instead of F, which is what we had in the ‘70s and early ‘80s. But when you had a semi-decent monetary policy, gold didn’t fluctuate too much – certainly not by today’s standards – and you had a great booming economy. So the evidence is very clear. Don’t try to engage in price controls, and the Fed should only step in when there’s a financial panic for whatever reason, war or whatever. And otherwise they should just go for a permanent vacation to North Korea. Q: One more question about money and monetary policy. Is it a surprise to you that during this period of financial repression, soaring debt loads, and perhaps setting us up for a crisis of our own currency, that you would see something like bitcoin come to the fore?

In your mind, where is the biggest malinvestment? Where is the biggest problem that we haven’t yet had to deal with because of this extended period of artificially low interest rates? STEVE FORBES: Well, the artificially low interest rates is the equivalent of price controls. Most people realize that rent controls are bad. They distort the market, lead to distortions and to shortages and the like. And yet economists and businesspeople sort of accept as a given that the Fed’s going to engage in what is in effect rent control: what price you pay to rent the money. And it has distorted the markets, especially in the last 10 years when the Fed has tried to suppress long- term interest rates. And that’s one reason why small-business formation has been very low-level, because of the distortion in the credit markets. Credit markets have become very hostile or reluctant to lend to new businesses, small businesses, households. And that’s one reason why we haven’t seen the kind of boom you normally get with small-business creation in this country. So the quicker the Fed can be pushed to get out of the interest rate game the better. And the idea that the Federal Reserve can guide this economy by manipulating interest rates is so preposterous. Central planning does not work, whether in the Soviet Union and Central planning does not work, whether in the Soviet Union and Mao’s China or the central banks today.

Listen to Steve Forbes along with giants in the field like Jim Grant, Dennis Gartman, and Robert Kiyosaki at the 2018 Stansberry Conference at the Bellagio in Las Vegas, October 1 and 2. Or, if you’d prefer not to travel, you can watch it all live on your computer, phone, or tablet from the comfort of your home. Click here for more details on how to get your ticket.

86 March 2018

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