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Forbes

Busi­nessman Steve Forbes speaks at CCA II: “The History of Money” in the Biermann Ath­letic Center Monday.

Anders Kiledal | Collegian

Steve Forbes is the chairman and editor-in-chief of Forbes Business Mag­azine and ran as a Repub­lican can­didate in the 1996 and 2000 pres­i­dential pri­maries. He holds a degree from Princeton Uni­versity and in 1985 was appointed head of the Board of Inter­na­tional Broad­casting by Pres­ident Ronald Reagan. He delivered a lecture titled “How the Destruction of the Dollar Threatens the Global Economy” on Monday.

What are some of the biggest impacts the Federal Reserve’s inflation of the dollar has made on the economy in the past 10 years?

It’s been very dis­ruptive to the U.S. economy and the global economy. It’s meant that we have a period of stag­nation when tech­nology has opened up a lot of opportunities.You see the rise of political extremism and the disrupt of pol­itics in this country — con­tempt for political estab­lishment is very real. That’s a dev­as­tating con­se­quence of what the Fed has done. John Maynard Keynes did some­thing right when he said that when we have a debased cur­rency, it under­mines all the pro­ductive forces of the economy.

How would you describe the gov­ern­ment’s role in the 2008 financial crisis?

Every major eco­nomic crisis has its origins in bad gov­ernment policies or gov­ernment mis­takes. Free markets always get the rap for it. This time “greedy bankers” are the ones getting the rap. It’s the gov­ernment who under­mined the dollar and set the man­dates for sub­prime mort­gages and Fannie Mae and Freddie Mac; that’s where the crisis originated.

Do you think the gov­ernment did the right thing given the circumstances?

They helped bring on the crisis both with the weak dollar and reg­u­lators putting in this rule for mark-to-market accounting. It put huge pressure on banks. And the gov­ernment [had an] incon­sistent response: They rescued cred­itors of Bear Stearns Cos., then mis­handled Fannie Mae and Freddie Mac, then let a bank far more important than Bear Stearns — Lehman Brothers — go under, then they reversed them­selves and rescued American Inter­na­tional Group Inc., so you had full-fledged panic. When you have full-fledged panic, drastic mea­sures are called for, and I don’t mind drastic mea­sures, but when the panic sub­sided, the Fed should’ve pulled back. Instead, the gov­ernment went on a binge, and Obama went on a spending binge and took over General Motors Co. and Chrysler LLC and passed Oba­macare, which never would have passed without the crisis, and the Dodd-Frank bill, which severely damaged the economy. The Federal Reserve con­tinued in the dis­ap­pointing recovery with quan­ti­tative easing and a zero interest rate policy, which means big com­panies get credit easily and cheaply and smaller busi­nesses and house­holds get very little. Smaller and newer busi­nesses are the ones that create the jobs, most of them. The Fed in the name of stim­u­lating the economy retarded it. They’re guilty of eco­nomic malpractice.

Which Repub­lican can­di­dates do you think would be the best in charge of the U.S. economy?

The heart­ening thing is almost all of them have come up with tax sim­pli­fi­cation pro­posals, and some of them advocate the flat tax, which I like. San­torum and Paul and Cruz came out with some plans, and I like the fact that Sen. Cruz is in favor of linking the dollar to gold. They’re starting to move in the right direction. One so far with the least sat­is­factory tax plan is Marco Rubio. He has high rates, much higher than anyone else’s. His big thing is the kiddie tax credit, and I think the flat tax properly struc­tured does far more for kids and fam­ilies than the Rubio plan.

You’ve been a pro­ponent of the flat income tax for a while now — how do you hope the flat tax will affect the economy?

The current tax code is incom­pre­hen­sible. That’s a huge waste of brain­power and resources. A low rate is less of a burden on the people, reducing the price of pro­duc­tivity. Combine that with a semi-sen­sible mon­etary policy and this country would take off, and we have a lot of catching up to do. There’s been mil­lions of dollars wasted on the tax code, and it’s not nec­essary. It’s a diversion of resources.

What does a sen­sible mon­etary policy look like?

A gold standard, stopping the hyper-reg­u­lation of banks, and letting the market set the cost of money.

How do you think the Fed has handled major eco­nomic issues over the past 10 years? 

Until the ’80s and ’90s, not badly, although the ’70s was an utter dis­aster. The Fed needs to learn more about money, take real mon­etary policy 101. The two prin­ciple things it should be focused on are keeping a stable dollar and dealing deci­sively and quickly with the occa­sional financial panic or crisis. That’s it.

What can Hillsdale College stu­dents do to be pos­itive forces in the economy? What does the economy need from us right now?

Not getting into the clutches of gov­ernment and not falling for all the fads that corrupt the integrity of other insti­tu­tions. Do what you have a knack for. Rec­ognize that you’ll learn things from expe­rience and agitate for sen­sible pol­itics and economics.

If you could rec­ommend one book on the economy today, what would it be?

The Way the World Works” by Jude Wan­niski and “Wealth and Poverty” by George Gilder.

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Kate Patrick
Since she sold her soul to journalism, history major and Associate Editor Kate Patrick has covered business, the tech industry, city council, and city news in Washington, D.C.; Dayton, Ohio; Rockford, Illinois; and Hillsdale, Michigan. She creates extensive rock playlists and investigates abandoned buildings in her spare time. email: [email protected] | twitter: @katepatrick_