Gold Can Save Us From Disaster
This story appears in the October 22, 2012 issue of Forbes.
A new gold standard is crucial. The disasters that the Federal Reserve and other central banks are inflicting on us with their funny-money policies are enormous and underappreciated. An unstable dollar is wreaking havoc on our capital markets, depriving us of money for productive enterprises and future enterprises while subsidizing government debt on a scale never before seen in U.S. history. The zero-interest-rate policy destroys capital by punishing savers and enabling the central bank to allocate where capital goes. By definition such central planning means subpar or negative returns. No one believes, given the finances of the U.S. government, that a ten-year Treasury bond should yield only 1.8%.The promiscuous printing of money in the U.S., Europe and elsewhere is enabling governments to put off pro-growth structural reforms and giving them incentive to increase the burdens on the private sector. The poster child here, of course, is France, raising its maximum income tax rate to 75%. Not since the early 1930s have governments of major countries collectively acted so destructively. The only difference between then and today—and it is a gargantuan one—is that we haven’t destroyed the global trading and capital systems. But even they are facing increasing strains and will continue to do so unless policies are changed.
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