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0:06 JIM: There's been a lot of speculation and nervousness about the US debt hitting unprecedented levels, statement the feds continue to print money. What does all this mean? Joining us today is the author of the new book Money, How the Destruction of the Dollar Threatens the Global Economy and what we do about it, Steve Forbes who is the chairman editor in chief of Forbes Media as well as the author of many books and past US president candidate. Welcome, Steve. 0:33 STEVE: Good to be back, thank you. 0:35 JIM: It's just come out, your new book, Money, How the Destruction of the Dollar Threatens the Global Economy. You cover a lot of points, and I've got a couple questions. You talk about the difference between money and value. What do you see as the difference between money and value? 0:49 STEVE: Money measures value, in and of itself it is not value any more than a coat check at a restaurant is value. Money in effect is a claim on products and services, and it comes from you doing something whether it's providing your labor or selling something or creating something. Money is a claim that reflects people's estimation of values of certain things, whether in the marketplace or things that they treasure in culture or in values, but money is a symbol, not wealth in and of itself. 1:19 JIM: So what do you define as real wealth? 1:22 STEVE: Real wealth is ultimately knowledge, and what you can create out of that knowledge. As we know in World War II for example, Europe and Japan were physically devastated, but because knowledge was not destroyed, when the US provided a security umbrella and also provided a sound monetary system and reduced trade barriers, those areas recovered far faster than experts ever thought possible, so weal wealth is the human mind and what you can create from what the human mind comes up with. 1:55 JIM: Now, you talk a little bit about sound money. How does that contribute to a well functioning society? 2:02 STEVE: Money should measure value the way scales measure weight or clocks measure time or rulers measure length. It makes transactions easier, much easier than barter which is very cumbersome. Money enables us to do literally billions of transactions a day, and that's how you get a higher standard of living and wealth creation, is through being able to buy and sell, putting things together, whether it's baking a cake, getting the ingredient, the stove, and delivery and all of that. You need numerous transactions, and so money facilitates the buying and selling with each other, trading with each other, and without that we stagnate. 2:39 JIM: One of the problems that we see is our feds are printing money like there's no tomorrow, so what does that do to stable money? 2:46 STEVE: It wrecks it. In the private sector if you go in your basement and print money, that's considered illegal, it's a form of stealing because you didn't create anything, you just took a piece of paper and in effect stole something from somebody with counterfeit money, but unfortunately when the government does that it's called stimulus or monetary management. It is still profoundly wrong. 3:09 JIM: I see it as a stealth tax, it's a way to tax people at all levels and not even realize it because if they keep printing the money, then we have inflation. What you had yesterday isn't worth as much today. It almost seems the same as just taxing people. Would you agree with that? 3:24 STEVE: It is a form of taxation and it's a very destructive form of taxation, precisely because people don't see it and that leads to lessening of trust, money only works because of trust, not because of intrinsic value. Coins have no intrinsic value, pieces of paper don't, blips on computers where we do a lot of our transactions now in and of themselves are worth nothing, it's the trust that you imbue into them, and so when that trust is undermined it also effects the rest of society, and there's no, experience has shown that where you have weak money, unstable money, you get more social disorder. We've seen since the early 1970s when we went off the gold standard. We've seen that income and equality rise up. Median incomes in recent years have been stagnating, and investment, positive investment in things that we don't see today but hopefully see tomorrow, and new products, and new factories and the like don't come to fruition. 4:18 JIM: We've got to take a short break. When we come back, I want to talk to you a little bit more about some of the money policy errors, so please stay tuned. 4:51 JIM: Welcome back. Now, you've mentioned in your book some of the money policy errors that we've had. What are some of the other money policy errors that you see and what current problems that that's creating in the global financial markets? 5:05 STEVE: When the US dollar becomes weak, it drags the rest of the world with it because we are a global currency, not from government negotiations but just because of our capital markets here, the deepest in the world, and because the dollar is in effect used to conduct trade around the world, even if you have people from two different countries with their own currencies, they often use contracts denominated in dollars. When you buy a barrel of oil it's denominated in dollars. The instability of the dollar hurts the global economy as well as our economy. 5:36 JIM: I've heard a lot of talk about the risk that we may no longer be the global currency. Do you see that potentially happening? 5:43 STEVE: Long term, yes, if we continue our bad behavior, but I don't think it's going to get to that point. I think people are waking up and realizing that what we're doing is bad. People sense that there's something profoundly wrong. People sense that Ronald Reagan was right when he said that no nation ever remained strong with a weak currency because it does get in the way of people doing productive things. I think what you're going to see is, and our book I think helps contribute to the cause, is given a national discussion, debate on where we should go. Just the other day Paul Volcker, former head of the Federal Reserve under Ronald Reagan came out the other day saying that we need a new monetary system. He didn't mention any gold standard, but when you have an eminent person like that say that what we're doing now is not working, I think that's the beginning of the kind of positive debate we need to get good money back again, just like you want 60 minutes in an hour, you want a stable dollar, and I think the movement has begun. 6:42 JIM: I just interviewed Dr. Michael Cox who used to be the economic advisor to the Federal Reserve and worked down at the Dallas Federal Reserve Bank, he mentioned too that the problem with the Federal Reserve is sometimes they're working for the government versus business, and there's always that conflict, and right now by keeping interest rates low, by printing this money, it's helping the government manage their debt but it really has had a negative impact on true economic growth. Do you see kind of the same thing? 7:15 STEVE: Absolutely. What the fed has done is make it easy as you've hinted at for the government to borrow at huge levels and it's a starve credit for the rest of the economy, so the government becomes a glutton and small and new businesses which are the job creators and innovators, are left with scraps, if even that. 7:34 JIM: Let's finish up with some things that we can do to have a positive impact. What do you think we can do to reestablish the strength of the dollar and other currencies? 7:43 STEVE: Well, we have to get the word out to our representatives, to our friends, that this needs to be done, that when we had a gold standard in this country, we had very good high growth rates even though we had world wars and depressions, plenty of political crises. The 180 years that we had a gold standard, the US did very well. If we had maintained the level of growth that we had when we had a gold standard, our economy today remarkably would be 50% larger than it is now, over $8 trillion, just fathom for a moment, think for a moment of how life would be better with an $8 trillion larger economy today. 8:21 JIM: When I look at the opportunities that we have, we have so much potential and growth opportunities, but on the other hand we got so much writing it almost seems like we're at a tipping point that if we don't make some serious changes, it's just a matter of simply we all have to balance our checkbooks as Americans, how do we get our government to do that? 8:42 STEVE: It's going to come from pressure from the American people. Ronald Reagan was right when he once observed, he said you don't change minds in Capitol Hill through sweet reason. You do it through the heat of public opinion. We've got to get the public heated up on this and get the word out that the reason why wages aren't going up in real terms, the reason why you're paying more for gasoline. Remember, it wasn't that many years ago when gasoline was a dollar a gallon, today it's three and a half, four and a half dollars depending on what part of the country you live in, so it comes from educating ourselves and that's one reason why we wrote this book, Money, because it explains things in a very straightforward way, no jargon, no equations, and helps set the stage for getting this national discussion going, and I hope ultimately concluding that what we did for 180 years was pretty good. 9:28 JIM: So do you think we can do it? 9:31 STEVE: I think we can, and I think things are beginning to stir now. As I mentioned Paul Volcker the other day came out and said what we're doing is not working. He didn't endorse a gold standard, the fact is that people are getting the feeling what we're doing now is not good, and that's how you get a movement beginning, people recognizing we've got a problem. 9:48 JIM: Well, I think we're all in this fight together as Americans and we've got the greatest country in the world. 9:54 STEVE: Yes. 9:55 JIM: We just need to fix some things, maybe a little bit of a step backwards before we take a step forwards, but we can continue taking steps forward instead of backwards right off the cliff. 10:05 STEVE: Exactly. 10:06 JIM: Well, Steve, I really appreciate you joining us today. Where can people get your book? 10:11 STEVE: They can get it at bookstores and also Amazon.com. 10:14 JIM: Thank you for being a guest today and shedding some light from your perspective. Hope to have you on again really soon. 10:20 STEVE: Jim, look forward to it. Thank you. 10:23 JIM: Thanks for joining us this week, and tune in again next week as we explore another phase of the Real Wealth process, and remember if anything you heard in today's show you'd like to get more information about, contact us. Also if you feel that any of this information would be helpful to a friend or family member, just forward this link to them. Protect Your Retirement By Going To: https://www.myprisminsurance.com/retirement_plans/retirement_review.aspx
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