In this recent hard-hitting interview with Financial Sense Newshour, successful entrepreneur and twice presidential candidate Steve Forbes likens Fed Chairman Ben Bernanke to a blind astronomer, says quantitative easings, or “QE’s”, should be called “Titanics,” while also warning listeners of impending wealth taxes now used in France and elsewhere.
First, on the precipitous drop in gold, Forbes explains:
I think what you saw there was anticipation that there’d be a huge rise in inflation because of the major increases in money—money printing done by the Federal Reserve. And so, starting in 2011, when we had one of these QE’s, gold reached a peak of almost $1900/ounce. But what the Federal Reserve did is that it indeed did print up the money and then, what I don’t think the gold market fully grasped until recently, was that the Fed then sterilized the money. It would give it to the banking system and then take it back in the way of bank reserves, paying the banks a nominal rate of interest. So, the banks didn’t mind, they got free profits guaranteed—no sweat.
On the effect quantitative easing and regulatory policy is having on the broader economy:
The Fed has given us the worst of all worlds. It’s undermined the integrity of the dollar and at the same time it has not permitted money to go into the economy. What you have unfolding is that regulators are still putting pressure on banks when they make business loans. Banks know that if they make a loan to a local drycleaner they’re going to have to paper it six ways to Sunday. So, what’s happened with the price of money, even though it’s theoretically almost at zero percent, it’s similar to what you had in the old Soviet Union where the saying was, “Health care is free but you can’t get any.” So, for small businesses and households the flow of credit is still very uncertain.
On the proper name for “quantitative easing”, or QE’s:
Instead of calling these Fed maneuvers QE’s, call them Titanics: Titanic 1, Titanic 2, which I think is a much better description of what they’re doing—they’re sinking the economy. The Fed really doesn’t know what it’s doing.
On the Fed’s exit strategy and competence of the Fed:
Ben Bernanke, the Fed Chairman, may think he’s a student of the economy but he’s like astronomers before the Copernican Revolution. He doesn’t realize that the sun doesn’t revolve around the earth, as much as the earth revolves around the sun. So, he’s looking at the world the wrong way, looking at history the wrong way, and I think…[w]hat he doesn’t realize is that every time the Fed tries to manipulate the economy it ends up doing more harm than good, creating distortions that just slow things down.
On the government limiting retirement pensions and taxation:
It’s part of their Statist, socialist mentality—to be blunt about it. They figure you should only have a certain amount for an ample retirement and any more is just being greedy. They want to do what, in spirit, happened in Cyprus when bank deposits were seized by the government. You’re now seeing it in this country. You’re seeing the camel’s nose under the tent, so to speak, with this proposal about restricting what you can have in your 401k’s and your IRA’s and the like... You see ideas now of taxing what they call buildup annuities, variable annuities, or life insurance policies. So, the government has an insatiable hunger for revenue, no matter what, and so they’re going to look for any way they can rob people’s piggy banks.
In the rest of this interview, Steve addresses coming wealth taxes and reiterates the need for a flat tax here in the U.S., pointing out how successful it’s worked in former communist countries like Russia and China.
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