Too Green, and not Gold Enough

Wednesday, January 30, 2008

Steve Forbes should have called for a gold standard and shouldn't have plugged a green book, but he does at least mention gold and point the finger at the source of the blame for inflation:

The most potent, constructive medicine would be for the Bush Administration to stop its Jimmy Carter-like weakening of the dollar. A feeble dollar means inflation -- witness what's happened to commodity prices over the last four years, the most prominent being oil, which has almost quadrupled in price. This ain't a case of supply and demand. Four years ago an ounce of gold would buy you roughly 12 barrels of oil; an ounce today would get you roughly 10 barrels -- that's hardly a 300% real price increase. A weak dollar also brings about economic distortions, such as the (now disastrous) subprime mortgage orgy. President Bush should announce that we will defend the dollar and make it stronger. The Fed should announce that it will let the federal funds interest rate float, at the same time removing some of the excess money it created in 2004--05.

The bottom line: No strong economy has a weak currency. [bold added]
Read the whole thing.

-- CAV

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