Tags: Steve Forbes | economy | recovery | dollar

Steve Forbes to Newsmax TV: 'World Starts to Unravel' When US Is Weak

By Dan Weil   |   Thursday, 31 Jul 2014 06:13 PM

Many economists expressed excitement over the 4 percent growth in GDP for the second quarter, but Steve Forbes, chairman of Forbes Media, doesn't share their enthusiasm and predicts only continued subpar growth, which could threaten global stability.

"It’s nice to have the snapback, but it's still a very punk recovery," he told "The Steve Malzberg Show" on Newsmax TV.

"I'm not sure in the latter part of this year we're going to get much above or even close to 3 percent real growth," said the author of the new book, "Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It," written with Elizabeth Ames and published by McGraw-Hill.

"Anytime the United States is weak, as happened in the 1930s during the Depression and in the 1970s, a terrible malaise decade of high inflation, the world starts to unravel," he said.

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Meanwhile, the economy is experiencing the worst recovery from recession in the nation's history, said Forbes, a former Republican presidential candidate. "It's like a baseball player who was hitting .150, and now he's up to .220 or .230. Very nice, but it ain't going to get you to the World Series."

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As for other issues:

• A weak U.S. economy has global repercussions, Forbes said.

"A strong U.S. is critical and when Reagan came in and made the needed reforms and America once again was seen as an innovative, fast-growing nation, we won the Cold War."

But now the perception of U.S. weakness is starting to encourage misbehavior by bad actors such as Russian President Vladimir Putin, Forbes said.

• Forbes isn't impressed with recent job gains either.

Non-farm payrolls rose 288,000 in June and are expected to show a 230,000 increase for July.

"We’re not getting the kind of increases in pay and productivity that would make this economy hum again. The labor participation rate is still at the levels of the late '70s," he said.  Wages rose only 2 percent in the 12 months through June.

• Forbes favors a return to the gold standard.

"All it would mean is that the dollar would have a stable value, which it had for 180 years from the time of George Washington through the early 1970s," he said. "It's similar to having a fixed number of minutes in an hour. Imagine what life would be like if the Federal Reserve did to clocks what it does to the dollar. You'd have 60 minutes in an hour one day, 42 minutes the next, 74 the day after."

• A stable dollar facilitates smooth global investment and trade, Forbes said.

"But when the government constantly changes the value of the dollar, then you have arbitrary winners and losers, which undermines social trust."

A sound dollar policy is the basis for sound economic policy, he said.

"You can get things right on taxes, you can get it right on regulations and spending. But if you don't get the money part right, it's going to undermine your economy, and you're going to have a subpar growth."

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