Jeffrey Bell, a two-time campaign adviser to Ronald Reagan, says it’s high time that the United States return to the gold standard, abandoned by President Richard Nixon in 1971. He cites Reagan as a proponent of the monetary regime and squarely blames current Federal Reserve Chairman Ben Bernanke’s policies for the ongoing global economic stagnation.
Bell is policy director of the American Principles Project. He served as an issues adviser in Ronald Reagan’s 1976 and 1980 presidential campaigns and was the Republican Party’s nominee for the U.S. Senate in New Jersey in 1978.
Bernanke’s policies — extremely low interest rates and flooding the system with unneeded dollars — are feeding stagnation and making our debt problems worse, Bell tells Newsmax.TV.
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“Right now, Ben Bernanke, the chairman of the Fed, is printing dollars. He’s really just summoning them up from cyberspace, out of a computer,” Bell says.
“If he had to know that each dollar was something of independent value, backed by gold or some other commodity — preferably gold — it would be much harder for the United States to borrow all this money it does from foreigners in order to finance huge budget deficits.”
Since rates are at zero, Bell says, nobody can tell what shape the economy is in or how long rates will stay low. The longer we stay at artificially low rates through money printing, the more the confusion grows, Bell maintains.
“I think that’s a big threat to the world economy’s sense of confidence,” Bell says.
Bernanke has gone on the offensive, appearing on “60 Minutes” to defend the Fed's $600 billion bond-buying plan. During the interview, he suggested that a third round wasn't impossible.
The bigger problem now isn't a second recession, he says, but stagnation as a result of confusion sown by Bernanke and the Fed.
“Ironically, Mr. Bernanke is addressing a problem, namely a slow recovery, that he himself is heavily responsible for creating,” Bell says.
Reagan understood the complexity of world economy, Bell says, and knew that it was simply too hard to eliminate human error from the equation. The late president always felt that being off the gold standard was a mistake, especially in times of double-digit inflation, which was happening as Reagan took office.
The sheer complexity of world economics is now coming back to bite the United States, which controls the world’s most widely used currency. Unfortunately for U.S. competitors that might like to get rid of the dollar, such as China and Russia, any move to dump it would create far bigger problems for them.
“The deterioration of the dollar is particularly threatening to the world’s confidence in its money,” since most countries use the dollar to back their own currency, Bell points out.
“The countries that have it don’t like that it’s depreciating, but if they start to sell it, it depreciates even more,” Bell says. “It’s a kind of gridlock.”
The weaker dollar is already feeding higher oil prices, with some analysts suggesting a return to $100 crude in just a few months. Since oil is priced in dollars, as it falls in value producers raise prices to compensate.
"The global market for oil is diverging as never before," Wood Mackenzie analyst Francis Osborne told ABC News.
"While the economy in the mature OECD regions continues to struggle, and with it oil demand, in the emerging markets it has generally been full speed ahead on both fronts."
"Leading this recovery is China and the rest of Asia."
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