Steve Forbes, chairman and editor-in-chief of Forbes magazine, has claimed that the Biden administration and the Federal Reserve are ignoring the "real cure" of inflation and are instead placing their attention on raising interest rates.
"Today, unfortunately, not only is the Biden administration putting up obstacles to deal with supply-side problems but also the Federal Reserve and other central banks think you have to depress the economy to bring down inflation," he said.
"They do it by artificially raising interest rates. So they have fewer people employed ... that is not the real cure," Forbes said, adding that "the real cure is to stabilize the currency. You don’t have to make people poor to conquer inflation."
In order to stabilize the U.S. dollar, Forbes suggested using gold—specifically, tying the currency directly to gold so that it has a fixed value.
Inflation Eating Away at EarningsHe cited higher economic growth rates after the Bretton Woods gold standard was introduced in the 1940s. Bretton Woods established a universal standard through which the U.S. dollar was fixed to gold and the currencies of virtually every country in the world were tied to the U.S. dollar.
However, the Bretton Woods system, while it provided the necessary stability at the time it was implemented, ultimately collapsed between 1968 and 1973 amid increased domestic and military spending, dwindling gold reserves, and other structural issues pertaining to the standard. In 1971, President Nixon ended dollar convertibility to gold.
Forbes's appearance at the Forbes Global CEO Conference comes as inflation is still eating away significantly at U.S. households, and Fed Chair Jerome Powell has acknowledged that achieving a so-called "soft landing" and avoiding an economic downturn will be a difficult task.
The average American worker’s real annual earnings increased by $4,000 under former President Donald Trump’s low-inflation economy, analysts noted.
"Maybe we’ll get a little blip upward in the third quarter, but we are in a downturn, and the Fed wants a downturn because the only way it knows how to fight inflation is by making people poorer," Forbes said.