Money
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Money

How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It

Steve Forbes and Elizabeth Ames
McGraw-Hill, 2014
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7

Recommendation

Publisher Steve Forbes argues that the US should reinstate a gold standard to revive its economy and reduce the risk of another global fiscal crisis. Money is supposed to provide a reliable measure of value, serve as a mutually acceptable medium of exchange between buyers and sellers and convey useful price information. Forbes, who generally has a conservative point of view, holds that money that fluctuates in value cannot perform these crucial, basic functions and that allowing market forces to reset currency values constantly impedes economic advancement. The US maintained a gold standard under the Bretton Woods agreement from 1944 to 1971 and its economy thrived. When it stopped converting dollars to a fixed amount of gold in 1971, Forbes reports, lackluster economic performance followed. It’s worth noting that Forbes somewhat simplistically attributes just about every economic failing of the past four decades to the loss of the gold standard. While always politically neutral, getAbstract recommends his treatise to readers who are interested in monetary policy, history and the debate about the gold standard.

Summary

Life After Bretton Woods

As World War II ended, leaders of the Allied countries convened in Bretton Woods, New Hampshire. At this meeting, they devised a multilateral monetary system that fixed the value of the US dollar in gold and set the value of other currencies in dollars. The Bretton Woods gold standard remained in effect from 1944 to 1971. Since 1971, the purchasing power of the dollar has fallen more than 80%. It could fall even lower because the US has led “a global monetary expansion” involving debt securities purchases by the Federal Reserve and other central banks, including the European Central Bank.

With the dollar’s value fairly stable, the US economy grew briskly from the middle of the 1980s to the end of the 1990s. Still, the US economy has shown slower growth since the 1970s than in preceding decades. The US rate of unemployment has averaged more than 6% since the early 1970s; jobless rates averaged less than 5% from 1947 until the the 1970s. The deepest economic recession in the US since the 1980s occurred in the late 2000s.

Trade Deficits

The price of oil has increased since the 1970s due to the declining purchasing power of the dollar...

About the Authors

Steve Forbes, co-author of Power Ambition Glory, is chairman and editor in chief of Forbes Media. Elizabeth Ames, founder of BOLDE Communications, co-wrote How Capitalism Will Save Us and Freedom Manifesto with Forbes.

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