While the global tightening wave spread, the policies followed to reduce inflation were criticized. What is the real remedy for inflation?
As inflationary pressures continue to spread around the world, global central banks are raising rates sharply to rein in rates. While the FED increased by 75 basis points for the third time last week, the move from Switzerland ended the period of negative rates in Europe.
As the outlook for the global economy was getting darker, Steve Forbes, Chairman of the Board of Forbes Media, offered a solution for inflation.
Forbes said that while central banks and governments focus on raising interest rates to reduce inflation, they overlook the importance of maintaining stable currencies. Forbes used the following statements:
“The real cure is to stabilize the currency. You don’t have to impoverish people to beat inflation.”
The statements of the famous name came after the sterling hit the bottom with the new package announced in the UK and the sharp activity in other currencies. While the record refresh of the dollar index by exceeding 114 affected all majors negatively, emerging currencies such as the Turkish lira also fell to record lows.
Speaking at a conference in Singapore today, Forbes argued that there is a misconception about inflation and interest rate hikes. He stated that many economists and policy makers adhere to a standard dogma or the mentality of targeting inflation by increasing interest rates, and that they cannot go beyond this.
The Case of Paul Volcker and Ronald Reagan
According to Forbes, steps could be taken to support currencies instead of raising interest rates to reduce inflation. He supported his idea by citing an example from the 1980s. He referred to the policies of Fed Chairman Paul Volcker, which has been on the agenda many times this year.
Volcker reined in inflation with a dramatic rate hike of more than 20 percent, while US President Ronald Reagan stabilized the economy and increased production by reducing taxes and deregulating. The Reagan administration also coordinated global efforts to sell dollars and buy other currencies.
Objecting to the idea that the only way to fight inflation is recession, Forbes said:
“Unfortunately today, not only is the Biden administration putting up barriers to deal with supply-side problems, but the Federal Reserve and other central banks also think you need to put pressure on the economy to keep inflation down.”
“The real cure is to stabilize the currency,” she said, adding that the fight against inflation is done by artificially raising interest rates.
Gold Is Better Than Anything Discovered Over 4,000 Years!
Forbes suggested using gold to stabilize currencies. He gave an example of tying the US dollar to gold so that the dollar has a fixed value.
“Gold holds its true value better than anything else in the world. Gold isn’t perfect as a stable value, but it’s better than anything we’ve discovered in over 4,000 years.”
At this point, she noted that economic growth rates were much higher after the introduction of the Bretton Woods gold standard in the 1940s, in which the US dollar was pegged to gold and other currencies to the dollar.
Source:
https://www.cnbc.com/2022/09/26/the-real-cure-for-inflation-has-gone-ignored-forbes-says.html
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