All this week, I’ve been doing interviews related to the release of my new book co-authored with Steve Forbes and Elizabeth Ames. It’s called Inflation: What It Is, Why It’s Bad, and How To Fix It, and you can get a copy from Amazon here.
As you probably guessed, we don’t think that “more unemployment” is the right solution for inflation.
For nearly two centuries, until 1971, the United States had a Stable Money policy, based on the gold standard. By linking the value of the dollar to gold, the dollar’s value was kept reasonably stable over time. As long as we stuck to this policy, the United States never had an inflation problem. Along the way, we became the wealthiest country in the history of the world. Stable Money works.
In the book, we make the point that “inflation” can come about from monetary and also non-monetary causes. Most of today’s high CPI figures, in my estimation, are actually due to non-monetary supply/demand-type issues. But a more pernicious and destructive process is “monetary inflation,” which arises due to a decline in currency value. Basically, when a currency loses value, then, over a period of months and years afterwards, markets gradually adjust by marking prices higher. It takes more currency to buy things. This is definitely happening now.
If a currency loses value, you get monetary inflation. If you keep a currency stable in value, then you don’t have monetary inflation. It really is that simple.
Today, I estimate that the value of the US dollar is about 1/50th of what it was during the 1960s. Fifty years of floating fiat currency has given us a two-cent dollar. (Most other countries did worse.) This long-term trend might intensify in coming years, especially if the Federal government gets into a habit of financing big deficits with the Federal Reserve’s printing press, as they did in 2020.
Maybe our book will help keep that from happening. Or, maybe, if things get really bad, we will need a roadmap out of our predicament. The resolution of our last major inflationary episode, during the early 1980s, was a lot more messy and difficult than it needed to be.
Both Forbes and I are gold standard fans (I wrote three books about it), so naturally we think that the best way to achieve Stable Money is to link the dollar’s value to gold. Most countries today do not have a floating fiat currency policy, but instead link their currencies to an external standard, such as the USD or EUR. They found that their own homegrown central bankers caused more problems than they solved. It’s the same basic idea.
This is politically remote today, but if we end up in a crisis, then we will need solutions quick. There won’t be time for “let me write a book about that and I’ll get back to you in about two years.” Instead, we should establish the blueprints for successful policy, which could be quickly implemented when the time is right, just as the world gold standard was reassembled at Bretton Woods in 1944.