Steve Forbes was on the Dennis Miller radio show last night promoting his new book about the dollar. Based on his comments to Mr. Miller, the book proposes something conceptually similar to John Taylor’s “rule-based” Fed, i.e. pegging the US dollar to gold at (say) $1200 per ounce. If gold rises to $1300, the Fed decreases the supply of dollars. It it falls to $1100, the Fed inflates.
This Forbes review of the book takes a shot at the Austrian view of “good” money, stressing that money should be understood only as a measure of value for exchange purposes. But even if one holds that view, it’s hard to get past the distortions central banks cause– rule-based or not. If the critical role of money is to convey information via prices, is this not an argument for eliminating any chance of misinformation caused by a middleman?
And what of the inherent and insatiable appetite of the political class for monetary inflation to buy votes (while leaving the ravages of debasement for future voters)? Can a central bank ever truly operate independent of pressure from politicians and politically-connected elites? Who enforces the new peg, and can it be suspended for “emergencies”? These are questions for Mr. Forbes that our David Gordon surely will address in his upcoming book review.
Mr. Forbes has been reasonably respectful toward Ron Paul, e.g. reviewing (favorably) Dr. Paul’s End the Fed. Forbes should be commended for bringing this issue to the forefront, and for his willingness to criticize the cronyist element of the Fed. I only wish he (and other conservatives) had been been a little more vocal back when Greenspan was making us all rich, and Dr. Paul was a lonely voice in the wilderness.