"The Definition of Insanity"

Steve Forbes to Newsmax: Obama, Bernanke Must Go

Wednesday, 31 Aug 2011 06:03 PM
By Jim Meyers and Kathleen Walter


Former presidential candidate and Forbes magazine editor Steve Forbes tells Newsmax that President Obama’s planned economic reforms are “the definition of insanity” — repeating failed policies in the hopes that somehow they will become successful.

In a wide-ranging exclusive interview, Forbes also declares that Federal Reserve Chairman Ben Bernanke should have resigned a long time ago, says Obama will be a one-term president, and looks for significant and positive reforms in Washington after the 2012 elections.

He also predicts the United States will make an “astonishing” move and return to a gold standard in the next five years, and says he’s “very impressed” with Gov. Rick Perry and is leaning toward supporting him for the GOP presidential nomination.



Forbes is also CEO and president of Forbes Inc. He ran unsuccessfully for the Republic presidential nomination in 1996 and again in 2000.

He told Newsmax his view of the Federal Reserve in San Francisco’s recent predication of a bear market through 2020 and depressed equity values until 2030.

“It’s what you would call rear-view mirror investing — taking the recent past and extrapolating it into the future,” Forbes says.

“The ancestors of the San Francisco Fed probably did the same thing in 1980 when you could have painted an equally bleak picture of the U.S. economy.

“The U.S. economic reforms are starting to be made. Because we have a divided government in Washington you can’t make as much progress as we’d like. But I think after the 2012 elections there’ll be significant reforms, just as we saw in the early 1980s.

“I think what you’re seeing in some of the states — such as New Jersey where even with a divided government the Democratic legislature approved a budget that was less than the year before — the country realizes it cannot continue on its current course.”

President Obama’s approval ratings have been hitting new lows, but he insists he inherited a mess from the Bush administration. Forbes isn’t buying that.

“Every president inherits what went on before, but I don’t remember Abraham Lincoln whining that James Buchanan left him a great big mess when he took office in March of 1861,” he says.

“You’re supposed to deal with it. You voluntarily took on the job.
“And I think the evidence is very clear that the president’s policies have made the situation worse, not better. The blowout in spending — where does the money come from? It comes from taxpayers one way or another. Obamacare — he passed that. Dodd-Frank — he pushed that. The weakening of the dollar — it started under the previous administration, but he’s made it much worse.

“So whether it’s the dollar, spending, refusing to do serious things in reforming the tax code or entitlements, that ball is very much in his court.”
Obama is poised to release a jobs plan that is expected to include proposals for extending the payroll tax cut and jobless benefits, spending money for new construction projects, and offering incentives to hire new workers.

Forbes offers his take on the plan: “What you see here is the definition of insanity — something does not work, you keep trying it and hoping that somehow it will work. Doing more government spending, doing more stimulus under another name, is not going to help getting this economy back on track again because again the government is in the driver’s seat.

“Extending unemployment benefits does not stimulate the economy. A payroll tax cut, because it’s temporary, does not encourage real spending or investment and the creation of new resources. Bottom line: more of the same. He doesn’t get it, which is why he’ll be a one-term president.”

Asked how Obama can jumpstart the economy, Forbes responds: “The president has to be serious about negotiating. He says he wants to deal, but it’s always on his terms.

“In terms of what he can do right away to help the economy, he could stop trashing the U.S. dollar and make the dollar as good as gold. That would go a long way toward attracting foreign capital, which is now leaving this country. He can stop the binge spending. There are a lot of things he can do but I don’t think he’s going to do them.”

Forbes is highly critical of Federal Reserve Chairman Ben Bernanke, who has said any rise inflation is transitory.

“Well, life is transitory,” Forbes observes. “What he’s doing in terms of manipulating the interest rate market is simply another form of price controls. That doesn’t work for very long. What he’s done with interest rate policy is subsidize government debt and discourage lending to small businesses. It’s distorted the market. He’s doing more harm than good. I wish he’d gone to Martha’s Vineyard with the president and stayed there.

“If Ben Bernanke was judged on how well he’s done his job, he would have resigned a long time ago. But in Washington, [be] a failure and you move upward.”

The Congressional Budget Office warns that the dollar will weaken over the next decade and possibly lose its status as the world’s reserve currency.

“If you continue to trash your currency and make it very plain you want it to weaken, as both our Treasury Department and Ben Bernanke are doing, yes, it will continue to lose value and the U.S. economy will remain relatively stagnant,” Forbes states.

“But I think in 2013 you’re going to see a new regime in Washington, and you’re also going to see in the next five years something that sounds astonishing today, and that is for the first time since the 1970s the dollar will be relinked to gold.

“We will return to a gold standard. It will be a modernized version of it, but in essence it will be the basic principle that the dollar will remain constant with gold.”

Asked how high the price of gold might go, Forbes responds: “Keep in the mind the real value of gold remains constant. What you see now is fears about the future.

“If Ben Bernanke were to announce today that the dollar will be as good as gold and he would work toward it, you might see a reduction in the gold price because there’s a lot of future devaluation priced into the price of gold.

“People see that Bernanke wants to trash [the dollar] so they don’t wait for it to happen, they start hedging right away. So it’s in Ben Bernanke’s hands. He could send it to $18,000 an ounce. I don’t think he’s going to have the opportunity to do so.

“In terms of investing in gold, of using it as a small part of your portfolio as an insurance hedge, be extremely careful. This dollar weakening policy is not going to continue, certainly not after 2012.”

Regarding Alan Krueger, the new director of the White House Council of Economic Advisers, Forbes comments: “For the most part Doctor Krueger is very much on the same song sheet as Obama. They both believe in the Value Added Tax, both believe in a higher minimum wage, which destroys jobs, and so they should get along very nicely.”

The Obama administration supports plans to refinance existing underwater Fannie Mae and Freddie Mac loans with new mortgages at low rates. That would be ineffective, Forbes tells Newsmax.

“The government should keep in mind what doctors are taught: First, don’t harm the patient. In this case they are harming the housing market. The market would have cleared by now. People would have started buying again, but instead they’ve clogged the arteries.

“What you get today is not many new mortgages but the refinancing of existing mortgages. There are a lot of people out there who should have never bought a house. Clear the decks, let them start putting their lives together again and stop pretending that they can afford what they can’t afford.

“We need one and a half million new houses a year in a normal economy because of wear and tear and population increase. So if the administration would let the markets clear, you would start to see in a couple of years these inventories would be gone — people know there are a lot of bargains out there — and you would see home building pick up seriously again.

Surveying the GOP presidential field for 2012, Forbes says: “Rick Perry, the governor of Texas, is now the front-runner. He’s had a good record even though liberals are now trying to trash it, along with perhaps some of his GOP opponents.

“But he did some very good things in reforming their personal injury liability system, very very positive reforms. He encouraged energy production instead of states like California that discourage it, and refused to put in a state income tax. So in the great scheme of things that’s a pretty solid record to run on. So he is the front-runner.

“Mitt Romney has a huge albatross. It’s called Romneycare, which was a miniature version of Obamacare. Maybe they weren’t twins but they certainly were first cousins in the sense of mandating what insurers can and cannot do, putting in mandatory insurance. I think that is eventually going to torpedo his candidacy.

“Michele Bachmann has demonstrated that she is a forceful advocate for good principles. The question she has to answer now and overcome is, can she be president of the United States, can she have the executive skills to do it? What she has to overcome is what you might call an executive credibility factor. If she does overcome that she could win the nomination.

“Ron Paul I think should be running for chairman of the Fed. That would be a short-lived job because he would radically overhaul the Federal Reserve if not send it off riding to the horizon.

“In terms of his foreign policy, I have very serious disagreements. But in terms of monetary policy, he has it exactly right. The Fed has been trashing the dollar and has not been called to account for it.”

Asked who Forbes is likely to endorse, he says: “I’m looking over the whole field now. I’m very impressed with Governor Perry, so that’s where the wind’s blowing in my little world. I’ll be making a decision soon.

“Maybe one or two other candidates might come in during the next couple of weeks, but I’ve certainly been impressed by what Governor Perry did. Perhaps he gets over-exuberant in what he says about the Federal Reserve, but he is right. The Fed has a lot to answer for.”