Many economists have called the slow 1.5% to 2% GDP growth "the new normal." But Steve Forbes, chairman and editor in chief of Forbes Media, calls it "the new abnormal" and believes a few significant policy changes would turn things around.
Speaking during the Monday General Session of the Truckload Carriers Association's annual convention in Las Vegas, Forbes laid out four reasons our economy is recovering so sluggishly from the Great Recession.
1. Monetary Policy
Forbes said the problem with monetary policy is that "it is the most boring subject in the world," as well as an intimidating subject. That, he said, may be why the Federal Reserve doesn't get as much Congressional scrutiny as it should.
If you see Federal Reserve Chairman Ben Bernanke testifying on Capitol Hill, he said, you can tell most senators and representatives are asking questions prepped for them by their staff, without really understanding the question or the answer.
"They get an answer, bob their head, and go on to the next question." The thinking, he said, must be, "He must be brilliant – I don't understand a word he's saying."
Yet monetary policy is critical to our economy, Forbes said, comparing it to an engine (at least an older non-electronic one) – too little fuel and it stalls out. Too much fuel and it floods.
"What is money?" Forbes asked. "Money simply makes it easy to buy and sell with each other. In the old days we had barter.
"Imagine what your life would be like if Washington did to the clock what it does to the dollar. Imagine if that fluctuated each day, if there were 60 minutes in an hour one day, 48 the next, 96 the next."
Forbes pointed specifically to the Federal Reserve's continued practice of keeping interest rates near zero.
"What the Federal Reserve is doing now by suppressing interest rates is the equivalent of rent control or any other price control," he said. "When a price is suppressed, you get less of the product. Cities with rent control have less housing."
The main beneficiary of a near-zero-percent interest rate, he said, is the federal government, so it helps keep its deficit costs down.
"That's a critical reason why we have this punk economy. You start trashing the value of money, you get less real growth. The blunt truth is, a weak dollar always means a weak recovery."
Forbes predicted a return to the gold standard. Gold certificates like this one from 1922 were used as paper currency in the U.S. from 1882 to 1933.
Forbes predicted that within a few years, the dollar would be relinked to the gold standard.
"More than any other product in the world, gold keeps its intrinsic value. It's like Polaris, the North Star, something you can fix on. We did it for 180 years and it worked pretty well.
"Who would you rather trust? Washington politicians or gold?"
Turning to the tax reforms he promoted during his runs for President in 1996 and 2000, Forbes cited high taxes as his second reason for the lackluster economy. He pointed to the Eurozone, where companies such as Greece are in economic ruin yet keep raising taxes. "5,000 businesses have moved from Greece to Bulgaria, where there's a simple 10% flat tax," he said.