Money, by Steve Forbes

“Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”- John Maynard Keynes

Federal Reserve Chairman Janet Yellen, trying to understand what Steve Forbes is saying.

Steve Forbes’ Money deals with the issue of American monetary policy from the late 20th century onward. Primarily critical of Federal Reserve’s attempted manipulation of the American dollar, Forbes repudiates current economic thought regarding inflation and quantitative easing, while offering his own proposed solution for gradually strengthening the dollar to minimize global impact. By rejecting what he describes “neo-mercantilism”, Forbes calls for a return to the gold standard to anchor the value of the dollar, and an end to currency devaluation as a means to create trade deficits that send false market signals.

Notes: Money, in Forbes’ eyes, facilitates the exchange of information, enterprise, and trade. It also fills an important role in measuring value, creating trust and communicates market signals to producers. Manipulation of the currency corrupts these mechanisms. He rejects the idea that increasing the monetary supply creates wealth- he argues that the human mind is the real source of wealth.

Inflation is not a positive thing. It has a powerful effect are on those with a fixed income, such as pensioners or retirees, whose purchasing power decreases dramatically with consistent inflation. Uses of indexes like the CPI aren’t enough to adjust for inflation, as they’re not tied to good indicators of buying power. Additionally, the way the Federal Reserve creates inflation affects small businesses by inhibiting the willingness of banks to make loans to them, and instead encouraging them to loan to large corporations and government entities.

The international effect of American monetary policy is also important to Forbes. The disruption of stability in the American dollar not only effects other countries by forcing them to adapt exchange rates, but also encourages retaliatory manipulation of currencies. The resulting battle to avoid trade deficits (which Forbes argues are positive) creates an environment where both producers and consumers lose.

Would I recommend this book? Forbes’ book has an interesting proposal for a gradual return to the gold standard, but I believe that I will probably find books that better explain the effects of monetary devaluation. I also disliked that Forbes offers only a cursory rebuttal of alternative arguments- the book seems mainly aimed at people already convinced of his perspective. However, Money does include some useful advice for guarding investments against inflation.

Level of Difficulty? 2. An understanding of basic economics is absolutely necessary, but only a mild comprehension of money and trade.