Recent developments suggest the world is inching towards a new gold standard, according to Steve Forbes, Chairman and Editor-in-Chief of Forbes Media.
“It’s hard to believe, but the world is beginning to lurch toward a gold-based monetary system,” Forbes wrote in a May 21 article. He noted that despite the historical gold standard being largely dismissed by economists and financial officials, it had proven effective for a long period.
Forbes emphasized that gold-based money had a successful track record, particularly in the United States, which adhered to a gold standard for 180 years until the early 1970s. “We never had inflation when the dollar’s value was tied to the yellow metal, and the U.S. experienced the greatest long-term economic growth in human history,” he explained.
He contrasted this with the period following the abandonment of the gold standard, during which U.S. average growth rates have declined by approximately 33%. Forbes argued that median household income today would be at least $40,000 higher if the historical growth pattern had continued. “Nonetheless, the contumely and scorn for a gold-based monetary system is universal,” he added.
Despite widespread skepticism, Forbes believes several indicators point towards a potential return to a gold monetary system.
“One indication is that central banks have been purchasing gold at record levels in recent years,” he noted. Key buyers include China, India, Russia, and countries like Poland, driven by growing doubts about the dollar’s long-term value, which reflects concerns over the perceived decline of the United States.
Another sign is the rising popularity of cryptocurrencies, which Forbes describes as “a high-tech cry for help in the face of increasingly unreliable fiat currencies.” He pointed out, however, that most cryptocurrencies, particularly Bitcoin, lack the stable value necessary for commercial transactions and long-term contracts. “A handful of cryptos tethered to gold exist but have yet to achieve widespread credibility or usability. Nonetheless, as governments falter in their monetary policies, this is likely to change,” he predicted.
Forbes also highlighted the concerning trend of runaway public and private debt creation, stating that it “will inevitably kindle crises that cannot be easily extinguished.” Currently, total global debt exceeds $300 trillion, approximately three times the world’s GDP.
He further cited the activities of the BRICS nations, which have been working on de-dollarization initiatives and alternative payment systems. Although these efforts have had limited impact so far, Forbes believes they are gaining momentum.
Additionally, Forbes mentioned India’s recent experiments with gold-backed government bonds. Monetary expert Nathan Lewis noted these bonds could be very popular with global investors, as a gold bond paying 4% would have outperformed all stock and bond markets since the beginning of the floating currency era in 1971.
Forbes also referenced Zimbabwe’s announcement of a new currency fixed to gold. While expressing skepticism about the government’s ability to maintain such an arrangement, he concluded, “The move is a sign of things to come.”
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