The United States will return to a gold standard of some sort after the 2012 presidential elections because current economic policies that weaken the dollar in hopes of fueling economic growth can’t last forever, says publisher and former Republican presidential hopeful Steve Forbes.
"We will return to a gold standard. It will be a modernized version of it but in essence, it'll be the basic principle that the dollar will remain constant with gold," Forbes tells Newsmax.TV in an exclusive interview.
The U.S. abandoned the gold standard, which bases the value of the dollar to gold, in the Nixon administration in the early 1970s.
Today, currencies are valued in relation to one another, normally set by foreign exchange rates.
However, since the U.S. dollar serves as the world's reserve currency, which means other countries use it for stockpiling reserves, to trade with one another or to buy and sell goods in global capital markets, the U.S. Federal Reserve enjoys the luxury of printing as much money as it wants in order to tinker with its economy as it sees fit.
The downside of such loose monetary policies includes higher inflation rates and a weaker dollar, and some say the United States should return to a gold standard in hopes of forcing the government to live within its means even if it means sacrificing the flexibility that comes from being home to the world's reserve currency.
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."
Fed Chairman Ben Bernanke has been criticized for weakening the dollar and pressuring inflation rates upward via loose monetary policies while the benefits they were supposed to generate — more growth and employment — failed to materialize of any measure.