Destructive fiscal practices that debase the value of the U.S. dollar and slow economic growth have both domestic and foreign policy implications that call out for "Reaganesque" solutions Steve Forbes, editor-in-chief of Forbes Magazine, explained during an interview at Regent University in Virginia Beach, Va.
This connection between economically destructive practices on the home front and geopolitical tensions abroad has gone missing from most U.S. media outlets reaching back to beginning of the year, a Nexis search shows.
Only 63 results were produced from a search on news reports that mentioned the weak dollar in connection with Venezuela, Iran and Russia and many of these were from outside the U.S. Publications in Ireland, England and France have focused some attention on the connection between a weak dollar at home and hostile activities abroad, while U.S. news services, with the exception of Forbes Magazine, have largely overlooked this connection.
With an eye toward history Forbes warned against allowing the dollar to continue its slide against other currencies and argued against raising taxes in the midst of a recessionary climate. The Great Depression of the 1930s and the "wild inflation" of the 1970s weakened America's posture in the world and emboldened malevolent powers, he observed.
Likewise, the weakening of the American dollar has geopolitical consequences today that extend beyond the specter of rising unemployment at home, Forbes warned. Belligerent states like Iran, Venezeula and Russia are now getting "windfall revenues" for their oil connected with the devalued U.S. currency, he observed.
"The Nazis never would have come to power in Germany if it hadn't been for the Depression, which led to a second world war," Forbes said. "In the 1970s when we had wild inflation America looked weak and we withdrew from the world and the communist took over in Nicaragua, the mullahs took over in Iran. And you can see this same pattern starting again."
Fortunately, President Ronald Reagan reversed course in 1981 and reasserted American primacy in the world by way of "massive tax cuts" that recharged the economy and an across the board military buildup that brought victory in the Cold War over the Soviet Union, Forbes told CNSNews.com.
A "Reaganesque approach" is needed once again to address festering dangers in Latin America and throughout the world, he argued.
On the domestic side of the ledger Forbes said the current financial crisis can be directly traced to flawed policies in Washington D.C. that were easily avoidable. He criticized the Federal Reserve for printing excess money that in turn weakened the dollar. Forbes also identified "market to market" accounting practices that compelled banks and insurance companies to mark down the value of assets for which no market existed creating artificial losses.
At the same time, the Securities and Exchange Commission (SEC) failed to enforced rules against short-selling that allowed for stock prices to be "pounded," he said.
With regard to Fannie Mae and Freddie Mac both institutions were complicit in creating a mammoth housing bubble by way of buying up too many sub prime mortgages, Forbes explained.
Putting all of these factors together created "a perfect storm" that made the recent bailout necessary as an emergency measure, he argued. The influx of new equity was needed to spur lending from banks that had seen their balance sheets "destroyed," he pointed out.
"Already real damage has been done to our economy and around the world," Forbes said. "We are in a recession. We will be in one for the next six months or more. But if we continue with these recovery programs and don't do anything foolish like raising taxes or going on another round of trashing the dollar by Spring we should start to see signs of recovery."
Forbes was on hand at Regent University to take part in debate entitled "Clash of the Titans: Which Party is Best Suited to Lead America?" He teamed up with former Arkansas Governor Mike Huckabee and former Pennsylvania U.S. Senator Rick Santorum to argue on behalf of the Republicans.
The opposing side was represented by Geraldine Ferraro, a former congresswoman from New York, who was the party's vice-presidential nominee in 1984, Donna Brazile, the campaign manager for Gore-Lieberman ticket in 2000 and Alan Colmes of Fox News.