Countries across the globe are facing high inflation as global macroeconomic conditions are pushing inflationary pressures and governments have forgotten the “real cure” for stopping inflation, according to Steve Forbes, Chairman and Editor-in-Chief of Forbes Media. The central banks and governments are focusing too much on bringing down inflation by hiking interest rates, ignoring the importance of stabilising the currency, according to Forbes.
“No central banker today — hardly any — talks about stable currencies. It’s about depressing the economy to fight inflation,” the 75-year-old said at the Forbes Global CEO Conference in Singapore, CNBC reported.
Adding that the economists and policymakers are sticking to the “dogma” of targeting inflation by removing excess liquidity through hiking key interest rates, Forbes said they were overlooking other steps. The US media baron had previously run as a Republican Party presidential candidate with the platform of flat tax rates in the country.
“Today, unfortunately, not only is the Biden administration putting up obstacles to deal with supply-side problems, but also the Federal Reserve and other central banks think you have to depress the economy to bring inflation down,” he said.
Forbes brought up the example of the 1980s, when the Fed had brought up interest rates to an unprecedented 20 percent under the former chair Paul Volcker. Instead of depressing the economy, US President Ronald Reagan had instead boosted the economy by cutting taxes and introducing deregulation.
Stating that inflation doesn’t necessarily have to be countered through a countervailing recessionary period, Forbes argued that raising interest rates artificially cools down the economy, which results in jobs being lost.
“The real cure is to stabilise the currency. You don’t have to make people poor to conquer inflation,” he added.
With rising interest rates, the value of the US dollar has been rising against other currency pairs. The dollar has risen by 10.4 percent against the rupee over the previous year. Forbes suggests that fixing currencies to gold could help stabilise currencies.
