Forbes magazine editor Steve Forbes failed to win the Republican presidential nomination in 1996 and 2000. And his pet big ideas -- a flat tax that would let citizens fill out their income taxes on a post card, individual health savings accounts and market-based Social Security reform -- remain unconsummated dreams of many conservative reformers.
But Forbes, 60, hasn’t lost his optimism, his edge as a sharp economic prognosticator or his capitalist’s disdain for dubious government fiscal and monetary policies -- even when Republicans are practicing them. Forbes writes editorials for each issue of Forbes magazine (circulation: 900,000) and appears often as a guest analyst on CNBC financial shows. I talked to the CEO of Forbes Inc. on Monday, March 10, by phone from New York City.
Q: The stock market seems to fall a percent and half a day. Oil prices just set a new record. The dollar is falling. Inflation is going up. The subprime troubles don’t seem to end. What has suddenly happened to our economy?
A: What’s happened is twofold. One is the weak dollar policy of the Federal Reserve and particularly the Bush administration. I’m a Republican, but I think they have made a grievous mistake here. When you debase your currency -- you print too many dollars -- strange and unpleasant things happen, such as soaring commodity prices. Since 2004 oil, copper, lumber, steel -- they’ve all gone up. The housing market, which was booming, went on steroids. The same thing with a lot of the hedge and equity funds. We’re paying the price for that today.
Then with the credit crisis last summer, what has made that protracted is, first of all, the people don’t know where the bad stuff is. It’s similar to getting a health warning that bags of lettuce are tainted. It may be only a small number, but nobody buys lettuce until they know where the bad stuff is. That’s what’s happening with the subprimes.
But we also have a modern version of a bank panic. Lenders are reluctant to lend, even to solvent customers. The system is frozen up. That’s why even solvent companies in the mortgage business are having a very, very tough time these days. So we have a panic and we have the unknown.
Q: Does all this add up to a recession?