The notion that the U.S. might one day return to the gold standard got a big boost in credibility yesterday when Steve Forbes, founder of the influential business news magazine and Web site, Forbes, predicted the U.S. would revert back to a gold standard in the next five years.

“People know that something is wrong with the dollar,” Forbes told Human Events. “You cannot trash your money without repercussions.”

Forbes offered several justifications as to why he thinks the move is “likely” by 2016. Among them:

• A stronger dollar
• An end to reckless federal spending
• Smaller and less damaging economic booms and busts

Since the U.S. adopted a fiat currency during the 1970s, we’ve almost been conditioned to accept inflation as a fact of life. It hasn’t always been that way, though, and it shouldn’t. In 2008, Representative Ron Paul (sitting Chairman of the Subcommittee on Domestic Monetary Policy) drove this point home when arguing against HR 5512 – a bill that called for alternative metallic content in U.S. pennies and nickels:

“At the time of the penny’s introduction, it actually had some purchasing power,” Rep. Paul said. “Based on the price of gold, what one penny would have purchased in 1909 requires 47 cents today. It is no wonder then that few people nowadays would stoop to pick up any coin smaller than a quarter.”

The value of the dollar has fallen to the point where the metals required for our coinage outstrip the cost to produce those coins. If inflation weren’t endemic, pennies might actually be worth something.

“HR 5512 is a sad commentary on how far we have fallen, not just since the days of the Founders, but only in the last 75 to 100 years,” Rep. Paul continued. “We could not maintain the gold standard nor the silver standard. We could not maintain the copper standard, and now we cannot even maintain the zinc standard. Paper money inevitably breeds inflation and destroys the value of the currency.”

As more and more people realize that current rates of inflation are unsustainable, our country’s leaders will have some tough decisions to make. We can either take the hard medicine we need, and slash government spending while simultaneously raising interest rates, or we can send the fiat dollar to its grave.

Younger Americans probably don’t realize that the fiat dollar was an unprecedented experiment. Forbes drives this point home in his interview with Human Events by pointing out that country successfully ran on the gold standard for 180 years before it was abolished just four decades ago.

Now that experiment has run its course, we’ve seen it’s too difficult to limit spending when there’s nothing in our way but an arbitrary debt ceiling. In such an environment, a return to a gold-backed currency might be the only workable solution. Linking the dollar with an asset that we can’t reproduce on a computer or printing press makes fiscal responsibility not a necessity but an absolute requirement. Forbes understands that, and it looks like the public’s starting to as well.

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