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Steve Forbes: The Fed's "trashing the US dollar"

The chief executive of Forbes Inc. railed on CBS' "The Early Show" Thursday against policies adopted by the Federal Reserve to try and stabilize the economy, saying the central bank "has got to stop trashing the U.S. dollar" and that its strategy will "hurt" private investment in the United States.

Steve Forbes spoke to CBS News correspondent Rebecca Jarvis as Wall Street prepared for the fourth day of trading since Standard & Poor's downgraded the status of long-term U.S. debt from its highest AAA rating to AA+. The Fed reacted Tuesday with an announcement that its key interest rate will likely remain near zero through mid-2013, which would keep it at "exceptionally low" levels for a total of nearly five years.

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The Dow Jones Industrial Average has reacted wildly to the downgrade, the Fed's announcement and increasing financial worries in Europe. Forbes told Jarvis that Wall Street's reaction isn't living up to some comparisons made in the media to the crash that happened in the fall of 2008.

"It's not 2008, but it's still a short-term serious crisis," said Forbes. "There's very real concern about the value of the dollar. Fed's made it clear it's going to knock it down again. That's going to hurt private investment in this country."

For nearly three years, the Fed has kept its funds rate at zero to 0.25 percent in an effort to make credit cheap so people can buy a home and businesses can borrow money. The central bank has also carried out two programs to buy government debt, completing a $600 billion bond-buying program at the end of June.

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Forbes dismissed the idea that changing the Fed's course would inflict pain on an already weakened economy.

"We're going through the pain now with the unemployment that we have, the lack of fundamental investing we're having in this country to get a real recovery," Forbes told Jarvis. "Small businesses aren't playing the role they should. So, in terms of strengthening the dollar, it doesn't mean interest rates soar. What it means is you stop subsidizing government debt, stop subsidizing debt for big companies and allow a flow of capital again to small businesses and the people to get an economy moving, so it would have the opposite effect."

Forbes expressed confidence that the economy will strengthen, and he hoped that the coming negotiations between Democrats and Republicans in Washington on the federal budget will produce results.

"We must reform our convoluted tax code, and I'll give you one prediction that will sound astonishing today," Forbes told Jarvis. "Because of what the Fed has done to the dollar I think in the next few years you're going to see something happen that hasn't happened since the 1970s and that is a relinking of the dollar to gold. Big things are starting to happen, starts small and then it's going to get big. In a few years this nightmare will be behind us."

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