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Trickle-down economics

During the town hall, the GOP candidate expressed his belief in trickle-down economics so long as it’s “driven by gains in the real economy.”

Trickle-down economics is a theory that states tax breaks and benefits for the nation’s wealthy — in this case, the 1% — stimulates economic growth, the benefits of which eventually trickle down through society to improve everybody’s well-being. This might include the creation of jobs and higher wages for all U.S. workers.

But Ramaswamy, a 38-year-old biotech entrepreneur, says the Fed has been tamping down wage growth “like a game of whack-a-mole for the last 25 years” in an effort to tackle inflation — which he says the Fed is responsible for by printing too much money.

Trickle-down economics “doesn’t work when it’s created by artificial paper wealth generated by Fed Reserve policies,” he added.

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Stabilize the dollar

As a successful businessman, Ramaswamy believes the U.S. needs a CEO in the White House — one that can apply “basic economic common sense,” which he said starts with “reform” of the Fed.

His one single mandate for the central bank would be to “stabilize the dollar as a stable unit of measurement,” and he would achieve this by pegging the dollar to a commodity, such as gold.

The U.S. employed the gold standard monetary system — where the dollar’s value was directly linked to gold — from the passing of the Gold Standard Act of 1900 through 1933. It then took nearly 40 years to abandon all remnants of the gold standard system in the U.S. economy.

The appeal of the gold standard system is that it controls the issuance of money (by tying currency to the physical quantity of gold), which helps to prevent inflation and to promote a stable economy.

“That ties the hands of our government [and] that’s a good thing,” Ramaswamy said. “When the dollar is stable, that’s when you actually help the bottom 99% in this country. That’s how you see real wage growth.”

The GOP candidate justified his calls for central bank reform with the following economic summary: “Prices are going up. Interest rates, including mortgage rates to buy your home, are going up. But wages have remained flat.”

He added: “I’m a realist. I’m not going to tell you the American Dream is alive and well right now. It’s not. It’s alive and hanging on for life support.”

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About the Author

Bethan Moorcraft

Bethan Moorcraft

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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