The U.S. recovery has been largely artificial in nature, the product of Federal Reserve meddling that is actually preventing the country from achieving lasting economic growth, economist and author Mark Skousen tells Newsmax.TV in an exclusive interview.

Since the downturn, the Federal Reserve has done all it can to juice recovery.

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On top of cutting interest rates to near zero, the Fed has rolled out two rounds of bond buybacks, officially known as quantitative easing (QE), with the aim of spurring recovery.

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QE1 saw the Fed buy $1.7 trillion in assets from banks, mainly mortgage securities, while QE2 saw the central bank snap up $600 billion of Treasury bonds, the latter of which wrapped up on June 30, 2011.

The move, also called balance-sheet expansion, aims to push long-term interest rates lower and encourage investment and hiring.

After QE2, the Fed announced a policy of selling short-term government bonds and buying longer-term debt in tandem to further ensure long-term interest rates stay low, a move dubbed Operation Twist by the markets since it twists the numbers around on the yield curve.

In reality, it's all just printing money out of thin air or temporarily propping up the economy, and it's definitely not the right medicine for the economy even though more such policies are likely on the way, says Skousen, a columnist for Franklin Prosperity Report, published by Newsmax.

"You are actually going to see another quantitative easing. There seems to be a little bit of panic in the air, certainly if Europe deteriorates you could see another QE," Skousen says.

"You have to understand that this easy money policy is all creating an artificial stimulus to the economy. Much of the recovery is artificial, not entirely, but much of it is artificial," says Skousen, who edits the investment newsletter Forecasts & Strategies.

What the country really needs is to cut spending and taxes via belt-tightening measures.

While painful and politically unpopular, austerity will make life better on the other side.

"Everybody must adopt austerity, the United States is going to have to do it no matter who wins in November. Austerity is the name of the game," says Skousen, author and editor of “Maxims of Wall Street: A Compendium of Financial Adages, Ancient Proverbs, and Worldly Wisdom.”

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Less regulations such as those outlined under the Dodd-Frank financial reform law, among others, would help as well.

"All we need is less regulation — getting rid of the minimum wage laws, all of these regulations that are restricting work and taxing businesses that are keeping them from hiring," Skousen says.

"There's a lots of things that could be done there but I don't think that anything is going to be done at this point so we are going to have a stagnating labor market until we get someone who has real leadership in creating the flexible job market that we need."

In its latest jobs report, the Bureau of Labor Statistics reported the country added a net 69,000 nonfarm payrolls to the economy in May.

By comparison, January and February added 275,000 and 259,000 net jobs, respectively.

Meanwhile, the country's gross domestic product grew a lackluster 1.9 percent in the first quarter of this year, down from an initial estimate of 2.2 percent, according to official data.

The U.S., meanwhile, should look to Eastern European countries as a model, some of whom are performing well today thanks to past austerity measures and tax cuts.

"Eastern Europe has done the right thing, especially Estonia, Poland as well. Poland was actually the only country in the 2008 crisis that saw economic growth continue," Skousen says.

"Estonia has adopted a very severe austerity program over the last few years. They cut government spending, they laid off government workers, they cut their salaries. It was a very difficult period, but now Estonia is growing at a 6-7 percent growth rate and doing very well. Their currency is very strong. So Estonia is an example of how austerity works."

Meanwhile in the U.S., tax cuts are set to expire at the end of this year at the same time automatic spending cuts are set to kick in, a combination known widely as a fiscal cliff that could siphon hundreds of billions out of the economy and send the country right back into recession.

That's not likely going to happen, Skousen says.

Going over the fiscal cliff would be so detrimental that politicians will likely put their differences aside and deal with the timing of tax and spending cuts.

"These people want to get reelected and they are not going to want to raise taxes dramatically or cut off government spending," Skousen says.

"The tax cuts need to be extended, and in fact, we need to move toward a flat tax, a very simple tax system in this country if we really want out standing economic progress," said Skousen, also the founder and producer of FreedomFest, an annual non-partisan festival of libertarians.

FreedomFest approaches

Skousen is set to host FreedomFest, an annual festival where free minds meet to celebrate “great books, great ideas, and great thinkers” in an open-minded society.

The festival this year will take place in Las Vegas, Nevada, from July 11-14.

"FreedomFest is the world's largest gathering of free minds — the best and the brightest," Skousen says

Expect over 100 speakers this year, all of whom will address urgent matters facing the nation.

"We are doing an emergency session because of the serious nature of these crises. We have Steve Forbes, we have John Mackey of Whole Food Markets, we have Steve Moore of the Wall Street Journal, Senator Rand Paul is going to be there. Newsmax will be there. Cato, Heritage, Reason — all of the major think thanks will be there"

For more information, visit www.freedomfest.com

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