An Old Dog Rediscovers an Old Trick: Greenspan on the Gold Standard (Video)
An old dog may not be able to learn new tricks, but he can apparently rediscover those that are long forgotten.
In a recent interview with Bloomberg, former Federal Reserve chairman Alan Greenspan warned of impending inflation.
His prescription?
A return to a gold standard.
Greenspan noted that growth in productivity has ground to a halt in the US. He described the current economic malaise as stagnation. Greenspan pointed out that the money supply measured by M2 is steadily increasing and has tilted up in the last several months. This is a leading indicator of inflation:
The thing that we should be worrying about now, which we have actually given no thought to whatsoever, is that this type of economic environment ends with inflation. Historically fiat money has always ended up that way.”
Of course, all of the mainstream pundits insist there is no inflation. They even argue deflation is the real boogeyman on the horizon. They will almost certainly dismiss Greenspan as old and maybe even getting a touch senile. The interviewer even seemed taken aback by his comments. But the former Fed chair stuck to his guns, saying he didn’t know when inflation would break out, but insisting it is inevitable:
If you look at human history, there are times where we thought that there was no inflation and everything was going fine… The oil prices have had a terrific impact on global inflation and would not be surprised to see the next unexpected move to be on the inflation side. You don’t have it until it happens.”
Greenspan then strayed even further outside the bounds of acceptable opinion, especially for a former head of the world’s most powerful central bank. He suggested a return to sound money:
Now if we went back on the gold standard and we adhered to the actual structure of the gold standard as it exists let’s say, prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the United States, and that was a golden period of the gold standard.”
Silver has also historically held its value in the face of inflation. Download SchiffGold’s Free Report: The Powerful Case For Silver
This isn’t foreign territory for Greenspan. In the years before his elevation to head of the Federal Reserve, he was a strong advocate for sound money. Consider what he said back in the 1960s:
Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim, on some tangible asset…The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.”
Sadly, Greenspan abandoned his principles when he was leading the Fed, and fell right in line with all of the other central planners, enabling government borrowing and inflating bubbles.
Why has Greenspan publicly returned to his sound money roots? Who knows. Maybe at 90 years old he realizes he has nothing to lose. Maybe ego got the best of him when he seized the reins of power and he genuinely thought he could somehow control the economy. Maybe now he’s recognized the error of his ways. Maybe this is his way of doing penance.
But his motives don’t really matter. The important thing is that he’s right. Money needs to rest on a solid, tangible foundation. The current system is nothing but a bunch of IOUs backed up by empty promises. Eventually the house of cards will come tumbling down.
The central bankers and government policymakers will likely never return to a gold standard until their fiat system collapses. But there is nothing stopping you from buying gold and making it a foundational part of your financial planning.
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This brings up several important questions. First of which is, do we, that is the United States, have any gold on hand? Our gold reserves have not been audited for decades and the bookkeeping is very hazy. China and India appear to be the largest accumulators of gold. Given that this is the case, can we Americans afford a gold standard?
Of course gold will always be valuable. It is valuable simply because there is not enough of it to go around. Silver is roughly forty times as common as gold (according to geophysicists) and so it is still pretty valuable and it has the advantage of having substantial industrial demand, but then so does tin and copper.
What are the most numerous of all ancient coins made of? Bronze, or some other alloy of copper. Brass looks too much like gold and it corrodes quickly. Bronze is hard and corrodes slowly. Bronze has been the single most common coinage used by mankind.
Now, what should our standard for the dollar be? I for one, would abolish all legal tender laws along with the Federal Reserve Bank, but I am not the one in charge. If we are to replace the dollar with anything, it should be a copper alloy rather than gold and let the market decide what gold and silver are worth in terms of a standard copper alloy. You do the math.
Re: “Why has Greenspan publicly returned to his sound money roots? Who knows. Maybe at 90 years old he realizes he has nothing to lose. Maybe ego got the best of him when he seized the reins of power and he genuinely thought he could somehow control the economy. Maybe now he’s recognized the error of his ways. Maybe this is his way of doing penance”.
Anyone engaged in “remaining part of the system but gumming it up and turning it against itself in various ways is even more effective and desirable as that hastens the collapse significantly.” could be accused of causing “Countless innocents suffered and … impoverished”, especially if those “innocents” were heavily dependent on government handouts and favors.
Ayn Rand made a point of Francisco exhibiting irresponsible, playboy-like characteristics in order to warn off responsible investors in his family businesses. She also made it clear what kind of people were replacing the responsible investors.
I think that a case could be made that Greenspan warned responsible people that the paper dollar is doomed and that he did indeed “turn it against itself in various ways [which is] even more effective and desirable as that hastens the collapse significantly.”
It amazes me the bias the financial media has against gold…right when Greenspan mentions about the gold standard …just look how the host switches the topic. it would have been great to have had a good 10 minute discussion about gold…never happened. This Bloomberg duo tom and Michael …I find pretty annoying.
In 10 years when the world is on some type of gold derived standard, Greenspan will be heralded as the wise economist who saw the collapse of the dollar and advocated a gold standard long before anyone else did. People will say, Greenspan was a genius, if only he was the Chairman, then the crisis could have been entirely avoided. The hilarity of it all, is that policies enacted under his tenure as Chairman directly created the unlimited credit expansion seen today. Perhaps in the coming months the Fed will seek to expand credit further. But unfailingly all of this unhealthy credit will collapse and bring the currency down with it. Once again, someone else will assume the credit for foretelling the next chapter of the Great American Storybook. Let’s just hope that guys like Peter Schiff make it into the references.
Any standard set by the government, even if it is a gold or silver standard, will be fiat currency. Why? Because the government is about force, not choice. Government arrogates to itself the right to decide what you must value as it sets a standard for a currency of any kind. Legal tender law is a blatant attempt to make you like something that you may or may not want at the point of a gun.
Should we have currency different from the one we have now? Of course we should. The currency we have now is based on less-than-nothing or credit or debt, and that is completely unworkable. Paying off debt becomes a severe deflation and you have a “balance sheet depression” just as we are seeing now. The banks and our Dear Leaders answer to that will be to eliminate all physical forms of money and go completely digital. Who knows where that will lead beyond an inflationary disaster?
So what lies at the root of our current woes? Government doing its desperate best to carry out Article 1 Section 8 Paragraph 5 of the Constitution. Congress will never regulate the value of anything, let alone our currency, simply because it cannot do such a thing. The individual is the valuer of all things, not any elected or appointed official bearing a firearm.
Just because you have a gun does not make you the absolute ruler over anyone. Just because you have gold does not make you an absolute ruler, either. Individuals have their own inherent rights simply by being human beings and place their values on things as they will.
Greenspan is mis-understood. Both ronald reagan & greenspan understood the destructive effect central banks had on economies, yet still they failed to take the necessary steps to dissolve the fed. This was because the fed & central banks were very powerful in their own right. Hence, reagan compromised & appointed greenspan to keep a watchful eye over the fed; as best he could. Greenspan wasn’t a disaster, the existence, purpose and intent of the fed was the disaster. The feds power is going to wane & hopefully we can be rid of central banks for good.
Alan Greenspan is the Master of Obfuscation…… Originally he was a disciple of Ayn Rand and Ludwig von Mises, both of which advocated Individualism and minimum government intervention, then later he switched his allegiance to Ronnie Reagun during the 1980’s and 1990’s, at a time that required monetary discipline, and turned on the money spigots . Now, this latest switch of his to return to the Gold Standard seems hypocritical to me, some kind of a ‘save face – lose ass’ trick of his to save his reputation…….. Just look at the charts, it’s all in the numbers. We’ve now got the lowest interest rates in 5000 years……..
So a bright young economist espouses the gold standard. He gets appointed chairman of the federal reserve, where he subsequently completely abandons the gold standard philosophy. Then he retires, and returns to espousing the gold standard. Kind of makes you wonder just how independent the federal reserve really is doesn’t it? Makes it seem as though it’s chairman is required to follow someone else’s dictates while he is chairman doesn’t it? BIS anyone?
NOTE Greenspan did not hear the question correctly and then talked about the Gold Standard, AFTER he was done his truth telling statement, the group took a break and OUTFITTED EVERYONE WITH HEADSETS so he would hear clearly as well as others might be able to better control the conversation…???