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January 23, 2011
Has Greenspan gotten religion?
There are certain things you just never expect to hear. Some of them follow:
This last one needs to be removed from the list. Alan Greenspan, according to Tyler Durden, may have just made such an admission:
- Harry Reid and Nancy Pelosi admit that George Bush was correct all along
- John Kerry admits he married for money
- The Pope admits there is no God
- George Bush admits he dodged the draft
- The Supreme Court admits they decide cases based on popular opinion rather than law and insists the Constitution is only a historical artifact
- President Obama admits he is a fraud with no experience or skills other than an ability to read words in a melodious voice
- Paul Krugman admits he has no understanding of economics and his only interest is in getting more Democrats elected
- Alan Greenspan says we probably don't need a central bank
You read that right. After such establishment "luminaries" as World Bank president Robert Zoellick, Warren Buffett's father Howard, Jim Grant, and, most recently, Kansas Fed presidentThomas Hoenig, all voiced their support for a return to a gold standard, the most recent addition to the motley group of contrite voodoo shamans is none other than the man who is singlehandedly responsible for America's addiction to cheap toxic credit, who spawned such destroyers of the middle class as the current Chaircreature, and who currently is the chief advisor in John Paulson's crusade to gobble up every ounce of deliverable physical in the world: former Fed Chairman - Alan Greenspan! In an interview with Fox Business, the man who refuses to go away into that good night: "We have at this particular stage a fiat money which is essentially money printed by a government and it's usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity... There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard." And a further stunner: Greenspan himself wonders if we really need a central bank. Now our only question: why couldn't the maestro speak as clearly and coherently during his tenure which resulted in our current near-terminal financial state. And as a reminder, courtesy of Dylan Grice, if and when we do get a return to a gold standard there would be a need to reindex the monetary base to a real time equivalent price of gold, putting the price of the precious metal at about $6,300: "The US owns nearly 263m troy ounces of gold (the world's biggest holder) while the Fed's monetary base is $1.7 trillion. So the price of gold at which the US dollars would be fully gold-backed is currently around $6,300." And here you have people worried about day trading volatility... Alan Greenspan professed to be a believer in the gold standard before entering politics. He wrote a spirited case for gold back in 1966 appeared in a collection of essays mostly written by Ayn Rand. Mr. Greenspan's contribution was entitled "Gold and Economic Freedom." He concluded his article with the following:
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. In 2007 he also referred to the benefits of gold.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
Mr. Greenspan should just go away. His shtick has worn thin and he is now nothing more than a public nuisance. His behavior at the Fed could not be more in contradiction with his principles (assuming one can determine these to be sincere).
A professed belief in the gold standard shows him to be the consumate political hypocrite that he was. Power overruled principles for Mr. Greenspan just as it does for most who go to Washington..
Monty Pelerin at www.economicnoise.com