Greenspan sees the writing on the wall The “Undertaker” has endorsed a return to the gold standard to resolve the coming currency crisis. Dear John,
First they ignore you…then they laugh at you. Advocates for sound money, the gold bugs, have been relegated to the fringes of discourse in recent decades, but no one is laughing at them now.
The failure of the European Union and its troubled currency, underlined by the United Kingdom’s sayonara, has witnessed a flood of interest in gold. Brexit’s wake has ushered in year-long highs, detailed play by play in our latest Gold Newsletter.
As I write this, Kitco.com shows today’s top trades at $1342.30 on the New York Spot gold price, up from the $1,150 of a year ago. But there are dire rumblings for the central bank on this side of the Atlantic as well.
It is no secret to readers of Golden Opportunities that the Great Recession never went away, and the US economy is stuck in a “new normal” of minimal growth and perilously low labor-force participation. Further, almost a decade of near-zero interest rates and trillion-dollar deficits from the federal government have inflated a bubble even larger than the previous one.
As Peter Schiff of Euro Pacific Capital says, this bubble is of government itself — and it is just waiting to pop. Few have wanted to listen to this doomsday talk, especially not those campaigning for election on promises they cannot keep. But more and more the severe ramifications of combined fiscal and monetary irresponsibility are garnering traction.
At this point, I must tip my hat to the Cato Institute. This overtly libertarian think tank has done the grunt work and pointed out the shortcomings of “today’s centralized, bureaucratic, and discretionary monetary and financial-regulatory systems.” Perhaps even more important, their Troubled Currencies Project has shown where the road leads for monetary mismanagement. They have been at the forefront of documenting high inflation, even periods of hyperinflation, in Venezuela and elsewhere across the globe.
Yes, Hugo Chávez’s legacy is a socialist basket case, which has well and truly collapsed at this point, but you can’t question his ability to print money. He and his successor Nicolás Maduro have the distinction of the world’s highest inflation rate, in a class of their own in this decade.
For too long, the free-banking economists at Cato and elsewhere appear to have been whistling in the wind, and the plights of places like Venezuela — the nation without toilet paper — have been brushed aside as comic news relief. That is changing.
Ayn Rand’s student shows his roots. There is a man without peer when it comes to both understanding and working with the Federal Reserve System, the central bank or banking cartel of the United States. A past speaker at the New Orleans Investment Conference, he was the longest serving chairman of the Fed’s board of governors.
When he talks, it matters, and no one call him an outsider or wannabe. Nicknamed “the Undertaker” by Ayn Rand, for his dark clothing and demeanor, that man is 90-year-old Alan Greenspan.
In a post-Brexit interview on June 28 with Bloomberg News, Greenspan let loose on what he described as an inevitable debt crisis and the unsustainable nature of fiat currencies. He did not forecast higher interest rates, but he pointed the finger at entitlement spending. He even hinted at hyperinflation and foresaw a position of seemingly no resolution, also known as stagflation: high unemployment, weak growth, and high inflation. But here is the kicker. What oh what shall we do? Going against all the so-called wisdom on the matter, Greenspan said it was time to return to the gold standard. “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…we’d be fine.”
Some have called this a flip-flop, but in fact it is more of a return to his objectivist, free-market roots. As if possessed by former Congressman Ron Paul, Greenspan even became an economic historian and reminisced the pre-1913 era. “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.” A new era of gold legitimacy? When my late friend Jim Blanchard took up the banner of private gold ownership more than 40 years ago, he was the butt of jokes. But eventually he turned the tables, embarrassed his detractors, and won that right for Americans.
Let’s not kid ourselves that a gold standard for the Fed is just around the corner. Any such change takes many steps and a growing groundswell of popular support, catalyzed by the failure of the status quo. Further, a gold standard in the modern era could take on many forms, such as the HayekGold digital currency promoted by Jim’s son, Anthem.
That being said, pressure is building, and the veneer of legitimacy over the Fed’s centralized bureaucracy is rapidly eroding, with gold being the chief beneficiary and counterbalance. The Brexit success and rejection of centralized governance took decades to achieve, and it will likely take a similar period to work towards and undo the harm done by the Fed.
The good news is that Greenspan’s shoot-from-the-hip observations and recommendations point to a growing openness towards alternatives. The Overton window of acceptable discourse has widened, and “Amexit,” Senator Thomas Massie’s (R-KY) push to get the United States out of funding the United Nations, is just one such manifestation of the new discourse.
This leaves more space for advocates of the gold standard, as they merit. With solid economics on their side, this momentum will build, and I for one look forward to following and profiting from it. All the best,
Brien Lundin
Publisher, Gold Newsletter
CEO, the New Orleans Investment Conference |
