The Reinvention of Alan Greenspan

Former chairman calls Fed balance sheet a tinder box, endorses private gold ownership

ByMichael J. Kosares

During the time Alan Greenspan and representative Ron Paul had their famous series of exchanges (some might have labeled them confrontations) during Congressional hearings from 1997 to 2005, the congressman made what turns out to have been a prescient observation. "My questions," he said, "are always on the same subject. If I don't bring up the issue of hard money versus fiat money, Greenspan himself does." I say "prescient observation" because here we are a decade or more later and the "new" post-Fed Greenspan sounds very much like the "old" pre-Fed Greenspan-the one who consistently advocated gold before he became Fed chairman.

Greenspan has always come across as a conflicted figure forced to reconcile his responsibilities as chairman of the Federal Reservethe epicenter of the fiat money universewith a "nostalgia," as he put it, for the gold standard, its diametric opposite. As such, I always saw him as torn between the twothe devil on one shoulder and an angel on the other.

Outside those memorable proddings by Congressman Paul, Greenspan rarely spoke publicly about the virtues of gold while Fed chairman, and when he did his approach seemed guarded. Even in the years following his tenure, he rarely broached the subject. In recent months though, as you are about to read, the gloves have come-off not just with respect to gold but with the dangers inherent to the fiat monetary system as well.

The reinvention of Alan Greenspan

Part one - an article in Foreign Affairs magazine

Greenspan's reinvention began with a surprising defense of gold in the October issue of Foreign Affairs magazine. In that article, titled "Golden Rule: Why Bejing Is Buying," he reminds top level policy makers of gold's role as a national asset of last resort. "If, in the words of the British economist John Maynard Keynes," he says, "gold were a 'barbarous relic,' central banks around the world would not have so much of an asset whose rate of return, including storage costs, is negative. . .Gold has special properties that no other currency, with the possible exception of silver, can claim."

So why is Bejing buying gold?

"If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold," he says, "the country's currency could take on unexpected strength in today's international financial system. It would be a gamble, of course, for China to use part of its reserves to buy enough gold bullion to displace the United States from its position as the world's largest holder of monetary gold. But the penalty for being wrong, in terms of lost interest and the cost of storage, would be modest."

Read the original:
The Reinvention of Alan Greenspan