Greenspan and Gold

[craigr]

I think some us know that Greenspan likes the gold standard deep down:

http://www.nysun.com/editorials/greensp ... old/87080/

Alan Greenspan spoke at the Council on Foreign Relations earlier today, and what was his advice? That central bankers should be doing what these columns, among others, have been rattling on about, namely that they should be paying attention to gold. “Fiat money has no place to go but gold,”? the former Fed chairman said at the Council, according to economist David Malpass, who quotes Mr. Greenspan in one of Mr. Malpass’ emails on the political economy. Mr. Malpass writes that the former chairman of the Federal Reserve’s board of governors was responding to a question in respect of why gold was hitting new highs.

Mr. Greenspan replied that he’d thought a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities “simply don’t pan out,”? as Mr. Malpass characterized Mr. Greenspan. “He’d concluded that gold is simply different,”? Mr. Malpass wrote. At one point Mr. Greenspan spoke of how, during World War II, the Allies going into North Africa found gold was insisted on in the payment of bribes.* Said the former Fed chairman: “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”?

Gold is definitely not a standard commodity no matter what people may claim. It's a very old and entrenched form of wealth used throughout human history.

Now how this relates to future prices, I don't know. But clearly the markets are anticipating some bad things for the dollar.

[MediumTex]

Greenspan is a hard nut to crack.  It's strange that he seems to have a subtle understanding of gold, and yet seems to have almost no appreciation for the problems associated with artifically low interest rates set by a central bank.

[Wonk]

I'm really conflicted as well on Mr. Greenspan.  I find it very hard to reconcile that a passionate supporter of Ayn Rand and the gold standard would do a 180 virtually overnight and lead the very system he despised.  There are conspiracy theories that he knew exactly what he was doing and that he and some others of the same mind worked for the destruction of central banking from the inside.  Sort of like a mad scientist letting a dangerous machine self destruct before it falls into the wrong hands.  Others write it off as just another example of power and greed corrupting a young and talented mind.

Either way, at this point it would be impossible to know what the truth is...but it makes for a heckuva story.