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Discussion > Greenspan And Gold

Alan Greenspan was a solid supporter of gold and the gold standard early in his career.

However his speech and behavior during his tenure at the Federal Reserve was certainly not one of a gold advocate. His easy money policies started us down the road we are on now. Continued by Ben Bernanke, and now Janet Yellen, Fed policy has America, and the world, in a hole of debt from which it cannot easily recover.

Which is why I found it fascinating, and noteworthy, that Mr. Greenspan recently posted an article on, a website of the Council on Foreign Relations, discussing China's preoccupation with gold

saying the following.


The broader issue -- a return to the gold standard in any form -- is nowhere on anybody’s horizon. It has few supporters in today’s virtually universal embrace of fiat currencies and floating exchange rates. Yet gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close. Today, the acceptance of fiat money -- currency not backed by an asset of intrinsic value -- rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.

If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute. Of the 30 advanced countries that report to the International Monetary Fund, only four hold no gold as part of their reserve balances. Indeed, at market prices, the gold held by the central banks of developed economies was worth $762 billion as of December 31, 2013, comprising 10.3 percent of their overall reserve balances. (The IMF held an additional $117 billion.) If, in the words of the British economist John Maynard Keynes, 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.


If Mr. Greenspan, and the CFR itself, is actually beginning to highlight the importance of governments holding gold, then perhaps the seemingly endless fiat money printing of our time is truly approaching its end-of-life.

We shall see.

October 5, 2014 | Registered CommenterJim