Greenspan on Gold:
Three Stages by Gary North | December
"When our friends
get elected, they aren't our friends any more." --
M. Stanton Evans
My deceased friend Stan Evans became deservedly
famous for this law of politics.
This law applies to high-level appointments.
Back in the days when I was starting out
in my career, Alan Greenspan wrote an article for Ayn Rand's
Objectivist newsletter. It was pro-gold standard. It has
been reprinted all over the Web. Back then, only a handful
of us knew about it. I reviewed it in 2007 here:
Greenspan personally launched the modern
era of extreme intervention by the Federal Reserve in order
to stop a collapse in the stock market. That took place
in the second month of his chairmanship at Federal Reserve.
It was in late October, 1987. The American stock market
had dropped by 20% in one day. Around the world, other markets
had dropped by a comparable percentage. No one knew why
then. No one knows why now.
Greenspan and the Federal Reserve Open Market
Committee intervened the next day to inject fiat money into
the banking system in order to stop the collapse. That was
the beginning of what became known as "Greenspan's
put." Stock market investors knew from that point on
that the Federal Reserve would not allow the market to fall
significantly. That carried through right until Bernake's
intervention in 2009.
Listen to Greenspan today. He justifies
his policies as FED chairman in terms of gold.
When I was Chair of the Federal Reserve
I used to testify before US Congressman Ron Paul, who
was a very strong advocate of gold. We had some interesting
discussions. I told him that US monetary policy tried
to follow signals that a gold standard would have created.
That is sound monetary policy even with a fiat currency.
In that regard, I told him that even if we had gone back
to the gold standard, policy would not have changed all
This really is incredible.
He is saying that his policies, and the Federal Reserve's
policies, were basically close to what the Federal Reserve's
policies would have been prior to August 15, 1971. In other
words, he was basically a gold standard man while he was chairman
of the FED.
This is what happens when our friends go to Washington.
Last June, he made this comment:
If we went back on the gold standard and
we adhered to the actual structure of the gold standard
as it exited prior to 1913, we'd be fine. 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. I'm
known as a gold bug and everyone laughs at me, but why
do central banks own gold now?
He reminds me of the late
William Simon when Simon was Secretary of the Treasury under
Gerald Ford. I was serving with Dr. Paul as his research assistant
and weekly newsletter writer. Simon had a reputation of being
a free market man. But he hated the gold standard. He referred
to it as the "theology of gold." He was strongly
in favor of having the United States government add more money
to the International Monetary Fund. On my first day on the
job, in June 1976, I had the responsibility of writing Dr.
Paul's response to hearings in the House of Representatives
on bankrolling this monstrosity. He was the only opponent
on the House Banking Committee. He was right. Simon was wrong.
For the entire period in which Simon was Secretary of the
Treasury, he was an apologist for the central banks, the IMF,
and the whole Keynesian international apparatus. Then, after
he left the treasury, he became a multi-multimillionaire hedge
When our friends go to Washington, they are not our friends
anymore. Ron Paul was one of the few exceptions. So is Warren
Buffett's father, Howard, who served in the House in the
late 1940's. But he never convinced his son of his philosophy.
It doesn't matter what their opinions are back home. It
only matters how they vote in Washington. When they have
power, they reveal what they really believe. What they believe
in is power.