HOT Alan Greenspan Says BUY GOLD

Alan Greenspan: "Buy gold."

Michael Derby at WSJ reports:

The question of when officials should begin raising interest rates is “one of those questions I cannot answer,” Mr. Greenspan said.

He also said, “I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner.

“We’ve never had any experience with anything like this, so I’m not going to sit here and tell you exactly how it’s going to come out,” Mr. Greenspan said. But he noted that markets often react to changes in central bank policy unpredictably and not entirely rationally. Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different, Mr. Greenspan said.

He said the Fed may not even have that much power over the timing of interest-rate increases. The problem as he sees it is an interest rate the Fed pays on the money banks park at the central bank, called reserves. Fed officials plan to use this tool as their primary lever for raising interest rates when the time comes. If bankers decide to put this money to work, creating inflation risks, the Fed may be forced to raise rates, even if the economy isn't ready for it, he warned.

“I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves,” Mr. Greenspan he said.

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.

Greenspan has it correct, the reaction to the Federal Reserve low interest rate policy will not be controlled by the Fed. Markets will move on their own. It is not going to be pretty and with Greenspan advising buying gold, it is clear he knows that part of the market reaction is going to be soaring price inflation.

BTW: This is a very serious but subtle attack on both Ben Bernanke and Janet Yellen monetary policy.

If you are a former Fed chair and you are advising that gold be bought, you are not suggesting that monetary policy is being handled in a competent manner.

Overall. this is the most sound analysis I have seem from the former Fed chairman. Murray Rothbard was right, they only speak truth once they are out of power.


(ht  Nick Badalamenti)

Walking in the Cinders of Ayn Rand

There's a funny musical video now circulating (see below) on the internet that was originally published in December 2008. Both the Big Picture and Naked Capitalist have posted it. It's about Alan Greenspan, as Fed chairman and his relationship with Ayn Rand.

Unfortunately, the production mis-states a few facts. It charges Greenspan with being for self-regulation, against government oversight and a libertarian. This is an absurd case to make since Greenspan was head of the Federal Reserve, which is all about government mass manipulation of the economy. This is about as far as you can get from government non-interference.

Barbara Walters, who was dating Alan Greenspan when he took the position as Fed chairman got this. In her book, Audition, she writes:

How Alan Greenspan, a man who believed in the philosophy of little government interference and few rules or regulations, could end up becoming chairman of the greatest regulatory agency in the country is beyond me. It was a big issue when Alan was first appointed...

Greenspan  has never been noyhing but a tool of the interventionist establishment elitists. This becomes clear from an understanding of who Greenspan's "friends" really were.

He writes in his memoir, The Age of Turbulence:

Even so, I did build up a wonderful circle of friends, Barbara [Walters] threw me a fiftieth birthday party. The guests were people I'd come to think of as my New York friends: Henry and Nancy Kissinger, Oscar a, Henry and Louise Grunwald and David nd Annette de la Renta, Felix and LIz Rohatyn, Punh and Carol Sulzberg Henry and Louise Grunwald and David Rockefeller. I am still friendly with many of these people today,more than thirty years later.

Rockefeller, Rohatyn, Sulzberg? How much more establishment can you get?

Murray Rothbard was unlikley to have known who Greenspan had as his "NYC friends", but as usual Rothbard instincts were right on. In 1987, he wrote:

Greenspan’s real qualification is that he can be trusted never to rock the establishment’s boat. He has long positioned himself in the very middle of the economic spectrum.

As for the Greenspan relationship with Rand and what that meant for Greenspan in terms of realeconomik, Rothbard had that nailed also:

There is one thing, however, that makes Greenspan unique, and that sets him off from his Establishment buddies. And that is that he is a follower of Ayn Rand, and therefore “philosophically” believes in laissez-faire and even the gold standard. But as the New York Times and other important media hastened to assure us, Alan only believes in laissez-faire “on the high philosophical level.” In practice, in the policies he advocates, he is a centrist like everyone else because he is a “pragmatist.”

As an alleged “laissez-faire pragmatist,” at no time in his prominent twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it. For Greenspan, laissez-faire is not a lodestar, a standard, and a guide by which to set one’s course; instead, it is simply a curiosity kept in the closet, totally divorced from his concrete policy conclusions.

Thus, Greenspan is only in favor of the gold standard if all conditions are right: if the budget is balanced, trade is free, inflation is licked, everyone has the right philosophy, etc. In the same way, he might say he only favors free trade if all conditions are right: if the budget is balanced, unions are weak, we have a gold standard, the right philosophy, etc. In short, never are one’s “high philosophical principles” applied to one’s actions. It becomes almost piquant for the Establishment to have this man in its camp.

Greenspan, The Slasher

A song memorializing Alan Greenspan's interest rate cuts, with apologies to Billy Joel.

He cut it once, he cut it twice
He cut it twelve times before
But still they believe to the core
That this cut was needed even more

But oh, there's no market bounce
And they should know it's time to buy the Mapleleaf gold ounce

Yet they stand there pleadin'
With their portfolios bleedin
'Cause deep down they want even more

Then he says he wants to fight deflation
It's such a clever obfuscation

He's so good with his explanation
They don't even see the looming disastrous inflation

He cuts so hard, he cuts so deep
He's got so much skill
He's so fascinating that they'll still be there waiting
When he comes back with the bill
They' ve been slashed in the face
Their portfolios a disgrace

But still they want more

'Cause he gives them what they need
While their stocks bleed

Then he says he is fighting deflation
What a clever obfuscation

He's so good with his explanation
They even think he is a sensation

He cuts a quarter, he cuts a half
As he carves up the economy’s life
But they won't do nothing
As he keeps on cutting
'Cause you know they love the knife

The market’s been overbought, the market’s been oversold
But they stand there pleadin'
With their portfolios bleedin'
'Cause deep down they want even more

From this Randian phony to the core

Then he says he is fighting deflation
What a clever obfuscation

He's so good with his explanation
They even think it is good for the nation

But the truth is the slasher
Is carving up a big time disaster

Inflation is ahead
You need gold under your bed
Use your head

Crudele, Rogers, Paul and Volcker have got this right
It is not going to be a pretty sight.