Over the past several years, Alan Greenspan has worn several faces. He has worn the face of a villain, poker player, and hero. The faces are all interpretations of what the true monetary standard should be and how someone who understands the economic system views our past Fed Chairman. Most people know Alan Greenspan as the Federal Reserve Chairman, a man who held the post from 1987-2006. Before he became Fed Chair, he was an efficient free market thinker with a keen understanding of gold. Many look at him as a chief engineer of the financial crises that have plagued our economy and continue to plague our economy. The Dotcom bubble and the Great Recession were caused by many things, but monetary policy from the Fed contributed.
Surprisingly, as his tenure at the Fed has ended, his views on gold have seemed to return to his original thesis. In an interview with Gold Investor magazine, Greenspan said, “I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” He even went to the extreme and agreed with Ron Paul that a gold standard would’ve been a deterrent to debt accumulation. “We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line.” Ron Paul argued that this system would create enormous debt loads and stagnating real incomes due to inflation.
Additionally, March 15, 2017 will be an important date, as the debt ceiling suspension will be lifted. Congress will have to renegotiate and likely raise the debt ceiling. With Trump in office, this may go differently than the previous 8 years. The Fed will raise interest rates in March and increase the interest on the debt line item. Debt accumulation, now roughly 106% of GDP, will eventually lead to a flight to gold as it always does.