Friday, January 21, 2011

Now we have all the proles gold…

Gold Standard Fully Supported By... Alan Greenspan!?

You read that right. After such establishment "luminaries" as World Bank president Robert Zoellick, Warren Buffett's father Howard, Jim Grant, and, most recently, Kansas Fed president Thomas Hoenig, all voiced their support for a return to a gold standard, the most recent addition to the motley group of contrite voodoo shamans is none othe than the man who is singlehandedly responsible for America's addiction to cheap toxic credit.

Posted by general congreve @ 06:53 PM (1734 views)
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8 thoughts on “Now we have all the proles gold…

  • general congreve says:

    Very strange indeed. I recently read a comment on a telegraph article by someone, who amongst other statements about the state of things today claimed he didn’t like the way the masses were being relieved o

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  • general congreve says:

    @1 Whoops, I’ll continue……..of their gold (cash4gold etc.) by the authorities. Seems quite an interesting point when taken in context of this surprise statement from Greenspan.

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  • The idea that the value of a countries gold can be valued by dividing the monetary base by the quantity of bullion held by that country’s central bank is simplistic. I’ll quote from “Gold: The Once and Future Money” by Nathan Lewis.

    “As England’s pound sterling grew to become the center of the entire world monetary and financial system in the latter nineteenth century and early twentieth, the reserves [of gold bullion] did not increase. Trust in the Bank of England’s sound monetary policies was so great that not only did people happily accept the bank’s consols (short for “consolidated,” government bonds that never matured), but from the 1880s to 1914 the bank’s gold reserves could be kept between £20 million and £40 million, while France and Russia kept over £100 million each. As a reserve bank, the Bank of England also held the reserve of banks of foreign countries, so in fact an even larger amount of currency and deposits were guaranteed by the Bank of England’s modest gold holdings. if the Bank of England had taken the advice of Walter Bagehot, an infuential writer for the Economist magazine, and increased its gold reserves to £200 million, it would have had no effect on the value or number of banknotes (nor did Bagehot intend it to), but would merely add to the security of the system in time of crisis. It is perfectly appropriate for the [sic] bank to increase or decrease the size of its reserves as it sees fit. An increase or decrease in reserves does not in itself imply a deviation of the currency from its gold peg, although it could be evidence of such. During the Bretton Woods period, 1944 to 1972, the entire monetary system of the world was backed by $12 billion in US gold reserves.
    However, there is often confusion on this point, because from the standpoint of a banker (and later central banker), the amount of gold in the vault matters very much. The inflow and outflow of gold can show whether the value of banknotes is changing compared to gold, and it serves as a signal to expand or reduce the supply of money.”

    In theory, we could return to a gold standard but only if the bank of England could be trusted to manage the money supply which is pretty close to the defintion of a fiat currency! Of course we won’t and I suspect that old fashioned money management in these times of ‘hot’ electronic cash rushing around the globe and massive amounts of arcane financial ‘innovations’ would be too difficult to control. Trying to calculate a value for gold is notoriously difficult but it is still a good store of value in times of monetary mayhem.

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  • 3. quiet guy said…

    Agreed, I would also like to add the UK & USA will not be returning to a gold standard because they don’t have much!

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  • Nothing surprising about that. Greenspan once wrote an article called “Gold and Economic Freedom”, before he became a turn-coat lackey of fractional reserve counterfeiting and interest rate price fixing. You can read it here: http://www.321gold.com/fed/greenspan/1966.html.

    Choice quote:

    “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

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  • general congreve says:

    @3 – Interesting post QG, thanks.

    @4 – Thanks to Brown, very true for the UK. As for the US, they claim to still have the biggest reserves in the world, if only they’d let someone audit it at some point in the last 50 years to confirm the fact.

    Of course, as a result of this, a voluntary return to the gold standard is mots likely not on the cards. But other events could cause the system to involuntarily switch to a gold standard, even if it is a de facto one.

    When you’ve got the head of the world bank and a former bubblicious Fed chairman calling for it, you know something has to be in the wind.

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  • Know the agenda and keep an eye on that US dollar.

    Never mind the personality flip flops, it’s just a game.

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  • Engineered boom and bust boyz. Can you still not see what it is.

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