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Young Greenspan and Gold

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I am far from the first gold commentator to seize upon a famous essay by a young, Alan Greenspan – which eloquently and forcibly argues two, extremely important points. The first is that a gold standard is the lynch-pin of a stable, global economy. The second point is that destroying the gold standard and discrediting gold has long been an obsession of those who longed for the freedom to create infinite amounts of debt, and to print infinite amounts of paper currency: the bankers.


Thus, while such an analysis is not “new”, it becomes more important every day – again, for two reasons. The first reason is that every hour, the global economy lurches closer to a total collapse of the international monetary system. The second reason for a need to repeat the wisdom of a previous era is that with the bullion banks (and the entire anti-gold cabal) nearly out of bullion to dump onto the market, their primary “weapon” against gold is now a massive, disinformation campaign.


This disinformation campaign starts with an infinite number of gold-bashing “news” items. Despite the price of gold quadrupling in a decade, we are told that gold “is not in a bull market”. Despite the fact that the price of gold has not yet reached half of its previous (inflation-adjusted) peak, we are simultaneously being “warned” that gold is in a “bubble”.


Meanwhile, inventory numbers are falsified, and investors have been duped into funneling $10's of billions into the phony “bullion-ETF's” where no legitimate audit has been done to verify that the bullion-banks who “back” these ETF's actually have sufficient bullion to honour their “custodian agreements” with the bullion-ETF's – as well as their massive “short” positions. In fact, it has never been shown that there is more than 50% of the bullion necessary to cover both positions.


Given that these “short” positions represent the largest such concentrations in the history of commodities trading, if these bullion banks only have enough bullion to back either their own “short” positions, or the bullion-ETF's, it's obviously the bullion-ETF holders who will be left with nothing but banker-paper.


This should be no surprise to any thinking investor, since the notion of the bullion banks (the largest “shorts” in history) subsidizing the entry of millions of retail investors into this market (through the near-zero fees they charge for “storing” all this supposed bullion) is ludicrous on its surface. The only rational way to explain the bullion-ETF market is as a means for the bankers to dilute/leverage their dwindling quantities of bullion – in order to delay their own bullion-default. Thus, the bullion-ETF market (with the exception of some smaller, legitimate funds) is nothing but a banker, bullion Ponzi-scheme...and bullion-fraud is nothing new for the Wall Street banksters.

 

Returning to the Greenspan essay, and the two issues with which he dealt, they are obviously connected. Destroying a gold standard was the key to the bankers being able to flood (and enslave) the world with their debt, while simultaneously flooding the world with the worthless scraps of paper currency which the bankers deliberately refer to erroneously as “money”.


I have previously published a commentary explaining the concept of “money”, and defining the necessary characteristics of all, good “money” (see “What is Money?”), and Young Greenspan also addresses this issue in his own essay. Despite the fact I will quote a couple of passages from it, I strongly encourage everyone to read it in its entirety.


The need for societies (and economies) to have good “money” to use as currency, and the need for a gold standard – for the global economy, collectively – are closely related. Specifically, both a gold standard and good “money” are essential to ensure a strong, stable global economy. In this respect, I am defining “strong and stable” as meaning that the global economy is strong enough to be able to absorb the stresses of the peaks and troughs of business cycles , and stable enough for our currencies to be a reasonable “store of value” (i.e. they do not rapidly lose their purchasing power).


Essentially, this is the official mandate of all “central banks”: keeping economies stable, and protecting the value of their sovereign currencies. In reality, today all Western, central banks are strenuously trying to accomplish the precise opposite: they are de-stabilizing all of our economies, by rapidly destroying the purchasing-power of our paper currencies.


The fact that Western, central bankers are “closet” currency-assassins can be easily demonstrated by examining their track-record. The most famous example is the U.S. Federal Reserve: since being created in 1913, it has presided over the U.S. dollar losing 97% of its value, in less than a century. The record of other, Western central banks is similar.


When it comes to “economic stability”, as Young Greenspan, himself, explains so well, it was central bankers who caused the (first) Great Depression:


When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities was as follows: if the Federal Reserve pumped excessive paper reserves [emphasis mine] into American banks, interest rates in the United States would fall to a level comparable to those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market – triggering a fantastic speculative boom. Belatedly, the Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economy plunged into the Great Depression of the 1930's.


This account of the Great Depression by Young Greenspan is entirely different than the “history” which has (since) been re-written by those same, central bankers. Instead of the gold standard being an important safety mechanism, which prevents the sort of insanity which led to the Great Depression, the banksters have bombarded us with the propaganda that the gold standard was, itself, somehow the “cause” of the (first) Great Depression.


Economic heretics, like Professor Ben Bernanke, invented their own Great Depression mythology: the Depression was supposedly “caused” by not being reckless enough in slashing interest rates and flooding the global economy with (un-backed) paper currencies. His reward for inventing this propaganda was a promotion to Chairman of the Federal Reserve.


However, I am “putting the cart before the horse”. In order to illustrate the intellectual (and moral) bankruptcy of Bernanke and all of his Keynesian ilk, we must first understand how a gold standard functions, and how and why it guarantees economic stability – when its mechanisms are not violated.


In the quasi-gold standard which existed in the 20th century, all paper currencies were partially backed by gold. While the total amount of paper “money” created by banks significantly exceeded their gold reserves, the ratio of paper-to-gold remained fixed. It was the function of central banks to raise or lower interest rates (whenever that ratio varied significantly) in order to maintain stability. If the ratio of paper-to-gold grew too large, the central banks would raise interest rates – curtailing the creation of new debt (and paper), and pushing the ratio back into balance. On the other hand, in the rare instances when the ratio fell too low, the bankers lowered interest rates – increasing the amount of paper versus gold.


It's important to note that these same, basic fundamentals exist today, but with one critical exception: with no gold standard to restrain the creation of the bankers' (worthless) paper, the size of the imbalances during periods of “irrational exuberance” are essentially infinite. This is of paramount importance since both the original “history” of the Great Depression and the bankers' subsequent re-write conclude that it was the withdrawal of excessive, banker “stimulus” (too much paper “money”, combined with excessively low interest rates) which caused the Great Depression.


Where the two accounts of history differ is as follows. Standard economic theory (which forms the basis of the gold standard) preaches that when economies “over-heat” and create large and unstable mountains of debt that such excessive speculation (i.e. “asset bubbles”) must be “popped” - before growing even larger, even more unstable, and much more dangerous and destructive. The beauty of a gold standard is that it is a built-in mechanism to “put the brakes” on these speculative “booms” before they become truly threatening to the existence of the entire economy.


Conversely, the economic heretics who function as a front for the banking cabal would try to convince us that we don't need to bound by the rules and principles of economics – or even the basic principles of arithmetic. The banker-apologists, led by Ben Bernanke argued that the real “mistake” of the Great Depression was to ever allow the de-leveraging of the debt-bubbles which the central bankers created – when they first began to violate the strictures of the existing gold standard.


They would argue that even after their original mistakes had been made, that instead of following through on an extremely painful period of de-leveraging that the bankers should have simply turned the entire, global monetary system into a “Ponzi scheme”: where the bankers simply pumped exponentially increasing amounts of their paper into the monetary system – to exceed the rate at which “old” debt was being destroyed through debt-defaults.


Interestingly, this camp of propagandists (championed by Bernanke) never included any “exit strategy” with their Ponzi-scheme philosophy for “preventing” a depression. This should be no surprise, since there are no mathematically feasible “exits” from any Ponzi scheme. At some point, it becomes impossible to maintain the exponential growth of paper money and debt. The inevitable result is hyperinflation (as money-printing spins out of control), a Soviet Union-like debt-implosion (as debts spin out of control), or both.


Thus, the “cure” for depressions advocated by Professor Bernanke and the other economic revisionists is to essentially instigate a total, global “self-destruct sequence” - where the central banks become irrevocably committed to a strategy where no “exit” is possible, and where a total economic meltdown is 100% inevitable.


We will now get to experience this sequence of events, first-hand, since what Western central bankers have done today in claiming to have “prevented a second, Great Depression” is to have begun the global, self-destruct sequence. Money-printing is increasing exponentially. Government debt-mountains are increasing exponentially. Through not allowing the insolvent, Wall Street banks to implode with their mountains of Ponzi-scheme debt, those trillions of dollars of debt-defaults instead simply sit on the balance sheets of Wall Street banks – hidden by the fraudulent accounting rules enacted in the U.S. in early 2009.


Meanwhile, the derivatives market: the $1 quadrillion, ultimate banker-bubble remains totally unregulated, and becoming more destructive by the day. Originally, as these derivatives-debts began to implode, it was 'only' corporations, towns, and institutions (like schools and hospitals) whose existence was threatened. Now, as we see unfolding in the news before us, it is the entire economies of nations whose existence is threatened by the inevitable implosion of the largest asset-bubble in human history (see “U.S. Economic Terrorism the NEW Winning Trade”).


The actions of the bankers are even more revealing. Instead of carefully attempting to whittle-down the derivatives-bubble, and to begin to “exit” from the most reckless monetary policies in the history of the world, the exact opposite has taken place. The derivatives-bubble remains untouched and unregulated. The Bank for International Settlements (the “central bank” for central banks) simply invented a new definition of the derivatives-bubble – where precisely the same set of contracts is now referred to as 'only' a $600 trillion bubble (a mere ten times the size of the entire global economy). Instead of beginning an “exit strategy” to end the current phase of “irrational exuberance”, Western interest rates remain at near-zero (the lowest in history), while hyperinflationary money-printing is still accelerating.


Thirty years after Young Greenspan wrote his essay extolling a gold standard as not only the best form of global, economic stability, but also the best means of maintaining global, economic sanity; an older Alan Greenspan wrote a new essay: this time from his position as Chairman of the Federal Reserve. We are led to believe that this older, Greenspan must have 'forgotten' everything he every knew about gold, and a gold standard.


Instead of extolling the virtues of gold as the tool for both global economic stability, and for maintaining our own “economic liberty” as individuals, an older Greenspan had somewhat different priorities on his mind. He went into a lengthy analysis of how the price of gold could be manipulated in order to maintain “confidence” in the worthless paper of the bankers – and thus preserve their mountains of debt (i.e. their financial empire).


The best rebuttal for the deceptive charlatan known as “Sir Alan Greenspan, Chairman of the Federal Reserve” comes from the words of Young Greenspan:


In the absence of a gold standard there is no way to protect savings from confiscation through inflation. There is no safe store of value [emphasis mine]. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, banks deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state [i.e. the bankers' paper empire] requires that there be no way for the owners of wealth to protect themselves.


This is the shabby secret of the welfare statists' [i.e. the bankers'] 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.


These are not the words of some rabid “gold bug”, but rather those of a man whose understanding of economics was deemed to be of such a caliber that he was selected to run the world's largest, most important central bank. It is an indication of Greenspan's deficiencies as a human being that he literally “sold his soul” in becoming chief mouth-piece for the banking cabal – and his own self-parody.


The logic of Young Greenspan in advocating gold, and a gold standard is as irrefutable as his betrayal of his own principles. Taken together, they tell us all we need to know about gold – and bankers.

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Jeff Nielson
...
written by Jeff Nielson, March 13, 2010
Thanks for the comment, Charlie. I don't know if you read a previous two-parter, discussing the coming end of China's peg to the dollar, and the rise of the renminbi as the new "reserve currency".

In that piece I made my best guess of what is to come: a "fiat" renminbi replacing the dollar, and then AFTER that first transition, the backing of the renminbi with a new gold standard.

Once a bigger cross-section of society starts to REMEMBER some of the lessons of history (notably, the consequences of fiat currencies), I think a gold standard will be demanded. But you're right that there is currently no will to re-implement a gold standard.

Bullionaire
...
written by Bullionaire, March 13, 2010
Hi Jeff,

Great article, as usual. If only it were possible to return to a gold standard! That would surely have the effects you attribute to the gold standard of yesteryear. Alas, the banksters have printed so much paper (quintillions?) that all the gold in the world, both above and below ground, would be insufficient to cover liabilities. The only function gold has nowadays is to protect the personal wealth of us and our friends and loved ones. I am particularly taken with the ideas of the anonymous blogger FOFOA and his/her concept of "Freegold". I also applaud the folks behind "Freedom's Vision" at SwarmUSA.com and their dictum "It's not WHAT back our money, it's WHO controls its QUANTITY." I fear that the upcoming “Greater Depression” will soon begin, with a BANG which will make the “shot heard ‘round the world” seem like a hiccup.

Best,

Charlie

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