Greenspan takes a U-turn on gold.

A hypocrite believes one thing, preaches a second thing, and practises a third thing.
 
Thanks for sharing the article.

Its very recent, 29 September.

It seems very strange to see the former head of the Federal Reserve write things like:

If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country's currency could take on unexpected strength in today's international financial system.
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and

Yet gold has special properties that no other currency, with the possible exception of silver, can claim.
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and

Today, the acceptance of fiat money -- currency not backed by an asset of intrinsic value -- rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.
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Greenspan is writing like a stacker!

I dont quite understand what the political agenda is behind the article.

Cheers,

Agnostic
 
To confuse people since generally people know anything the federal reserve chairman current or past says is bs...they want us to sell.

I am buying and suggest if you have balls you do the same...jk

Sub $17 means monster boxes around $10k which is good in my eyes when they sold for $20k a few years ago.
 
Not to mention this view on future Chinese growth that I (and others) have been saying for the past few years

However much gold China accumulates, though, a larger issue remains unresolved: whether free, unregulated capital markets can coexist with an authoritarian state. China has progressed a long way from the early initiatives of Chinese leader Deng Xiaoping. It is approaching the unthinkable goal of matching the United States in total GDP, even if only in terms of purchasing-power parity. But going forward, the large gains of recent years are going to become ever more difficult to sustain.

It thus seems unlikely that, in the years immediately ahead, China is going to be successful in vaulting over the United States technologically, more for political than economic reasons. A culture that is politically highly conformist leaves little room for unorthodox thinking. By definition, innovation requires stepping outside the bounds of conventional wisdom, which is always difficult in a society that inhibits freedom of speech and action.

To date, Beijing has been able to maintain a viable and largely politically stable society mainly because the political restraints of a one-party state have been offset by the degree to which the state is seen to provide economic growth and material wellbeing. But in the years ahead, that is less likely to be the case, as China's growth rates slow and its competitive advantage narrows.
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bordsilver said:
Not to mention this view on future Chinese growth that I (and others) have been saying for the past few years

However much gold China accumulates, though, a larger issue remains unresolved: whether free, unregulated capital markets can coexist with an authoritarian state. China has progressed a long way from the early initiatives of Chinese leader Deng Xiaoping. It is approaching the unthinkable goal of matching the United States in total GDP, even if only in terms of purchasing-power parity. But going forward, the large gains of recent years are going to become ever more difficult to sustain.

It thus seems unlikely that, in the years immediately ahead, China is going to be successful in vaulting over the United States technologically, more for political than economic reasons. A culture that is politically highly conformist leaves little room for unorthodox thinking. By definition, innovation requires stepping outside the bounds of conventional wisdom, which is always difficult in a society that inhibits freedom of speech and action.

To date, Beijing has been able to maintain a viable and largely politically stable society mainly because the political restraints of a one-party state have been offset by the degree to which the state is seen to provide economic growth and material wellbeing. But in the years ahead, that is less likely to be the case, as China's growth rates slow and its competitive advantage narrows.
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Good summary on possible limits to shorter-term Chinese growth, but there seem to be some further complexities with consequences that are not yet fully understood. China has been called a laissez-faire authoritarian state, so while political and social activity may be highly constrained within strictly managed limits, there is also a highly competitive manufacturing and technology sector (outside of state-run companies) with intense entrepreneurial focus on profit and a rather lax regard for constraints imposed by intellectual property rights. Will this ensure a move to more innovation-based growth as traditional investment-based growth reaches its limits? Will it be enough to overcome the constraints of authoritarian rule? Will it lead to change in the type of government that leads China? Or will authoritarianism stifle the full potential of the Chinese nation?

Closing paragraphs of a 2012 article that briefly covers this idea of laissez-faire authoritarianism (via the Cato Institute):

...Every time I visit China I'm left with a feeling of restrained optimism. The country is bustling and bubbling, in rapid and chaotic transition from traditional rural to modern urban. People are asserting their freedom in personal, social and economic life. It's only natural for them to desire more political control as well.

The usual colorless apparatchiks, now led by Xi Jinping, are working mightily to hold down the lid as the pot boils. However, they lack the unique mix of vision, commitment, genius, evil and madness which characterized the revolutionaries who created the PRC's modern state. It seems unlikely that Mao's successors can forever thwart the aspirations of more than a billion Chinese. They may not want U.S.-style democracy. But they surely want something very different than permanent rule by self-replicating mediocrities. If the Chinese people ever do take control, the West may learn the real meaning of the famous Chinese curse about living in "interesting" times.

http://www.cato.org/publications/commentary/chinas-laissezfaire-authoritarians
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Yes. A lot is political entrepreneurship as well which is residing on extremely shaky financial foundations. As someone I forget said "The Chinese financial system is built on sand running through a Rube Goldberg hourglass."
 
An interesting viewpoint in Forbes:

Greenspan Lets His Hair Down; Talks Up Gold

...Former Federal Reserve chair Alan Greenspan published a mighty interesting article in Foreign Affairs last week. He said that China could be thinking of increasing its gold stocks in a big way. Perhaps, Greenspan implied, the Chinese even have a thought of making their currency, the RMB, convertible in gold.

The episodic article went on to discuss how strange it is that the big fiat-country countries, from the United States on, maintain their multi-hundred-billion-dollar gold stocks. They never want to sell, for all the trashing of gold-as-money from the wonks, economists, and serious statesmen.

When gold prices are low (which happens when countries conduct monetary policy well), there is no profit in selling. When prices are high, there is such skepticism about the conduct of monetary policy that countries cannot think of getting rid of the one monetary asset which everybody still believes in. So tons of gold sit there forever, parked in government vaults.

Greenspan recounted a memory of the Ford Administration, when Treasury secretary William E. Simon tried to get the president to unload the U.S. gold stock. The Fed chair, Arthur Burns, supervising the only serious peacetime inflation in the nation's history, was deadly against. He knew that all confidence in the dollar would be gone if the U.S. were bereft of its gold.

Greenspan (who was chair of the Council of Economic Advisors at the time) suggested in his article that Milton Friedman's argument that "gold no longer served any useful monetary purpose" had motivated Simon. I wonder. Friedman never quite made that argument, and Simon had been the one who pushed Ford to sign, in 1974, the Rep. Phil Crane-inspired order permitting Americans to own gold once again. Owning gold valued at more than $100 had been outlawed since 1933, when President Franklin Roosevelt tried to hang the very origins of the Great Depression on people's tendency to be gold "hoarders."

The U.S. gold stock in Fort Knox (built 1936) was all the stuff collected by FDR in 1933 and justified by stacked Supreme Court decisions in 1934. The idea that the U.S. has legitimately held the greater portion of its gold stock since 1933 is untenable; that gold was nationalized in exchange for a price about 40% below market.

Simon's voluminous paper trail, in his bestselling books and all the archives, reveal an official who wanted to remove cover from the monetary system. There is no reason that an issuer of a currency convertible in gold has to have gold on hand. If gold is available on the open market, it can be bought in the issuer's currency. The only reason the price would fluctuate is if the currency were mismanaged. Simon was probably calling the Keynesians' and the monetarists' bluff in the 1970s. The United States should have no goldand still have a currency convertible in gold.

China has been accumulating big gold positions for many years now for one paramount reason: it has also accumulated trillions in United States government debt. The value of the dollar and the price of gold move in opposite directions. It's essentially an inverse relationship. Thus do the Chinese ensure that their dearly-bought reserves stay at par value.

What use does China have for trillions in reserves to begin withis that not a waste of financial resources? Of course it is, but when your government and currency was founded by Chairman Mao, you have to assume that internationally, people will remain skeptical of your issue. You need to cultivate the credible impression that you could at any moment make the RMB convertible to a valid, international form. In the Chinese case, this would be a hybrid of the gold and the dollar.

The interesting case, the one which Greenspan hints at in Foreign Affairs, is if China strove to assume leadership in the international monetary system, as opposed to its present posture of conceding its secondary, Mao-cursed status. What if it announced that the RMB were convertible in gold, forcing other major currencies (even the dollar) to follow suit? One thing the Chinese may be up to in accumulating so much gold is to reinstitute, worldwide, a convertible currency system.

The flaw in this argument is rehearsed above. The best gold-standard currency issuers need not bother with having any gold at all. In fact, having gold is probably an indicator that you think you can get away with some overprinting before convertibility becomes impossible.

A currency that maintains its value against the private price of gold has the most essential aspect of convertibility. It is de facto convertible. De jure convertibility is merely the promise on the part of the issuer to make the trade itself, on demand, of its currency for gold.

A big country that can really move markets, like the United States, and perhaps China in the future, will find that its gold standard is most credible when it prescinds from the faade of holding gold. It will prove its currency is convertible to gold at a fixed rate when the markets never feel reason to bid at variance with that rate.

When that kind of monetary and currency policy comes, the world's capital will flow into real purposes, the business of hedging the vagaries of currencies having lost its foundation. And things like the most major entrepreneurial and technological revolutions, along with a fat mass prosperity, will result.

http://www.forbes.com/sites/briandomitrovic/2014/10/06/greenspan-lets-his-hair-down-talks-up-gold/
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Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

From Mr Dylan
 
Fox guarding the chickens... would not trust him as far as I could throw him while he was holding all the gold Fort Knox is supposed to hold
 
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