Atlas Just Shrugged

On September 15 former Federal Reserve Chairman Alan Greenspan made a speech to the Council on Foreign Relations. Some very interesting comments he made with respect to gold in response to a question were reported in an editorial in the New York Sun, "Greenspan's Warning on Gold":

On this occasion Greenspan, who has been famous for gobbledygook that leaves the audience guessing what he meant, did not mince his words. He said, "Fiat money has no place to go but gold."

He further commented that "if all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it."

Greenspan was a close friend of the writer Ayn Rand and he reportedly read drafts of her novel Atlas Shrugged before it was published and even had a letter published by The New York Times in November 1957 in response to the newspaper's negative review of the book. In 1966 Greenspan wrote an essay published in Rand's newsletter The Objectivist titled "Gold and Economic Freedom":

In that essay Greenspan declared:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. 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, bank 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 requires that there be no way for the owners of wealth to protect themselves.

"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."

When one juxtaposes Greenspan's views from 1966 with those of 2010, it is clear that he has a good understanding of the central role gold plays in the monetary system and that unbacked fiat currency is intrinsically worthless. So one would have to conclude that between these two reference points, when Greenspan was Federal Reserve Chairman for 19 years, he knew he was part of an elaborate charade to continue the "shabby secret" of the welfare statists.

In a debate against GATA [Gold Anti-Trust Action Committee] Chairman Bill Murphy in May 2010, CPM Group executive Jeffrey M. Christian declared that he has advised "most of the central banks in the world" and that "central banks think very little about gold, and those that do think about it and have gold reserves are happy when the gold price goes up."

Perhaps most of the central banks Christian has advised were also successful in keeping this "shabby secret" from him. That is in stark contrast to GATA, which has been shining a light on the dark world of gold for more than 10 years and showing that the organization's officers and consultants are more knowledgeable about the gold market than any of the bought-and-paid-for anti-gold cartel apologists who purport to be experts.

I expect that in the days and years ahead the remark "Fiat money has no place to go but gold" will resound around the world and will be a stake through the heart of the blood-sucking vampire we call central banking. If you weren't paying attention, you need to know that Atlas just shrugged.

Adrian Douglas is editor of the Market Force Analysis newsletter and a member of GATA's Board of Directors.

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