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Allan Greenspan: Ben Bernanke is wrong, Ron Paul is right

Former Federal Reserve Chairman Ben Bernanke famously told Campaign for Liberty Chairman Ron Paul that gold is not money. Perhaps Bernanke should have a talk with his predecessor. In his “Golden Rule - Why Beijing Is Buying,” an article published in Foreign Affairs, Alan Greenspan calls gold the "ultimate form of money" and warns that gold could displace fiat currencies if "sovereign" governments experience a financial crisis.

Excerpts from Dr. Greenspan's article here (hat tip: Zero Hedge):

 “No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close.”

“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.”

“If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute. Of the 30 advanced countries that report to the International Monetary Fund, only four hold no gold as part of their reserve balances. Indeed, at market prices, the gold held by the central banks of developed economies was worth $762 billion as of December 31, 2013, comprising 10.3 percent of their overall reserve balances. (The IMF held an additional $117 billion.) “

“If, in the words of the British economist John Maynard Keynes, gold were a “barbarous relic,” central banks around the world would not have so much of an asset whose rate of return, including storage costs, is negative.”

 

 


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