Difficult question asked to Alan Greenspan at Congress :D

Discussion in 'Economics' started by harrytrader, Apr 25, 2004.

  1. http://wwws.house.gov/search97cgi/s...yZip=federal reserve&SourceQueryZip=vdkvgwkey><substring>

    Congressman Ron Paul
    U.S. House of Representatives, Financial Services Committee
    July 17, 2002

    Hard Questions for Federal Reserve Chairman Greenspan

    Rep. Paul: "Welcome Chairman Greenspan. I've listened carefully to your testimony but I get the sense I may be listening to the Chairman of the Board of Central Economic planning rather than the chairman of a board that has been entrusted with protecting the value of the dollar.


    I would like to quote an eminent economist by the name of Alan Greenspan who gives me some credibility on what I am interested in. A time ago you said, 'In the absence of the gold standard there is no way to protect savings from the confiscation through inflation. There is no safe store of value without gold. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process that stands as a protector of property rights.'"

    Congressman Paul then added the he strongly believed this statement by Greenspan taken from a 1966 article that was included in an article he had written titled, "Gold & Economic Freedom" was true. Congressman Paul continued,

    "But gold has always had to be undermined if fiat money is to work and there has to be an illusion of trust for paper to work. And I think this has been happening for thousands of years. At one time the kings clipped coins. Then they debased the metals. Then we learned how to print money. Even as recently as the 1960's for us to perpetuate a myth about our monetary system, we dumped 2/3 of our gold, or 500 million ounces of gold at $35 per ounce in order to try to convince people to trust the money. And even today, there is a fair amount of trading by central banks, the dumping of hundreds of tonnes of gold, loaning of gold for the sole purpose that this indicator of gold does not discredit the paper money and I think there is a definite concerted effort to do that.

    "My questions are two fold relating to gold. One, I have been trying to desperately to find out the total amount of gold either dumped and sold on to the markets by all the central banks of the world or loaned by the central banks of the world. And this is in hundreds and hundreds of tons. But those figures are not available to me. Maybe you can help me find this. I think it would be important to know since all central banks still deal with and hold gold whether they are dumping, or loaning or buying for that matter.

    "But along this line, I have a bill that would say that our government, our Treasury could not deal in gold and could not be involved in the gold market unless the Congress knows about it. Now that to me seems like such a reasonable approach and reasonable request. But they say they don't use it (gold) so we don't need the bill. But if they are not trading in gold, what would be the harm in the Congress knowing about handling and dealing about this asset, gold?"

    Chairman Greenspan: "Well first of all, neither we nor the Treasury trade gold. And my impression is that were we to do so, we would announce it. It is certain the case that others do. There are data published monthly or quarterly which shows the reported gold holdings of central banks throughout the world, so you do know who holds what. The actual trading data, ah, I don't think is available though the London gold exchange does show what its volume numbers are. And periodically, individual central banks do indicate when they are planning to sell gold. But they all report what they own. So it may well be the case that you can't find specific transactions. I think what you can find is the net result of those transactions and they are published. But so far as the United States is concerned, we don't do it."
  2. From "Gold and Economic Freedom," in Capitalism: The Unknown Ideal, 1967, Alan Greenspan

    "The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.... The law of supply and demand is not to be conned. As the supply of money increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods . When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes.... 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... 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' tirade against gold. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
  3. pspr


    In simple terms, if more money is in circulation then normally prices of goods will rise (inflation). Not a revolutionary concept.
  4. Who talks about revolutionary concept ? Not only it isn't revolutionnary but it is as old as historical facts of several millenars that without protection money expands at such a rate that the big crash of the system will finally ruin the majority of people riches and poors.

    I remind this story from Scientist:

    Hey Funster,

    My family lived in Germany during that time, and until the late 90's. I am still half-German and I've grown up and been schooled there. So I've gotten a good bit on the German history.

    My family during that time, spell great-grandparentsn were very very wealthy...

    To make it short, we were a Hanseat Hamburg-based dynasty of coffee traders for several centuries (about 500 years afaik), and later on controlled a lot more, such as several of Hamburg's largest banks at the time.

    When Hitler took Germany, it was all over. Finance went down, and inflation came. My grandfather's grandfather at the time, who owned the largest bank back then, was part Jewish, and Hitler had taken most rights and control off him. Yet, he pretended everything was OK, and continued going "to work" at "his bank" for another 8 years, just not to worry his family.

    Hyperinflation came, and my family, not long before worth hundreds of millions (at a time where you could buy a nice car for DM 800 or so), had left nothing, but the places they lived in. It didn't take long till their net worth was that of a postage stamp... I still have some 500-Million-Reichsmark stamps in my collection here... It was a crazy chain of events.

    Of course they had to give up all their possessions too, just to be able to eat. They couldn't maintain anything.

    My grandfather's grandfather eventually disappeared somehow - let's not speculate.

    My grandfather's uncle also ended his story rather tragically. My grandfather used to tell me about how when he was a kid, he would stay at his uncle's and drive around through his estate in his own little horse coach, over white bridges bridging his uncle's rivers. Obviously, he was extremely wealthy, too. The centre of his estate was literally a castle, and a he owned a stud of over 500 of the finest thoroughbred horses, just for his entertainment. We still have photos of the estate, it was massive.

    One day, Hitler came and demanded his stud for the purposes of warfare. He refused, then was told that he had the choice between being offered great war honors, golden stars and hero status in the name of the Reich for his donation, or if he refused, to be detained and have his stud taken, anyway.

    Well, he thought about it, and decided that he loved his horses too much to have them suffer in in Hitler's crazy war. He organized very large amounts of explosives and blew himself up, inmidst his entire stud and anything he owned and loved.

    There went another one. My grandfather's father also disappeared at some stage, so his mother (my great-grandmother) was suddenly solely responsible for caring for him and his older brother during the war, and did anything to bring them through... The lady who used to spend over DM 100,000 per day on "Attire, jewellery and other household amenities" (we still have the household diaries), was now walking from door to door, selling vacuum cleaners, in the hope to make it through the toughest times. She was celebrated a hero of our family, and finally died at the age of 95, one day before I was born.

    Scrolling back another 50 years, after the war, our family started anew, all from scratch. A long dynasty and fallen, but the spirit was still there. There was nothing more to lose and everything to gain.

    What was the reason for all this misery? Well, money pumping, hyperinflation, and the terror of the nazi regime.

    There's a great lesson to be learnt here: Money really can't be eaten and can become worth nothing any day... Be prepared...

  5. The problem is that people are greedy by this apparent flood of money like the monkeys newbies are greedy by a bubble in stock market - in fact the two phenomenas are linked - try to reason these monkeys is useless I know it's just my pleasure to continue to do so. It is only when the party is over that they will react and complain about treachery, trahisons, etc. It is when they will lose their job, won't be able to pay their house at credits, lost their money in stock market, lost their retirement funds, that the dollar without any Gold to protect its value any more will plunge that they will wake up although I'm not even sure as they will be told fairy tale about fatality. In fact they will maybe too desperate to look for another situation that they won't have the luxury to care about that ... like many poor families today who have to fight day to day survival and don't have any time ressource to understand what is responsible of their situtation. As I said the poors don't count it is only when the rich will be touched that the screaming will be heard. At the moment most of them think they are secure.

  6. Money, Market, Credits are vehicules and Oil of Economy, they are necessary. What is not necessary is the constant tweaking of interest rates under the pretext of regulation whereas if they really wanted to regulate efficiently the economy they would tweak the long term target and adjust with short term as one does in engineering whereas they do exactly the contrary so yes in that case by design it is rotten.

  7. From Milton Friedman:

    "A change in the Fed’s target rate has no direct effect on other rates, though it may have an indirect effect through altering the expectations of borrowers and lenders. More important, Fed open market purchases of government securities to enforce a reduction in the target rate add to bank liquidity. That increase the availability of loans, which tends to lower interest rates across the board, particularly on short-term loans such as three-month treasury bills, or commercial paper. However, it also tends to stimulate the economy. That increases the demand for loans, which tends to raise interest rates. The latter effect becomes dominant if monetary expansion is continued at a high rate. AS a result the immediate and long-run effects of monetary policy on interest rates generally are in opposite directions. "
  8. "Milton Friedman has long maintained that the Federal Reserve should be abolished and the federal government should instead permit the money supply to grow according to a stable, predictable, publicly known formula. "
    Peter Robinson