Gold & Economic Freedom - an Article by Alan Greenspan (1966)

Discussion in 'Economics' started by TraderD, Jan 20, 2011.

  1. TraderD


    In 1966, Alan Greenspan wrote the following essay/article about the relationship between Gold & Economic Freedom.... which was published in Ayn Rand's "Objectivist" newsletter in 1966, and reprinted in her book, Capitalism: The Unknown Ideal, in 1967....

    By Alan Greenspan; An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

    In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

    Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

    The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

    What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.
  2. TraderD


    ... see above link for full article
  3. TraderD


    A golden quote from Alan:
    "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation."

    And then Nixon took US off gold standard, did not he?

    One wonders why people change? Must be the age...Or may be something in environment?...
  4. Sodajerk


    "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation."

    Considering the source, we're going to need a fairly rigorous proof of that assertion. While you're at it, produce a listing of who's who in global gold ownership, including private hands, i.e. those looking to be empowered by such a policy.

    Show your work, Mr. Chairman.
  5. Alan Greenspan sounds like he was almost quoting word for word of Adam Smith (The Wealth of Nations) Anyone else notice this?
  6. TraderD


    Care to post some links?
  7. No, a much more simple explanation. GREED! :mad:

    America has gone from "Sound As A Dollar" (some younger ETers probably never heard that expression)... to virtually bankrupt... in only 40 years. All because of GREED... facilitated by fiat to do excess spending on military, government and social programs.

    Spending on things deemed "desirable or necessary" is entirely different from "spending yourself into bankruptcy".
  8. TraderD


    such spending can be prevented by proper framework...and that is what Alan wrote about in 1966...
  9. Yeah... he became an asshole when he got political/power ambitions.

    It's obvious to anyone with half-a-brain that he was right initially, then wrong after.
  10. Sodajerk


    Links for what? I'm simply asking Mr. Greenspan for something resembling a logical argument for his opinion. Considering he was later hired to run the Federal Reserve (who surely knew about his position, which he never repudiated afaik), his answer would merit careful scrutiny. Especially relevant is the list of who already owns the gold he would make the basis of money. I suspect there is a significant overlap between those people and the private shareholders of the clever entity that employed him.
    #10     Jan 21, 2011