Can the U.S. Return to a Gold Standard? - Greenspan

[FRED]

http://www.itulip.com/images/greenspangold.jpg (http://www.itulip.com/images/greenspangold1981.pdf)
Click for full article as PDF

[Starving Steve]

The U.S. and the world's central banks could return to a Bretton-Woods type of agreement where currencies like the dollar would be given a 25% backing by gold. Although this would not make currencies fully redeemable, it would make the unlimited printing of currency by central banks all but impossible.

What we have now in the world without Bretton-Woods is total monetary chaos with all of the world's currencies being printed at ever-increasing rates, all of them losing purchasing power against commodities, and inflation accelerating everywhere. Not only this, but the entire world is awash in a sea of bad debt stemming from a series of mis-guided central bank policies.

Worse yet, no-one know how bad this monetary break-down is going to get. Are we all going to be bankrupted together in one big worldwide hyper-inflation unleashed by central bank arrogance?

What is the next outrage? Another round of 1% interest rates, or an interest rate spike to 10 or 20%? Are these central banker gods planning exchange controls? A new global currency?

A new Bretton-Woods Agreement with a partial-backing for paper money would be a good start toward a solution to our current monetary malaise.

[zoog]

http://www.itulip.com/images/greenspangold.jpg (http://www.itulip.com/images/greenspangold1981.pdf)
Click for full article as PDF


I don't understand this part:

Alternatively, if the bid price is initially set too high, or subsequently becomes too high, the Treasury would be inundated with gold offerings. The payments for the gold drawn on the Treasury's account at the Federal Reserve would add substantially to commercial bank reserves and probably act, at least temporarily, to expand the money supply with all the inflationary implications thereof.So they're inundated with gold offerings. Everyone and their grandmother wants to sell gold to the US Treasury. Ok, fine. If they buy all that gold, the dollars paid for the gold would add to the money supply and be inflationary. Alright, sure. What I don't understand is, why would the Treasury be forced to buy all the gold that was offered? I'm sure I'm missing something simple.

[metalman]

now that is the top of a gold bubble... when your next central banker gets an article in the wsj on the goodness of a return of the gold standard.

[Starving Steve]

Greenspan upside-down thinking>>> that everyone would want to sell gold to the US Treasury at one of their mickey-moused prices, and that gold would be inflationary because the Fed would want to monetize it by coining it or issuing paper money backed by it.

Can you believe that this guy got the head job at the Fed for 18 years?

And Greenspan is not an acception to the rule because look at Gordon Brown, the former Exchequer of the Bank of England--- its head guy. And Gordon Brown sells half of the Bank of England's gold reserve at $252 per ounce so that the B. of E. can draw interest on its dead money in gold; so he bought US Treasury paper that paid 1% or 2% for most of the recent decade.

I only wish this was a joke and that I was making this up.

Greenspan let the banks go into toxic mortgages and creative finance. Not only that, but he let derivatives go wild too, on the justification that they allowed risk to be removed from banks. For such incredible stupidity, Greenspan received a knighthood by Queen Elizabeth.

And then comes the Bank of Japan with interest rates at 1/2% and held there now for two decades. So thanks to their stupidity, we have the carry trade monster.

And then Bouey of the Bank of Canada: who devalued the Canadian dollar to 62c causing Canada to go into depression for 30 years.

Then comes Robert Magave who earned an M.A. in economics from the University of London. Magave now runs Zimbabwe with its 15,000% per year inflation.

And these guys are the brightest in the field of economics?

And witness the disaster that has been Latin America for decades with Argentina, Brazil, Bolivia, Peru, and Chile now on their fifth currency in 40 or 50 years of economic stewardship by their central bankers--- each of them with high degrees in economics.

How interesting that so little has been written about the mess in Latin America from 1960-2000. So much could be learned about what not to do in central banking.

In fact, safe to say, whatever to-day's central bankers do, really the best policy would be to do the OPPOSITE: instead of lowering interest rates, they should be raising them; instead of devaluing the dollar, the dollar should be re-valued; instead of de-regulating markets, the markets should be re-regulated; instead of bailing-out the banks, the banks should be closed and their bankers jailed; instead of flooding currency into the markets, currency reserves should be drained and burned; instead of presiding over free markets such as the stock market, the central bank should manage the markets.

The world really needs to fire its economists because otherwise we are all going to starve.