I'm not a gold bug but Alan was a proponent of the gold standard. He wrote about how the gold standard created responsible spending and more equality in the world:
The world we are in now, especially in the US, is one where there is near unlimited government credit but it is, according to many, papering over deep structural problems. At some point, these chickens will come home to roost in some way or another. But it is hard to predict when.
So he was in favour of the gold standard because it prevented massive unconstrained expansion of credit and that seems sensible.
Further, sticking to the gold standard made the Great Depression worse as it reduced flexibility and options of central banks had, and made deflation worse:
39 trillion in debt with no Congressional stomach for...
- spending cuts
- stopping fraud
- figuring out how the net worth of people in Congress increases from hundreds of thousands of dollars to 10s or 100s of millions of dollars
- addressing wasteful and ineffective programs
Given those issues, the only solution will be inflation. The circling the drain moment will hit with the associated welfare programs get a direct staple to inflation itself, so we will spend more to combat inflation, causing more inflation faster.
> ...it prevented massive unconstrained expansion of credit and that seems sensible.
At the height of the Great Depression (1936), some economists proposed The Chicago Plan to separate the provision of credit from the money supply by eliminating fractional reserve banking, giving better control of the increases and contractions of credit, the elimination of bank runs, and a dramatic reduction in debt. There was a recent (2012) paper from the IMF [1] that seemed to find this actually is pretty sensible, although I do not claim to be smart enough to understand all of the implications.
He also oversaw the economy for twenty years before one of the worst recessions in the world. He helped set the stage for multiple disasters with his policies, so I'd take his opinions with a grain of salt.
I don't think anyone really holds him responsible for the dotnet crash of 2000 as that was a market issue and irrational exuberance issue and not a monetary one.
And 2008 was similar. The Fed doesn't control or have any responsibility for lower lender standards or ARM mortgages.
Congress was responsible for the GSE's that bought any mortgages and wrote insurance on those mortgages, so you can't blame the FED for that.
Wallstreet are their regulators were responsible for the securitization of mortgages that went bad in 2008, not the FED.
At worst you can say they had the wrong monetary policy but that's an opinion and not something that can be said as a fact.
Can you flesh out how you feel Greenspan is responsible for 2008?
It is well know there weren't deep structural problems at the time of (and caused by) the gold standard...
I don't understand why people keep banging about the theoretical advantaged of a gold standard whan it was the default monetary system for centuries and we have firsthand evidence of the problems it causes (and certainly not more equality in the world!). It has been tried by the whole Earth during several generations.
If you think, like Greenspan and others, that there ought to be a mechanism to force some monetary restraint on governments, try to think of a new mechanism, because the "old way" wasn't better. We know it. Move on.
IIRC it was Greenspan that didn’t mean to, but did disclose the use of gold swaps, so even if there is all the gold that is claimed to be in Fort Knox, the question of who owns the gold is unanswered.
Mostly I just know Alan Greenspan for being a disciple of Ayn Rand back in the 1950s/60s. Though the Objectivists didn't like his work at the federal reserve. In 2008 he admits to being shocked that banks weren't rationally selfish.
I'm not a gold bug but Alan was a proponent of the gold standard. He wrote about how the gold standard created responsible spending and more equality in the world:
https://ritholtz.com/2008/11/gold-and-economic-freedom-by-al...
The world we are in now, especially in the US, is one where there is near unlimited government credit but it is, according to many, papering over deep structural problems. At some point, these chickens will come home to roost in some way or another. But it is hard to predict when.
So he was in favour of the gold standard because it prevented massive unconstrained expansion of credit and that seems sensible.
> He wrote about how the gold standard created responsible spending and more equality in the world:
The Gilded Age, which had quite high levels of inequality, occurred when the gold standard was active:
* https://en.wikipedia.org/wiki/Gilded_Age
It should also be noted that the gold standard did not bring any kind of price stability:
* https://archive.is/https://www.theatlantic.com/business/arch...
Further, sticking to the gold standard made the Great Depression worse as it reduced flexibility and options of central banks had, and made deflation worse:
* https://www.nber.org/papers/w3488
The sooner countries left the gold standard the sooner they started recovering from the Great Depression:
* https://www.nber.org/papers/w27586
39 trillion in debt with no Congressional stomach for...
- spending cuts
- stopping fraud
- figuring out how the net worth of people in Congress increases from hundreds of thousands of dollars to 10s or 100s of millions of dollars
- addressing wasteful and ineffective programs
Given those issues, the only solution will be inflation. The circling the drain moment will hit with the associated welfare programs get a direct staple to inflation itself, so we will spend more to combat inflation, causing more inflation faster.
It's not going to be fun.
> ...it prevented massive unconstrained expansion of credit and that seems sensible.
At the height of the Great Depression (1936), some economists proposed The Chicago Plan to separate the provision of credit from the money supply by eliminating fractional reserve banking, giving better control of the increases and contractions of credit, the elimination of bank runs, and a dramatic reduction in debt. There was a recent (2012) paper from the IMF [1] that seemed to find this actually is pretty sensible, although I do not claim to be smart enough to understand all of the implications.
[1] https://www.imf.org/en/publications/wp/issues/2016/12/31/the...
He also oversaw the economy for twenty years before one of the worst recessions in the world. He helped set the stage for multiple disasters with his policies, so I'd take his opinions with a grain of salt.
Really?
I don't think anyone really holds him responsible for the dotnet crash of 2000 as that was a market issue and irrational exuberance issue and not a monetary one.
And 2008 was similar. The Fed doesn't control or have any responsibility for lower lender standards or ARM mortgages.
Congress was responsible for the GSE's that bought any mortgages and wrote insurance on those mortgages, so you can't blame the FED for that.
Wallstreet are their regulators were responsible for the securitization of mortgages that went bad in 2008, not the FED.
At worst you can say they had the wrong monetary policy but that's an opinion and not something that can be said as a fact.
Can you flesh out how you feel Greenspan is responsible for 2008?
2 replies →
It was generally 20 years of growth and the 2008 banking crisis actually happened after he left.
4 replies →
It is well know there weren't deep structural problems at the time of (and caused by) the gold standard...
I don't understand why people keep banging about the theoretical advantaged of a gold standard whan it was the default monetary system for centuries and we have firsthand evidence of the problems it causes (and certainly not more equality in the world!). It has been tried by the whole Earth during several generations.
If you think, like Greenspan and others, that there ought to be a mechanism to force some monetary restraint on governments, try to think of a new mechanism, because the "old way" wasn't better. We know it. Move on.
Nixon was running out of money fast- the cold war was expensive.
IIRC it was Greenspan that didn’t mean to, but did disclose the use of gold swaps, so even if there is all the gold that is claimed to be in Fort Knox, the question of who owns the gold is unanswered.
Mostly I just know Alan Greenspan for being a disciple of Ayn Rand back in the 1950s/60s. Though the Objectivists didn't like his work at the federal reserve. In 2008 he admits to being shocked that banks weren't rationally selfish.
Non paywalled obituary: https://apnews.com/article/greenspan-federal-reserve-death-2...
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