Why Greenspan's reinvention is important to the average investor
So why go to the trouble of cataloguing Alan Greenspan's October, 2014 epiphany?
We need to keep in mind that this is an individual who actually sat at the controls of the most important central bank of the world. As such he saw first-hand how the monetary system operates––the good, the bad and the ugly. For him to graduate from that experience a proponent of gold reveals more about the efficacy of central banks than perhaps those institutions would like to be known. After all, the central bankers' stock and trade is trust and belief. Wall Street trusts that the central bank knows what it is doing and it believes that it is powerful enough to make its will stick.
Greenspan in the course of thirty days has dispelled both notions. He tells us unambiguously that the Fed's power is limited; that its policies by and large are dictated by forces outside its control (as mentioned earlier, he exclaimed at one point that he "never said the Fed was independent"); and that the Fed's options are restricted by the overwhelming needs of a government fiscally out of control. What's more he recommends gold to the citizenry as a financial defense. Tellingly, the man who was once called "maestro" for his apparent mastery of economic orchestration appears to have been humbled by his experience. His born again embrace of gold, and as one of the Fed's most vocal critics, should be viewed as one of the more important curtain calls of the modern era. I am surprised that more has not been made of it.
As a young man Greenspan wrote what has become a famous tract––one widely referenced by gold advocates even now and one that still ranks among the most highly visited pages at USAGOLD. "Gold and Economic Freedom" is a strongly worded, no-holds-barred attack on fiat money and the welfare state written in the late 1960s. It also endorses the gold standard as a means to restraining those impulses.
Former Congressman Ron Paul once told the story of his owning an original copy of "Gold and Economic Freedom" and asking Greenspan to sign it. While doing so, Paul asked him if he still believed what he wrote in that essay some forty years earlier. Greenspan, then still Fed chairman, responded that he "wouldn't change a single word." True to his word, and after serving a 19-year stint as chairman of the Federal Reserve, he comes back to the place where he began. At nearly 89 years of age, he squares the books and adds a new and, in my view, useful chapter to his legacy. At the New Orleans conference Greenspan was asked where he thought gold would be in five years. He answered "higher." When asked how much, he said "measurably."
Welcome back, Mr. Greenspan.