It’s well-known that the former Federal Reserve chair, Alan Greenspan (KBE, Knight Commander of the British Empire), was a gold-standard advocate in the 1960s. And thereafter muffled his principles, as he rose to become the unofficial king of the world’s banking establishment.
In Greenspan’s multi-decade tenure at the Fed (and, going against his former sound-money principles), he gave us the “bubble economy” we know and love. Including the dot-com bubble of the late 90s and the housing bubble of the mid-Naughties. His intellectual heirs, Ben Bernanke and Janet Yellen, have given us the market bubbles of today.
So his short, new article in Foreign Affairs caught my eye. It promises to explain “Why Beijing is Buying [Gold].” Of course it doesn’t explain any such thing. Its point wanders. Why Greenspan even wrote it is a mystery.
And yet, he did write it. In other words, Alan Greenspan, KBE, felt the need to publicly raise the topic of China buying gold, in Foreign Affairs magazine. And check out his side remarks:
If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system…For the rest of the world, gold prices would certainly rise…
For more than two millennia, gold has had virtually unquestioned acceptance as payment…Today, the acceptance of fiat money — currency not backed by an asset of intrinsic value — rests on the credit guarantee of sovereign nations…a guarantee that in crisis conditions has not always matched the universal acceptability of gold.
If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute…
In essence, the world’s former top banker has just publicly hinted that:
- Gold is money.
- China will start buying it.
- China will become the world’s new financial powerhouse.