Greenspan, Gold, and the Banality of Evil

A controversial article looking at former U.S. Fed Chairman Alan Greenspan’s role in the easy money systems which have pervaded the U.S. and the world economies – and his recent disavowals of these systems in retrospect.  While the article is primarily directly relevant to the U.S. economy, it has parallels within any nation which has implemented similar monetary easing.  The views expressed are those of the author and not necessarily those of the owner of this website.

By Stefan Gleason*

Under certain circumstances, seemingly decent human beings are capable of horrific things.

So it is with Former Federal Reserve Chairman Alan Greenspan, who parlayed his sound money bona fides into the top post at America’s private banking cartel and current issuer of our un-backed currency. In betrayal of his own stated free-market principles, Greenspan spent his tenure at the Fed pumping up financial markets with easy money and enabling runaway government spending commitments.

Today, however, the “maestro” of central banking is playing a very different tune. He’s warning against an inevitable crisis resulting from the very policies he helped implement.

Perhaps it’s a late-life crisis of conscience. Perhaps he feels guilty. Perhaps at age 90, he just feels free to speak his mind in a way that most current and former Fed officials don’t. In any event, Alan Greenspan is very concerned about the legacy he will leave and now seems genuinely worried about the country’s financial future.

Greenspan: “We Are in the Very Early Days of a Crisis Which Has Got a Way to Go”

Following the Brexit shock and the market volatility that followed in its aftermath, Greenspan scolded British officials for the “mistake” of allowing the vote to leave the European Union to take place. He predicted more dominos would fall. In an interview with Bloomberg last week he said, “We are in very early days of a crisis which has got a way to go.”

It’s not surprising to hear Greenspan echo other pro-globalist voices in bemoaning the potential disintegration of the European Union. Central bankers, commercial bankers, governments, and international corporations all have vested interests in pushing for what they call “integration.”

Alan Greenspan on Bloomberg

Outgoing United Kingdom Independence Party (UKIP) leader Nigel Farage declared the successful Brexit referendum “a victory for ordinary people” against “multinationals,” “big merchant banks,” and “big politics.”

As global stock markets protested, the gold market surged to new 2016 highs post-Brexit.

The success of Brexit, which defied the predictions of pollsters, may bode well for Donald Trump. His unconventional campaign for the presidency hits on similar anti-globalist, anti-establishment themes.

Meanwhile in Congress, renegade Republican Rep. Thomas Massie is pushing what he calls an “Amexit” from the United Nations. Massie’s American Sovereignty Restoration Act (HR 1205) would allow the U.S. to leave the United Nations and cease sending $8 billion per year in “contributions” to the world body.

Anti-establishment politics irks elites in central banking and elsewhere who institutionally prefer the status quo. But what really worries former Fed chair Alan Greenspan isn’t the upcoming election or any bill in Congress. It’s the $19+ trillion national debt and the trillions more in future spending commitments that are already baked into the cake.

Greenspan: Entitlements Time Bomb “Is What the Election Should Be All About”

The problem, as Greenspan sees it, is the structure of Social Security, Medicare, and other “mandatory” spending programs. Through them, ever growing numbers of people “are entitled to certain expenditures out of the budget without any reference to how it’s going to be funded. Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate. That annual growth rate of two percent is not adequate to finance the existing needs.”

Greenspan’s prognosis: “I don’t know how it’s going to resolve, but there’s going to be a crisis.”

All Tax Revenue Will Go Toward Health Care, Social Security, and Net Interest by 2032

His pessimism stems from the political reality that elected representatives lack the will to address entitlement spending. “Republicans don’t want to touch it. Democrats don’t want to touch it. They don’t even want to talk about it. This is what the election should be all about in the United States. You will never hear one word from either side,” Greenspan told Bloomberg.

He is right, of course. Even self-described “conservative” Republicans who tout smaller government in principle don’t actually vote for it in practice. Mathematically, they can’t.

Once you rule out cuts in military and entitlement spending, as most Republicans do, what’s left on the table to cut is small potatoes. Going after waste, fraud, and abuse isn’t going to stop the bleeding of red ink as millions of Baby Boomers withdraw from the workforce and expect to collect trillions in unfunded benefits that have been promised to them.

The good news (if you’re a politician) is that under our monetary system you don’t ever have to cut. You don’t have to ensure that your promises of future benefits can be met with revenues. You can be as fiscally irresponsible as the Federal Reserve’s willingness to expand the currency supply permits you to be. The Fed stands ready to buy up government bonds in unlimited quantities, making a sovereign default practically impossible and enabling the government to borrow at artificially low interest rates.

The government debt bubble is a product of the fiat monetary system. Under a gold standard, Congress would be limited by what it could actually extract from the people in taxes.

Gold Standard

Here’s what one of the world’s most famous economists said recently about gold: “If we went back on the gold standard and we adhered to the actual structure of the gold standard as it existed prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the United States, and that was a golden period of the gold standard.”

The self-described “gold bug” economist quoted above is none other than Alan Greenspan!

Yes, the longest-serving chairman of the world’s most powerful fiat money establishment.

The same Alan Greenspan who helped both Republican and Democrat administrations drive up the national debt from $2.4 trillion to $8.5 trillion in the years 1987-2006.

The same Alan Greenspan whose implicit open-ended backing of U.S. debt markets helped Congress grow unfunded liabilities by untold trillions more than is even reported in official debt figures.

The same Alan Greenspan who engaged in shocking interventions and currency devaluations, starting with bailing out Long Term Capital Management in 1998 and followed by a blowing up of the tech bubble, and, after its crash, the housing bubble.

Why Did Greenspan Commit His Horrific Monetary “Crimes”?

At last, Greenspan sees the light. Perhaps in private he always did. Before he helmed the Fed, he was known as a free-market advocate who associated with novelist-philosopher Ayn Rand and strongly favored a gold standard. But unlike a Randian hero, Greenspan compromised his principles in his pursuit of power, fame, and social status.

Taken to its extreme, the phenomenon of Greenspan’s tenure was akin to the “banality of evil,” a concept that came into prominence following Hannah Arendt’s book about the Nazi trials. Arendt’s thesis, as described by author Edward Herman, was that people who carry out unspeakable crimes aren’t necessarily crazy fanatics, but rather “ordinary individuals who simply accept the premises of their state and participate in any ongoing enterprise with the energy of good bureaucrats.”

Why did Greenspan play a key role in undermining sound fiscal policies and sound money while he was at the height of his power and influence at the Fed? Why did he do so much to fuel asset bubbles and reckless debt spending? Only Alan Greenspan himself knows for sure, but we’re the ones paying the price.

 *Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, TheStreet.com, Seeking Alpha, Detroit News, Washington Times, and National Review.
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Gold and silver regaining their luster?

Julian Phillips looks at the trans global economic data which has been supporting the latest run up in the gold and silver price

New York closed at $1,224.90 up $3.10 over Friday’s close. Asia took it up to $1,230. The LBMA Gold price was set at $1,228.15 up $11.85 over Friday’s level. The euro equivalent stood at €1,077.23 up €6.45 while the dollar was weaker and the euro stronger at $1.1401 up $1.1359 against the euro. Ahead of New York’s opening, gold was trading lower in London at $1,226.60.00 and in the euro at €1,075.63.

The silver price closed at $17.53 up 10 cents on Friday’s level. Ahead of New York’s opening it was trading at $17.57.

With the gold price well above resistance at $1,220, touching $1,230 we expect a stronger day for gold and silver.   The dollar index is now at 93.60.

Confidence in the future is now waning as data out of the U.S. is contrary to the expectations markets had at the beginning of the year. And this is at a time when in the U.S. the ‘new normal’ of lower growth and potentially rising U.S. rates are kicking in. But the growth we see is not consistent with an economy that has gained traction and is moving to a robust state. What is very alarming is that if the U.S., after so much stimuli has only reached this position, any downturn will find the Fed and Lawmakers without ammunition to bring it to a robust state.

In Japan where an even more aggressive program of Q.E. is on the way economic prospects are weakening. In the Eurozone where QE is still in its early days, unless the euro falls to parity with the dollar, which is still likely, QE by itself is not going to outperform the U.S. or Japan?  With Bond Yields rising, investors who went into equities for yield may retreat, bringing the equity market into the same state as the bond markets. Against such a backdrop it seems that gold and silver may have started to regain some of their luster. With markets looking vulnerable in this picture it may only take a relatively small event to trigger volatility of an ominous nature.

Which brings us to Greece, once again; ignore the politics and look at the cash and the mandate the new government was given when it was elected.  The government cannot commit political suicide and there is very little cash left. A referendum is their next move or default.  The default or an exit from the Eurozone could be the next event to trigger global financial market volatility, once an outcome is clear.

As prices began to look stronger on Friday there were no sales from the SPDR Gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are at 723.911 tonnes and at 166.14 tonnes in the Gold Trust.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

Oil and copper crash – are we seeing start of next great depression?

Latest commentary on Mark O’Byrne’s Goldcore website – www.goldcore.com  looks at some disturbing possible scenarios.  Are we perhaps on the verge of a global depression?

Oil prices fell another 1 per cent this morning  and continue their collapse – down 57% in just over 6 months. Copper crashed 8% on the London Metal Exchange, plunging to 5 and a half year lows.

Oil fell to fresh six-year lows and has fallen almost 60 per cent since June 30, 2014 to levels last seen in early 2009 after the 2008 crash (see chart).

February Brent crude dropped another 79 cents to $45.80 a barrel and West Texas Intermediate crude for was at $45.34, down 55 cents. Copper for delivery in three months on the LME dropped as much as 8.7 percent to $5,353.25 a metric ton, the lowest intraday price since July 2009. Nickel slid 4.6 percent and lead fell 3.8 percent to the lowest in more than two years.

Commodities came under further pressure after the World Bank cut its forecasts for global growth, reinforcing worries of a gloomy economic outlook.

There has been much speculation in recent months as to the causes of oil’s dramatic crash in price. Some analysts have suggested that Saudi Arabia is attempting to put the U.S. shale oil industry out of business in order to keep the U.S. dependent on Saudi oil exports. Others suggest that prices were forced down by the Gulf states and the U.S. in order to damage Russia’s exports and its economy.

Copper Comex Spot HG Index - 1997 to January 14, 2015 (Thomson Reuters)

These may be factors but it is becoming increasingly clear that if they are, they are secondary factors to the major trend which is falling demand and a slowdown in the global economy – this is most pronounced in China, in Japan and in Europe.

We already have witnessed the customary New Year’s hype from many banks and governments that this year will finally be the year when economies come off the life-support of ultra low interest rates – even as they cheer-lead the ECB’s expected foray into QE and euro money printing.

However, the fact is that the omens for the economy this year are far from good. The most telling sign is not specifically that oil prices are collapsing but that it is happening in conjunction with the most widely used industrial metal – copper.

Copper fell over 8 per cent today, after a 1.3 per cent fall yesterday hitting its lowest level in nearly five years on the back of an 18% decline last year.

China has been the major user of the metal in recent years as its construction industry boomed. The Chinese housing and property market is now slowing down with the potential for a staggering collapse as dozens of “ghost cities” – brand new cities financed by reckless banks with nobody to occupy them – unwind.

The effects of such would be harsh on metal and commodity exporting countries, particularly those exposed to China like Australia and Brazil.

While copper has seen the most notable declines, other industrial metals are also faring poorly. According to Bloomberg, “A gauge of the six main industrial metals has declined 9.3 percent in the past 12 months to the lowest since June 7, 2010.”

Clearly global industrial production is slowing down.

When oil price declines are viewed against this backdrop a more worrying picture emerges. Oil prices are now at almost six-year lows and this despite record imports of oil by China.

The Financial Times report that trade data showed “China imported 30.37m tonnes of crude in December, up 19.5 per cent month-on-month.”

In only six months oil has lost 60% of it’s value. This may have been partly exacerbated by strategic maneuvering by various players but, by any standard, such a decline must be viewed with alarm.

The recent plunge in commodity prices and especially copper should also be viewed with alarm. It is said that copper should be known as Doctor Copper as the metal is said to have a PhD in Economics and the ability to predict future economic growth or a lack thereof.

Are we on the verge of a global depression?

Only, time will tell. The inability of central banks to stoke inflation and sustainable economic growth, statistics from Europe suggesting deflation, and stubborn and rising unemployment across the western world would suggest that it is a real possibility.

At the very least, the ‘great recession’ seems likely to continue. A serious recession or depression will likely collapse the already fragile banking system, especially in Europe, and the savings of ordinary people and companies will become exposed to bail-ins.

As ever, there are so many actors, factors and potential outcomes, it is unwise to predict exact outcomes. All we can be sure of is that the outlook is uncertain and unfortunately negative and we should prepare accordingly.

From a financial perspective, now is the time to be risk averse and diversify and favour safe haven assets such as safer forms of cash, bonds, hard assets and of course physical gold.

Click this link to read more commentary and data on the www.goldcore.com website

Gold is far more than just a precious metal

Gold is far more than just a precious metal

Julian Phillips’ looks at today’s early market action and looks for further falls in the Euro against the dollar.  Will the Swiss National Bank intervene to follow the euro down?

New York closed Friday at $1,187.50 up $4.90 as the world goes back to business as usual and volumes rise on Chinese demand. Gold rose in Asia to $1,196.00 ahead of London’s opening. The AM Fix saw the gold price set at $1,192 up $7.50 and in the euro, at €998.81 up €15.46 while the euro was another cent weaker at $1.1934. Ahead of New York’s opening gold was trading in London at $1,188.60 and in the euro at €998.53.

The silver price was at $15.79 up 10 cents. Ahead of New York’s opening it was trading at $15.90.

There were no sales or purchases from or to the SPDR gold ETF or Gold Trust on Friday. The quiet holiday period appears to be out of the way now and Asia came in solidly.

Will further falls in the oil price affect gold and silver? Will Russia bring in Capital Controls as it watches the Ruble fall or are we looking at a different world than in the past? Are the rules governing exchange rates changing for good? Will the slowdown in China hurt the gold price? These are questions that will be answered in 2015 by the realities that will confront us. We continue to believe that gold is far more than just a precious metal, it is a metal that reflects so much of the perceptions of the financial world. 2015/16 will demonstrate this well. We will cover these in our work.

Early in 2014 we forecast the euro would fall to between $1.10 and $1.20. We are there now and the market tone tells us that it will fall further as the battle over Q.E. in the Eurozone continues. The euro price of gold is trying to make a solid break through €1,000 a signal that it is breaking out upwards. We see this as bringing in traders and speculators even in the U.S. The dollar price of gold has more work to do before it reflects the same prospects, but this week may see that work done. We expect to see the Swiss National Bank step into the market to weaken the Swiss Franc as it moves over 1.2 to the euro.

What QE really does is to protect the balance sheets of the banking system, but if, as we saw in the U.S. and now in the Eurozone, lending does not pick up as a result, we have to conclude that it is the entrepreneurial drive that brings growth back to an economy, as we are now seeing in the U.S., and not ‘cheap depreciating money’.  But the recovery we are seeing in the U.S. is not nearly as robust as we saw in the nineties and is barely discernible in the Eurozone continuing so for the next few years, because of its Socialist nature. The main drivers to growth, right now, are a cheap euro and oil. These directly impact that economy. The euro has already dropped 20% from its peak and yet deflation threatens at the door still. Europeans will turn to gold in 2015.

The silver price appears reticent to rise with gold at the moment, again waiting for direction from gold.

Julian Phillips is founder and editor of www.goldforecaster.com and www.silverforecaster.com