Greenspan Warns A Crisis Is Imminent, Urges A Return To The Gold Standard

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On Friday afternoon, after the shocking Brexit referendum, while being interviewed by CNBC Alan Greenspan stunned his hosts when he said that things are about as bad as he has ever seen.

“This is the worst period, I recall since I’ve been in public service. There’s nothing like it, including the crisis — remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away. I’d love to find something positive to say.”

Strangely enough, he was not refering to the British exodus but to America’s own economic troubles.

Today, Greenspan was on Bloomberg Surveillance where in an extensive, 30 minutes interview he was urged to give his take on the British referendum outcome. According to Greenspan, David Cameron miscalculated and made a “terrible mistake” in holding a referendum. That decision led to a “terrible outcome in all respects,” Greenspan said. “It didn’t have to happen.” Greenspan then noted that as a result of Brexit, “we are in very early days a crisis which has got a way to go”, and point to Scotland which he said will likely have another referendum on its own, predicting the vote would be successful, and Northern Ireland would “probably” go the same way.

His remarks then centered on the Eurozone which he defined as a truly “vulnerable institution,” primarily due to Greece’s inclusion in its structure. “Get Greece out. They’re a toxic liability sitting in the middle of a very important economic zone.” Ironically, the same Eurozone has spent countless hours doing everything in its power to show just how unbreakable the union is by preserving Greece, while it took the UK just one overnight session to break away. Luckily the UK was not part of the monetary union or else it would be game over.

But speaking of crises, Greenspan warned that fundamentally it is not so much an issue of immigration, or even economics, but unsustainable welfare spending, or as Greenspan puts it, “entitlements.”

The issue is essentially that entitlements are legal issues.  They have nothing to do with economics.  You reach a certain age or you are ill or something of that nature and you 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.

 

I don’t know how it’s going to resolve, but there’s going to be a crisis.

 

This is one of the great problems of democracy.  It goes back to the founding fathers.  How do you handle a situation like this?  And it’s very troublesome, but eventually you get things like Margaret Thatcher showing up in Britain.  Their situation is far worse than ours.  And what she did is she turned it all around essentially by, as I remember it, the miners were going to strike and she decided – she knew they were going to strike.  Since at that point, the government owned these coal mines, she built up a huge inventory so that when they went on strike, there was enough coal in Britain so that eventually the whole union structure collapsed.  She fundamentally changed Britain to this day.  The fact that we are doing so well in the E.U. is not altogether clear that it is the E.U. or whether it was Margaret Thatcher.

When asked if “we need an accident of history” to address this, Greenspan replied “Probably. In the United States, social benefits, which is the more generic term, or entitlements, are considered the third rail of American politics.  You touch them and you lose.  Now, that is a general view.  Republicans don’t want to touch it.  Democrats don’t want to touch it.  They don’t even want to talk about.  This is what the election should be all about in the United States.  You will never hear one word from either side.  ”

This is the same entitlements crisis that Stanley Druckenmiller has also been raging about for years, most recently in his “The Endgamepresentation delivered at the Ira Sohn conference.

Greenspan then went on to bash the false “recovery” narrative, warning that “the fundamental issue is the fact that productivity growth has ground to a halt.” 

 We are running out of people.  In other words, everyone is very pleased at the fact that the employment rate is rising.  Well, statistics tell us that we need more and more people to produce less and less.  That is not a prescription for a viable political system.  And so what we have at this stage is stagnation.  I don’t think that there is anything out there which suggests that there is a recession, but I don’t know that.  What I do know is that the money supply, and too, which has always been a critical indicator of inflation, is for the first time going up remarkably steadily 6 percent, 7 percent, almost a straight line.  It’s tilted up in the last several months.  It’s added a percentage point or two.  The thing that we should be worrying about now, which we have actually given no thought to whatsoever, is that this type of economic environment ends with inflation.  Historically, fiat money has always ended up that way.

And here we get to the heart of the matter, because in not so many words, Greenspan effectively says that hyperinflation is coming:

I know if you look at human history, there are times and times again where we thought that there was no inflation and everything was just going fine.  And I just basically say, wait.  This is not the way this thing ordinarily comes up.  I don’t know.  I cannot say I see it on the horizon.  In fact, commodity prices are soggy.  The oil prices has had a terrific impact on global inflation.  It’s not about to emerge quickly, but I would not be surprised to see the next unexpected move to be on the inflation side.  You don’t have inflation now.  And you don’t have it until it happens.

Of course, Greenspan ignores his own role in the creation of the boom-bust cycle which has doomed the world to series of ever more destructive bubbles and ultimately, hyperinflation which will likely be unlashed once the helicopter money inevitably arrives. In retrospect, the 90-year-old, who clearly is looking forward not backward, has a simple solution: the gold standard.

If we went back on the gold standard and we adhered to the actual structure of the gold standard as it exited 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.  I’m known as a gold bug and everyone laughs at me, but why do central banks own gold now?

Why indeed. And of course, that’s rhetorical.

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wip
wip

1) “In the United States, social benefits, which is the more generic term, or entitlements, are considered the third rail of American politics. You touch them and you lose.”

Why can’t US citizens have a referendum vote on that?

2) He didn’t say hyperinflation, he said inflation.

Anonymous
Anonymous

A referendum would just reaffirm them, and more strongly and untouchable than they are now.

Over half of the population is dependent on some form of government benefits, it has become systemic to our entire way of life.

The only they will go away is a total systemic collapse and (probably) about half the population dead from it before it stabilizes, and maybe not even then depending on how it plays out.

susanna

Anon,
That was harsh. There are not too many jobs
available for functional illiterates in dependent
inner cities. There aren’t too many for the marginal
others of all stripes, that are using quasi-disabilities
to collect a gov check. Then we have the hoards of
illegals that are subsidized and political refugees from
the former communist nations. I could go on. There is
SS that is collected by all sorts of groups/other than seniors.
There is fraud in the system up the gazoo and many multiples
of bureaucracy to administer all of it. What do those care?
It is not their $ and they ensure their own job security.
I don’t think wishing or predicting all the dependents must
die is any solution.
Greenspan the sage NOW calls for a gold standard. I do not
respect that man. He and his fraudulent practices contributed to the fiscal nightmare. We might consider taking the
trillions the banking cabal stole from the usa/and the gov
that enabled them, back. If we had those monies we could
refund the retirement money people saved for their
unproductive years. ZIRP has contributed to our demise
and conversely, the wealth of the nasty self-enriching
bankers and their friends. Why doesn’t Greenspan talk
about the MIC waste and the bankers’ theft and fraud?
Instead he focuses on the ultra poor.

MuckAbout

Mr. Greenspan was an acolite of Ayn Rand. He was a hard money man all his life until he was appointed chairman of the Federal Reserve where, because of the fact he was in the job and it was politically proper for him to do it, he reversed himself, played the “bail out” game, bought Treasuries, gave money to the banks to be redeposited at interest with the Fed (to “insulate it” so inflation would not ballon to 30% a year within two years) and generally played the establishment Elite/PTB game.

I do not have one iota of respect for Mr. Greenspan. I think he is a total two-faced asshole who took the job of Fed chairman and did absolutely nothing to change the course of history. History will call him an asshole too, just mark my words.

I wouldn’t piss on him if he were on fire.

Muck

kokoda
kokoda

Agree – Greenspan was a Gold guy before he became the Fed head, then changed his tune, then loved Gold again after he left the Fed.

Integrity – his words are useless.

Uncle Charley

May I play Devil’s advocate and say Greenspan had no choice once in the system of corrupt bankers and politicians to tell them what they wanted to hear. Which was meaningless babble. Hasn’t anyone noticed that his latest comments are lucid and understandable? Maybe we still shouldn’t trust him but the straight talk from him is interesting for a change.

susanna

Muck,
perfect…100%

MuckAbout

Ms. Rand, no doubt, spun in her grave while Mr. Greenspan fiddled away chance after chance to pull a “Volcker” and kill the massive mal-investment and various bubbles that happened under his watch.

Muck

Homer
Homer

Muck About–If you are going to die, it’s better to die tomorrow than today.

When Greenspan became chairman, the die was cast. Collapse was baked into the cake by bad government decisions over decades. The collapse is going to be horrendous. It will be widespread rioting on steroids with loss of life. There aren’t going to be enough police to even make a dent in maintaining the peace. The only hope is for the citizens to be armed and for them to maintain the peace.

Despite Obama’s beliefs to the contrary, actions have consequences.

I’m still out on whether Greenspan is a good guy or a bad guy. Bix Weir thinks he is a good guy.

That judgement may still be out, pending further review.

tayronachan
tayronachan

That’s why I’d rather see that happen on Hillary’s watch, rather than Trumps. Although it’d be better to have a Trump at the helm, than a Hillary at that time.

durangodan
durangodan

Anyone who thinks Greenspan a “good guy” is an idiot. Hang him by his dried up useless testicles before he escapes his due by old age. Same for that evil fuck Kissinger. Both played major roles in destroying this country. Much too late to be fixed, so revenge is best we can hope for.

susanna

who cares what Bix thinks…his thinking isn’t perfect.

tayronachan
tayronachan

So…we’re doomed.

Anonymous
Anonymous

Yep, no way out.

CT-Hilltopper
CT-Hilltopper

Yup

Greenspan coming out and saying that we should go back to the gold standard is pretty much equivalent to hearing the proverbial fat lady sing

Walt
Walt

I have never understood why a rabid Gold bug would be given the keys to the Fed. It’s a bit like putting Jesus in charge of your War Department.
Or a Joseph Mengele type in charge of an obstetrics department. People like that generally gravitate towards abortion clinics, where murder is ‘perfectly’ legal.
Maybe Bix and his ‘Road to Roota’ theory isn’t far off the money after all. We shall see…

Rainman
Rainman

Gold has nothing to do with it. It was buying votes with entitlements, entitlements that were never funded. That Social Security lock box? It never existed. Chicago will go first. That great windy city. Blown away by greed and stupidity. Even before common core math, the city fathers figured that 8 times 8 equals 88. Then 8 times 8 equaled 8,800. And why stop there. Union flunky’s getting a second whole new pension by simply working one day at a different municipal entity. I was a fool for turning my nose up to a career at a city library. Now I have 3 jobs and a bad hip and I’m going down to a union hall tomorrow to apply for a fourth job. And I’ll get it because so many people just don’t want to work and don’t have too.
All you govt goons that read these blogs looking for traitors, better look in the mirror. No ones getting a pension. There’s no more money left to steal.
Rainman……….

Grog
Grog

“Gold was the enemy to me because that was a speculative vehicle while I was trying to hold the system together. [The speculators] were on the other side.”
Paul Volcker

“It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. [I]f the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.’ The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.”
Paul Volcker

susanna

I have more contempt for the Volcker than Greenspan,
but it is close.

RCW
RCW

Not that he was a saint, but the older I get, the more I think Andrew Jackson (and Jefferson too) correctly identified the threat and true nature of banksters.

Hollow man
Hollow man

He is starting to spin himself out of the web he helped create. Hopefully, in his mind, he won’t be lynched in one form or another.

susanna

drawn and quartered is more apt…more bang for the buck.

Ed
Ed

Apparently, Greenspan’s hypocrisy knows no bounds. He wrings his hands and cries about the state of the economy without admitting his own culpability. He’s a typical Randian, self absorbed, intellectually dishonest and just an overall insufferable prick.

BTW, y’all, Ayn Rand was a fucking fraud who couldn’t write her way out of a wet paper bag. Anybody who thinks her silly novels were readable obviously doesn’t get out much.

Bea Lever
Bea Lever

Ed

Rand’s “The New Left: The Anti-Industrial Revolution” is one of my faves. Stick a sock in it.

Ed
Ed

That explains some of your retardation, Bea. Rand was a nutjob, who built a cult of personality for herself. Fuck her and all her “objectivists”. I never met an objectivist who wasn’t an insufferable dickhead.

Bea Lever
Bea Lever

Ed- You obviously have never read “The New Left: The Anti Industrial Revolution” or you would not make such a ignorant statement and call moi retarded. I doubt few here have read it and few here have even a clue as to why she wrote it and why it was always 100% of the text of her public seminars.

Most people who pooh-pooh Rand have never read her books. Let me encourage you to read the above referenced book of Rand’s and remember it is from the very early seventies and THEN equate it to what has happened in this country since that time.

I am far from retarded thank you very much, Mr. Ed.

TJF
TJF

Greenspan is a two-faced fraud. He seems to want us to believe what his words and ignore his actions. He should’ve been a politician.

CT-Hilltopper
CT-Hilltopper

He was the Fed Chairman…same thing

TJF
TJF

LOL. Yes, I guess so, but he never had to campaign to try to get the lowly public to vote for him, but I suppose there is just as much campaigning behind the curtain.

Stucky

Greenspan could have stopped the bullshit …. when he had power.

Now that he doesn’t have the power … all he has is bullshit.

AGES

Bea Lever
Bea Lever

Complete retardation to believe da joos who craft these schemes and jacked the control of our money would “stop the bullshit” they created to skin us like rabbits. Rothschilds (joos) own the central banks of the world, get a clue. AG is just another joo in the club….period.

bb

How can you not have inflation when you have fractional reserve banking ? Bank are really just little money making ( out of thin air ) machines much like the biggest counterfeiting machine on the planet ( Federal Reserve ).Inflation comes with debt monetary systems and policies.
I think Greenspan and all central bankers are liars.Just liars and deceivers.

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