Alan Greenspan: Champion of the Gold Standard.

[ZenOps]

http://www.youtube.com/watch?v=yRJs5yL62BA

Talking about the Gold standard again.

[dre]

http://www.youtube.com/watch?v=yRJs5yL62BA

Talking about the Gold standard again.

Id be REALLY carefull about taking that guys advice on anything. Im not a huge fan of the federal reserve or fiat currency, but Alan Greespan and his decisions were one of the CAUSES of the housing bubble. He ignored the Taylor Rule, and kept interest rates way lower for longer than modern macro-economic theory would suggest.

http://static.seekingalpha.com/uploads/2009/4/5/saupload_09_04_03b_taylor_rule.png

The problem isnt necessarily the Federal Reserve its that he did a shitty job running it.

[ZenOps]

I wouldn't blame Greenspan entirely for the sub prime mess.

I'd tend to blame greedy mortgage lenders more. They lent out money knowing full well that many people would default. Thing is - it backfired on the banks when they lent out too much money when it came to pay the bills (so to speak) It would have been fine to lend to maybe 5-9% sub-prime knowing that they would default, but they got greedy and started hitting double digit percentages of defaults.

Then they ended up with too many houses, and no liquid income to pay back lenders.

This is why fiat money doesn't work, its not honest. Now assume that for every downpayment on a house, a person had to put 10 ounces of gold or equivalent silver. But in that case - you get people protesting that they cannot get a loan.

http://www.youtube.com/watch?v=UX4b_rhT0nU

I think that Greenspan did what he could. That the US population itself could not pay 2.whatever% interest on a regular basis as in real productive and tangible goods growth - is also partially a fault, of the people themselves. Many sub-prime borrowers went into a mortgage with the intention of defaulting (at least they get to live in a nice place for a while, even though they can't make the minimum payments, nevermind the full amount.)

[Smallc]

The gold standard is an utterly ridiculous thing. You see, gold has no more inherent value than paper money.

[Moonlight Graham]

The gold standard is an utterly ridiculous thing. You see, gold has no more inherent value than paper money.

At least the price of gold can't be manipulated and controlled by a single country.

[dre]

I wouldn't blame Greenspan entirely for the sub prime mess.

I'd tend to blame greedy mortgage lenders more. They lent out money knowing full well that many people would default. Thing is - it backfired on the banks when they lent out too much money when it came to pay the bills (so to speak) It would have been fine to lend to maybe 5-9% sub-prime knowing that they would default, but they got greedy and started hitting double digit percentages of defaults.

Then they ended up with too many houses, and no liquid income to pay back lenders.

This is why fiat money doesn't work, its not honest. Now assume that for every downpayment on a house, a person had to put 10 ounces of gold or equivalent silver. But in that case - you get people protesting that they cannot get a loan.

http://www.youtube.com/watch?v=UX4b_rhT0nU

I think that Greenspan did what he could. That the US population itself could not pay 2.whatever% interest on a regular basis as in real productive and tangible goods growth - is also partially a fault, of the people themselves. Many sub-prime borrowers went into a mortgage with the intention of defaulting (at least they get to live in a nice place for a while, even though they can't make the minimum payments, nevermind the full amount.)

No he absolutely failed. Raising interest rates in 2003 once it was apparent to everyone with a brain that a housing bubble was forming probably would have cooled down the market. Instead he continued lowering rates.

You can blame lenders and borrowers all you want but at the Macro level the fed is supposed to control liquidity so that people dont play fast and loose with money. Abject Failure.

[dre]

At least the price of gold can't be manipulated and controlled by a single country.

Which of course is the problem. If you cant manage the size of your money supply so that it expands and contracts along with the economy your currency becomes worthless as a transactional medium.

[Topaz]

If found video about the Bush tax cuts and how the US now is doing to cover those cuts. They are going to other countries and borrowing money. Among them are the Chinese and Iranians. Also in this video, you see will that the Republicans will spend more on the tax cuts than the Democrats. http://www.msnbc.msn.com/id/3036677/vp/40540298#40540298

[dre]

If found video about the Bush tax cuts and how the US now is doing to cover those cuts. They are going to other countries and borrowing money. Among them are the Chinese and Iranians. Also in this video, you see will that the Republicans will spend more on the tax cuts than the Democrats. http://www.msnbc.msn.com/id/3036677/vp/40540298#40540298

Whats more they are using investment banks to raffle off national infrastructure.

Some american investment bankers recently showed up in Dubai and tried to sell the Pensylvania turnpike to wealthy muslims Various other cities have auctioned off things like parky meters to wealthy arabs for less than 1/10th of what revenue they would have generated over the next 30 years.

It aint cheap to give free money to wealthy white folks, while youre spending trillions to explode random middle eastern folks at the same time!

Wonder what the Saudis would pay for the Hoover Dam?

"I was in a meeting where a bunch of American investment bankers were trying to sell us the Pennsylvania Turnpike," he said. "They even had a slide show. They were showing these Arabs what a nice highway we had for sale, what the toll booths looked like . . ."

I dropped my fork. "The Pennsylvania Turnpike is for sale?"

He nodded. "Yeah," he said. "We didn't do the deal, though. But, you know, there are some other deals that have gotten done. Or didn't you know about this?"

As it turns out, the Pennsylvania Turnpike deal almost went through, only to be killed by the state legislature, but there were others just like it that did go through, most notably the sale of all the parking meters in Chicago to a consortium that included the Abu Dhabi Investment Authority, from the United Arab Emirates.

There were others: A toll highway in Indiana. The Chicago Skyway. A stretch of highway in Florida. Parking meters in Nashville, Pittsburgh, Los Angeles, and other cities. A port in Virginia. And a whole bevy of Californian public infrastructure projects, all either already leased or set to be leased for fifty or seventy-five years or more in exchange for one-off lump sum payments of a few billion bucks at best, usually just to help patch a hole or two in a single budget year.

Edited January 23, 2011 by dre

[Guest TrueMetis]

At least the price of gold can't be manipulated and controlled by a single country.

No it can be manipulated by multiple countries, including third world dictatorships. That's much better.

[August1991]

http://www.youtube.com/watch?v=yRJs5yL62BA

Talking about the Gold standard again.

No, Greenspan simply said that we should have a gold standard, or given that we have fiat currency, we should have a currency board or some mechanism that will control money emission.

There is nothing controversial in what he said in that clip.

-----

I happen to agree with Alan Greenspan on many things and I think that many people are using him as a scapegoat for their own irrational exuberance.

"Get rich quick schemes" are part of the American Dream and no force on Earth will ever stop such exuberance. America will have more bubbles and banking crises in the future.

The major change was deposit insurance in the 1930s. Exuberance is one thing, but collapse is another. The State can sell a Put Option but it can't buy a Call Option.

Edited January 23, 2011 by August1991

[dre]

No, Greenspan simply said that we should have a gold standard, or given that we have fiat currency, we should have a currency board or some mechanism that will control money emission.

There is nothing controversial in what he said in that clip.

-----

I happen to agree with Alan Greenspan on many things and I think that many people are using him as a scapegoat for their own irrational exuberance.

"Get rich quick schemes" are part of the American Dream and no force on Earth will ever stop such exuberance. America will have more bubbles and banking crises in the future.

The major change was deposit insurance in the 1930s. Exuberance is one thing, but collapse is another. The State can sell a Put Option but it can't buy a Call Option.

Greenspan was the one with irrational exuberance. He ignored rate management policy, and if you look at various things he was saying at the time, it was because he believed that computerization, and an unprecidented time of peace provided a "once in a hundred years opportunity" and that the rules didnt apply. We know for a fact that intelligent rate policy would have mitigated the housing bubble, we just know exactly how much. Greenspan was also the guy that counciled Americans to take teaser rate mortgages, and variable rate mortgages, and these products turned out to be very damaging to the economy and to American families.

In anycase... nobody responded to my other post above. How do you maintain stable pricing indexes if you cant control the size of the money supply? If you dont do that then your currency becomes useless as a transactional medium.

You need to dig into what inflation, and deflation really are in order to answer this question. Fixing currency to a commodity will severely hamper the economy and economic growth.

[Pliny]

The gold standard is an utterly ridiculous thing. You see, gold has no more inherent value than paper money.

t has never been worth zero as have many fiat paper currencies that I would refuse to call money. It does not have the same properties that can define it as money.

[Pliny]

Talking about the Gold standard again.

I wonder how many know why you said "again"?

Yes. Goldspan was a proponent of the gold standard in his earlier years and I remember even reading a dissertation of his on why he supported it.

Ah....but power corrupts, and while the head of the Federal Reserve he followed the Keynesian model of macroeconomics like a schoolboy with a shiny new toy.

We must remember that the Bush administrations forwarding of Clinton's Community Re-investment Act. This was becoming a problem and by 2006 was showing signs of overheating the housing market. Several economists and a few republicans, Bush included mentinoed it but the newly elected congress controlled by the democrats thought it was just fine and continued to pursue a policy of a roof over everyone's head and the approval of NINJA loans to do it.

Something had to have triggered Wall street to abandon a century of prudent financial behavior. I would think it was the nod of Fannie Mae and Freddie Mac to approve everyone for a mortgage that could mist a mirror and guaranteeing to buy up those risky mortgages. If one company goes along with that and makes a 20% profit for the company then why should the CEO of another company settle for 5%. Shareholders would pressure him to do the same and if he stubbornly refused he could be replaced by someone who would. But, it was essentiall the policies of the government and the fiscal policies of the Fed that started the ball rolling that led to the bust in '08.

[dre]

We must remember that the Bush administrations forwarding of Clinton's Community Re-investment Act. This was becoming a problem and by 2006 was showing signs of overheating the housing market. Several economists and a few republicans, Bush included mentinoed it but the newly elected congress controlled by the democrats thought it was just fine and continued to pursue a policy of a roof over everyone's head and the approval of NINJA loans to do it.

Fantasy. First of all it was blatantly obvious by 2003/2004 that there wa a realestate bubble forming, and Greenspan ignored exasterbated the problem by continuing to lower rates for a full two years after they should have been rising.

Second of all the CRA is a red herring. Heres the top 25 subprime lenders.

http://www.publicintegrity.org/investigations/economic_meltdown/assets/img/top25-listfull.jpg

Only a small handfull of them accept FDIC insured deposits, so the CRA didnt even apply to them. Most of them were either thrifts, pure mortgage companies or investment banks.

No government regulations forced these companies to lend money to ANYONE. These companies were loaning out as much paper as possible, as fast as possible, and they created the housing bubble intentionally and got filthy rich doing it. Then got bailed out with public money once the house of cards came crashing down.

You oughta read into some of the things these companies were doing, especially the market makers. For example, Goldman Sachs would buy up shitloads of bad paper and bundle it into mortgage backed securities then adverstise those products and sell them to their customers. But while they were out selling these derivitives and telling people how great they were, they were actually short-selling these products themselves (betting on them to fail). Its outrageous that these people are not in prison.

Thats why this will happen again... Obama is a corporate patsy and absolutely nothing got done to resolve the problems that lead to the crisis. You still have a large percentage of the financial sector intentionally trying to crash the economy and making a mountain of money doing it.

Edited January 24, 2011 by dre

[Bonam]

The gold standard is an utterly ridiculous thing. You see, gold has no more inherent value than paper money.

I tend to agree that a gold standard is unnecessary but to say that "gold has no more inherent value than paper" is factually incorrect. The value of paper per unit mass is far lower than the equivalent for gold. The value of used paper that has already been printed on is very very low. In fact, it might well be negative considering the energy requirements of recycling it. In contrast, gold is (and has for a very long time been) in high demand, including for use in jewelery, for use in coinage and wealth storage, for use in industrial applications and for use in scientific applications. Meanwhile, the accessible supply of gold is very limited and it can only be extracted through expensive and painstaking methods.

Edited January 24, 2011 by Bonam

[dre]

I tend to agree that a gold standard is unnecessary but to say that "gold has no more inherent value than paper" is factually incorrect. The value of paper per unit mass is far lower than the equivalent for gold. The value of used paper that has already been printed on is very very low. In fact, it might well be negative considering the energy requirements of recycling it. In contrast, gold is (and has for a very long time been) in high demand, including for use in jewelery, for use in coinage and wealth storage, for use in industrial applications and for use in scientific applications. Meanwhile, the accessible supply of gold is very limited and it can only be extracted through expensive and painstaking methods.

I think what he meant is that the value of both is based on demand. Clearly there can be a lot of demand for either gold or government backed currency. Although the diversified demand for gold that you mentioned certainly makes it a lot less likely to completely collapse like government backed currencies can.

Im still hoping someone will tell me how youre supposed to manage inflation/deflation on the gold standard.

[maple_leafs182]

Im still hoping someone will tell me how youre supposed to manage inflation/deflation on the gold standard.

The point of the gold standard is to limit government spending.

When governments digitally create too much money it debases the currency and robs the savers of their wealth.

Central banks are extremely dangerous, they hold more power then governments, they can make or break economies. Ben Bernake is one of the most powerful person in the world.

There is a reason why America had dismantled a few central banks prior to the Federal Reserve.

[Bonam]

Im still hoping someone will tell me how youre supposed to manage inflation/deflation on the gold standard.

The question is based on the premise that the government should be managing such things to begin with. Likely, that is not a premise that is particularly prevalent among supporters of returning to a gold standard.

[Pliny]

No it can be manipulated by multiple countries, including third world dictatorships. That's much better.

How?

[Pliny]

Im still hoping someone will tell me how youre supposed to manage inflation/deflation on the gold standard.

I realize that's important for wage and price stability. No one likes their wages to go down. Price stability is better for borrowing and being in debt, and for dependable government revenues.

[Pliny]

Fantasy. First of all it was blatantly obvious by 2003/2004 that there wa a realestate bubble forming, and Greenspan ignored exasterbated the problem by continuing to lower rates for a full two years after they should have been rising.

Blatantly obvious to whom? I remember a few politicians with concerns but by 2006 all concerns were pooh-poohed by a newly formed democrat majority in Congress by the likes of Barney Franks, Chris Dodd and Nasty Pelosi.

Second of all the CRA is a red herring.

How so? I think you are only looking in the direction that finger-pointers want you to look. It's a big factor in the development of the "moral hazard" created along with picketers encouraged to march on banks and the homes of bank managers who refused to approve mortgages to obviously unqualified buyers - a Government policy based upon CRA and backed by the picketers.

Heres the top 25 subprime lenders.

http://www.publicintegrity.org/investigations/economic_meltdown/assets/img/top25-listfull.jpg

Only a small handfull of them accept FDIC insured deposits, so the CRA didnt even apply to them. Most of them were either thrifts, pure mortgage companies or investment banks.

All of them accept any and all "deposits". Do you mean buy loans?

Mortgages sold in the States were bundled as derivatives and bought up by both Wall Street and Fannie and Freddie. Fannie and Freddie were eager to buy them to promote the "Home for every American" policy encapsulated in the CRA. Wall St. knew they were high risk and further bundled them up and sold them to Fannie and Freddie and other investors willing to take a high return risk that Wall Street knew would eventually end in a bust. The government pushed it as far as it would go.

One has to ask how prudent lending practices were abandoned by people who should have known better (Moral Hazard) and where the regulatory agents were at the time? Were those regulatory agents told to

take a hike?

Apparently, the Democrats are quick to blame deregulation by the Bush administratoin but that still leaves the abandonment of prudence from companies that had been around for nearly a century and had to be aware of the risks....and of course they did because they engaged in hedging themselves against their own products. Obviously, though they didn't hedge themselves enough because a lot of them folded or had to be bailed out. Which your theory doesn't seem to explain too well!

No government regulations forced these companies to lend money to ANYONE.

That was left up to community activists.

These companies were loaning out as much paper as possible, as fast as possible, and they created the housing bubble intentionally and got filthy rich doing it. Then got bailed out with public money once the house of cards came crashing down.

They were interested in speculating on the housing boom as were many buyers in the market. The ones that were hurt the most were the poor who bought "homes" to live in because the government said they should and everything would be ok. They deserved their own home. It was the American dream. In the end they lost all the speculative equity in their homes and were left with a mortgage, in many cases, twice the value of the home. Better to walk away and have a nice day, thank yo very much.

You oughta read into some of the things these companies were doing, especially the market makers. For example, Goldman Sachs would buy up shitloads of bad paper and bundle it into mortgage backed securities then advertise those products and sell them to their customers. But while they were out selling these derivitives and telling people how great they were, they were actually short-selling these products themselves (betting on them to fail). Its outrageous that these people are not in prison.

I know what they were doing. I watched some of the hearings and you can imagine my thoughts of those arrogant, self-righteous politicians looking down their noses at those bankers, taking absolutely no responsibility for the crisis whatsoever. Yet they will claim they are great managers of the economy when all is well, you would think they would at least have some responsibilty; have played some role, when it hits the skids - but no-ooo-o.

If your claim is true that it was so "blatanlty obvious a real estate bubble was forming" why didn't the governmnt do something then? You can blame the Bush administration but even in 2006 when the house went to the democrats they weren't screaming for Bush to do something they were claiming all was well, a la Barney Franks, and full speed ahead. Yet...it was blatantly obvious in 2003/4??????

Thats why this will happen again... Obama is a corporate patsy and absolutely nothing got done to resolve the problems that lead to the crisis. You still have a large percentage of the financial sector intentionally trying to crash the economy and making a mountain of money doing it.

It will happen again because of a manipulative economic infrastructure built on a house of cards. It creates booms, not the stability in prices it promises, which inevitably must bust. The roller coaster ride is just about over.

Edited January 24, 2011 by Pliny

[Oleg Bach]

Watching the American administration a while back - bowing in awe to Alan Greenspan..it was shameless...and very stero-typical...If I could be the fly on the wall on the inside of the average congressman's scull...I believe I would hear "He's the super Jew...he must know what he's talking about when it comes to money"........as for the gold standard...that is a no brainer..You have to have some substance that is physically measureable - that acts as proof of wealth and real worth, when dealing with promisary notes that we call paper money.

Still in a crisis - you can not eat gold and it will not keep you warm in winter. There is a huge rush that has been going on for a while where all the gold on the planet earth is being horded by shrewd bastards...I love those commericals "send us your broken gold" - yah a gold brick with a crack in it is only worth half the money.

[dre]

Blatantly obvious to whom? I remember a few politicians with concerns but by 2006 all concerns were pooh-poohed by a newly formed democrat majority in Congress by the likes of Barney Franks, Chris Dodd and Nasty Pelosi.

How so? I think you are only looking in the direction that finger-pointers want you to look. It's a big factor in the development of the "moral hazard" created along with picketers encouraged to march on banks and the homes of bank managers who refused to approve mortgages to obviously unqualified buyers - a Government policy based upon CRA and backed by the picketers.

All of them accept any and all "deposits". Do you mean buy loans?

Mortgages sold in the States were bundled as derivatives and bought up by both Wall Street and Fannie and Freddie. Fannie and Freddie were eager to buy them to promote the "Home for every American" policy encapsulated in the CRA. Wall St. knew they were high risk and further bundled them up and sold them to Fannie and Freddie and other investors willing to take a high return risk that Wall Street knew would eventually end in a bust. The government pushed it as far as it would go.

One has to ask how prudent lending practices were abandoned by people who should have known better (Moral Hazard) and where the regulatory agents were at the time? Were those regulatory agents told to

take a hike?

Apparently, the Democrats are quick to blame deregulation by the Bush administratoin but that still leaves the abandonment of prudence from companies that had been around for nearly a century and had to be aware of the risks....and of course they did because they engaged in hedging themselves against their own products. Obviously, though they didn't hedge themselves enough because a lot of them folded or had to be bailed out. Which your theory doesn't seem to explain too well!

That was left up to community activists.

They were interested in speculating on the housing boom as were many buyers in the market. The ones that were hurt the most were the poor who bought "homes" to live in because the government said they should and everything would be ok. They deserved their own home. It was the American dream. In the end they lost all the speculative equity in their homes and were left with a mortgage, in many cases, twice the value of the home. Better to walk away and have a nice day, thank yo very much.

I know what they were doing. I watched some of the hearings and you can imagine my thoughts of those arrogant, self-righteous politicians looking down their noses at those bankers, taking absolutely no responsibility for the crisis whatsoever. Yet they will claim they are great managers of the economy when all is well, you would think they would at least have some responsibilty; have played some role, when it hits the skids - but no-ooo-o.

If your claim is true that it was so "blatanlty obvious a real estate bubble was forming" why didn't the governmnt do something then? You can blame the Bush administration but even in 2006 when the house went to the democrats they weren't screaming for Bush to do something they were claiming all was well, a la Barney Franks, and full speed ahead. Yet...it was blatantly obvious in 2003/4??????

It will happen again because of a manipulative economic infrastructure built on a house of cards. It creates booms, not the stability in prices it promises, which inevitably must bust. The roller coaster ride is just about over.

If your claim is true that it was so "blatanlty obvious a real estate bubble was forming" why didn't the governmnt do something then? You can blame the Bush administration but even in 2006 when the house went to the democrats they weren't screaming for Bush to do something they were claiming all was well, a la Barney Franks, and full speed ahead. Yet...it was blatantly obvious in 2003/4?

Your attempts to turn this into a partisan issue dont interest me. Between 1997 and 2003 realestate prices increased almost 300%. More in some markets. If you didnt see a bubble coming at that point you were alive or awake. And its the federal reserves job to cool down the economy in that kind of situation. As for the government "doing something about it", they WANTED a housing boom, and they actually sold that housing boom as a "recovery" from soft economy after the .COM boom ended.

[dre]

I realize that's important for wage and price stability. No one likes their wages to go down. Price stability is better for borrowing and being in debt, and for dependable government revenues.

Of course its important... my question though is how do you do it?