Foreshadowing...?

Thu, Nov 13, 2014 - 4:00pm

Some light musings on the usually incomprehensible economic prognostications of the Maestro, the notoriously fickle pronouncements of career politicians, and the direction of gold pricing in the near future.

1.) February 11th, 2003, Washington, D.C. Chairman Alan Greenspan -- Federal Reserve Board's semiannual monetary policy report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate and the Committee on Financial Services, U.S. House of Representatives (Feb. 12th, 2003):

“Indeed, the heightening of geopolitical tensions has only added to the marked uncertainties that have piled up over the past three years, creating formidable barriers to new investment and thus to a resumption of vigorous expansion of overall economic activity.

The intensification of geopolitical risks makes discerning the economic path ahead especially difficult. If these uncertainties diminish considerably in the near term, we should be able to tell far better whether we are dealing with a business sector and an economy poised to grow more rapidly--our more probable expectation--or one that is still laboring under persisting strains and imbalances that have been misidentified as transitory. […]

If instead, contrary to our expectations, we find that, despite the removal of the Iraq-related uncertainties, constraints to expansion remain, various initiatives for conventional monetary and fiscal stimulus will doubtless move higher on the policy agenda.”

2.) May 1st, 2003, Flight deck of the USS Abraham Lincoln – President George W. Bush

(Reuters/Larry Downing)

“Admiral Kelly, Captain Card, officers and sailors of the USS Abraham Lincoln, my fellow Americans, major combat operations in Iraq have ended. In the battle of Iraq, the United States and our allies have prevailed.”

3.) March 3rd, 2009., Washington, D.C. – Joint press conference of Barack Obama and Gordon Brown at the White House.

Watch/listen closely from 10:07:

Video unavailable

“What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it,” – President Barack Obama, March 3, 2009., 3 trading days before the market bottom of S&P 666.79

4.) October 29, 2014, New York - Council on Foreign Relations discussion on current trends in the global economy and solutions for addressing the financial crisis.

Speaker: Alan Greenspan, President, Greenspan Associates LLC; Former Chairman of the Board of Governors, Federal Reserve System

Presider: Gillian Tett, U.S. Managing Editor, Financial Times

Alan Greenspan: Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It

TETT: I'm going to turn to the audience for questions in one minute, but before I do though, I just want to ask though, one of the really interesting chapters in your book is about gold. And there's been a lot of media debate in the past about your views on gold.

You yourself oppose a question as to why would anyone want to buy this barbarous relic -- I don't know whether John Paulson is in the audience -- but it's an interesting question. But do you think that gold is currently a good investment given what you're saying about the potential for turmoil?

GREENSPAN: Yes.

(LAUGHTER)

TETT: Do you put...

GREENSPAN: Economists are usually perfect in equivocating. In this case I didn't equivocate. Look, remember what we're looking at. Gold is a currency. It is still by all evidences the premier currency where no fiat currency, including the dollar, can match it. And so that the issue is, if you're looking at a question of turmoil, you will find, as we always have in the past, it moves into the gold price.

But the gold price is actually sort of half a commodity price, so when the economy is weakening, it goes down like copper. But it's also got a monetary characteristic which is instrinsic. It's not inbred into human beings -- I cannot conceive -- of any mechanism by which you could say that, but it behaves as though it is.

Intrinsic currencies like gold and silver, for example, are acceptable [without] a third party guarantee. And, I mean, for example at the end of World War II, or just at the end of it, Germany could not import goods without payment in gold. The person who shipped the goods in would accept the gold, and didn't care whether there was any credit standing -- associated with it. That is a very rare phenomenon. It's -- it's the reason why, for example, in a renewal of an agreement that the central banks have made -- European central banks, I believe -- about allocating their gold sales which occurred when gold prices were falling down, that has been renewed this year with a statement that gold serves a very important place in monetary reserves.

And the question is, why do central banks put money into an asset which has no rate of return, but cost of storage and insurance and everything else like that, why are they doing that? If you look at the data with a very few exceptions, all of the developed countries have gold reserves. Why?

TETT: I imagine right now, it's because of a question mark hanging over the value of fiat currency, the credibility going forward.

GREENSPAN: Well, that's what I'm getting at. Every time you get some really serious questions, the 50 percent of the gold price determination begins to move.

TETT: Right.

GREENSPAN: And I think it is fascinating and -- I don't know, is Benn Steil in the audience?

TETT: Yes.

GREENSPAN: There he is, OK. Before you read my book, go read Benn's book. The reason is, you'll find it fascinating on exactly this issue, because here you have the ultimate test at the Mount Washington Hotel in 1944 of the real intellectual debate between the -- those who wanted to an international fiat currency which was embodied in John Maynard Keynes' construct of a [Bancor], and he was there in 1944, holding forth with all of his prestige, but couldn't counter the fact that the United States dollar was convertible into gold and that was the major draw. Everyone wanted America's gold. And I think that Benn really described that in extraordinarily useful terms, as far as I can see. Anyway, thank you.

Full transcript here.

(click chart for larger image)

Coincidence? Wild-eyed speculative grasping at straws? Do the oft-mentioned PTB really need such public forum pronouncements to ensure that every intended entity is working from the same playbook (or for any other reason)? How much does MOPE (management of perception economics) really shape the global economy? Could it be that…

For anyone not yet familiar, perhaps it is worthwhile to peruse the Maestro’s early thoughts on gold - Gold and Economic Freedom (1966)

Thoughts and comments are welcome on the Forums. If you have not done so already, please feel free to explore the Archives, or add a new thread (or restart an old one) in the ongoing discussions.

UPDATE:

The book referenced by Mr. Greenspan is The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order (Council on Foreign Relations Books (Princeton University Press)).

There are numerous sections on Keynes, Bancor (SDR? 'Supernational Bank Money -- SBM), his equivalent of BIS / IMF (International Clearing Bank -- ICB), and much much more.

As far as I can tell, it is pretty easy to read the whole book on Google Books -- it's certainly very interesting background material. Of note are repeated references to WHY the US would not consent to non-gold-backed international currency: it was a CREDITOR NATION.

FWIW, I am inclined to take the Maestro's words at face value. Perhaps he forgot the conversation was televised, and intended to speak for the rarified audience of CFR. The fact that this section was 'accidentally left out due to technical errors' from the transcript (not sure about the video, but I think there too) lends credence to this option. IMHO it's an 'all clear' signal for the intended audience of the CFR (which ain't you or me) that it is now safe and TIME to accumulate. Of course it's much easier to say that after a day like today (Fri 11/14)...

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