Audio Recordings & Transcripts
I cannot think of a single time in human history when gold was rejected as a means of payment for goods and services. You cannot say that about any other currency.
There is something about gold’s attraction to human beings that goes back in history as far as you can go. It’s always been acceptable. It’s always been the prime means of acceptance of exchange. It’s always been the number exchangeable commodity – not diamonds, not silver, or other commodities.
If you look closely at how they operate policy, we are trying to replicate what the gold standard would do. To whatever extent we did or we didn’t succeed is not the point. That was fundamentally what we tried to do.
Chris Lowe: Would it be a better system in your view to go back to the gold standard?
Dr. Greenspan: If we had a society that was willing to do it, certainly.
It is certainly true that, ultimately, fiat currencies have always ultimately ruined the economies that worked with them. That has never happened in a system in which gold was the medium of exchange.
What is fascinating is that fiat money would not exist if it were turned down by those who currently use it.
Taxes Drive Money:
The issue is that you have what I call a “fiat money premium” – human beings are willing to take worthless money in exchange for goods until they learn better. If we were all wholly rational, we wouldn’t do that, and the system would work without any further. In other words, fiat money would not work in the essential sense, unless it were backed by something.
Now, I grant you that the coercive action of government taxation policy can be a substitute for gold [backing]. But nothing much else can.
The question that you have to really ask is: What would induce the population as a whole to eschew taking paper currency as a means of payment?
You can’t really tell because if there is a taxing policy on the part of a government, one could always say, “I view the taxing power as creating the means by which the government can get resources in exchange for its currency.” It did not work, of course, in the Continental currency [when the South] did not have any taxing power.
People chase things for weird reasons, and if they are willing to accept fiat currency, why not bitcoin? They think it’s going to go up and there’s other people who are going to pay more, they buy it. I would prefer to eschew to big gains because I can get big gains theoretically by going to Las Vegas and throwing coins.
If you have a breakdown, like 2008, the maximum short-term probability of coming through it is [for the central bank] to basically buy up the whole system. Since the central bank can print as much as it needs to, there is no limit. You can stop any crisis cold merely by just buying up everything.
The trouble is, what do you do then? If that sort of action is taken several times, you engender a degree of uncertainty in the marketplace that essentially destroys the viability of the structure.
The problem I have with democracy is that 51% can legally annihilate the other 49%. The U.S. has never been a pure democracy. It’s always been a constitutional representation of government. Going evermore from where we are now to more and more democracy is not working for us.
Why he ran the Fed the way he did:
What eventually happened was I found that I could do a lot of things which changed things because I had inadvertently got put in a very important position as far as policy was concerned.
I said to myself, “Do you want to be on the outside looking in and complaining or on the inside biting your tongue on occasion?”
I’ve sort of gone in that direction but fully recognizing that if you’re a government official and you’re sworn in you’re supposed to follow the laws of the land and that’s what I did. I didn’t say I agreed with them, but I did essentially follow them.
Greece is in the ECB by accident. They came in under false pretenses and the government, immediately following the government that got Greece fraudulently into the ECB said the numbers were all wrong and if they were actually the numbers used they would not have been in, but nonetheless they let them stay. That was a terrible mistake.
… You look all over Europe and what you can see is a very clear indication of the discontent because standards of living are barely growing. There’s no substitute for prosperity.
… The basic problems are, you get bubbles because human nature is what it is. People get euphoric. We know by experience that fear is a far more formidable force in human activity than euphoria and as a result, for example, recessions go down far more sharply than recoveries and the stock market behaves exactly the same way so that you’ve got these very odd patterns. Without getting into too much detail, most economic models that work try to integrate human nature into the asymmetries that we’re seeing.
…I think the real danger here is the fact that we’ve allowed this issue of a huge amount of entitlements to rise as we age and to keep adding to them. This is a non-sustainable outlook. There’s no scenario I can conceive of. I’ve listened to the debates. The word ‘entitlement’ never came up once and the reason is entitlements are the third rail of American politics. If you’re running to office and you mention them, you lose. How are you going to run government on that? I do not know. Trump may have some magic formula which he hasn’t divulged to anybody, but i don’t see where we go from here.
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