Former Chairman of the Federal Reserve, Alan Greenspan, spoke at the Council on Foreign Relations on September 15. He spoke on a variety of issues. I can’t help but feel a sense of the outdated nature of his concepts. The ideas seem as out of touch with reality as Mort Zuckerman’s U.S. News and World Report’s plan to turn their magazine in to a monthly.
Here’s my point.
1. Greenspan says that he is just now coming to an understanding of the seemingly arbitrary nature of the human condition when it comes to a fascination with the stored value aspects of gold. You’re kidding me right. Like this is some sort of breakthrough.
2. I’ve blogged before about the need for gold to get to $5,000 in order for us to be able to deal with the China problem. Am I saying that gold is going to $5,000 tomorrow or that it is even worth the $1,000+ price that we see today? Not necessarily. Gold is worth what people will pay for it and conversations like this one between Zuckerman and Greenspan actually create a temporary bubble in the price of gold.
3. To say that all fiat currency is eventually headed to gold as the only store of value is, I don’t know… uh, goofy. Sure in a world crisis everyone will turn to gold as a small, portable and reliable means of exchange, but they will also turn to silver, clean water, grain, oil, canned vegetables, deer meat and firewood. The gold is the least productive of all assets on the planet and it’s a great place to hide, but unfortunately unless your Osama Bin Laden hiding is no way to live much less educate your children, buy a home or go on vacation which comprise other possible interests known as living.
So what am I saying exactly? I’m saying this type of conversation is irresponsible. It’s as irresponsible as previous words that have emmanated from Mr. Greenspan which we have blogged about in the past. How many investors want to buy gold at $1,500 to see it fall back to $800? Based on the volatility of the market that could happen. Sure everyone wants to buy it at $1,200 and see it go to $5,000, but what if that takes fifteen years. You would probably do twice as good by putting your money into LendingClub.com. We’re not financial advisors here at TradeWithDave.com so you would be unwise to listen to us and even unwiser to listen to Greenspan. Look at his record. I believe that he’s the one person most responsible for the mess we’re in right now. He’s no friend of the citizens of the United States of America in my opinion.
To listen to Mr. Greenspan’s comments on gold, click on the full-length version of the video. You can advance to the 36 minute mark. http://www.cfr.org/publication/22947/conversation_with_alan_greenspan_video.html
Here’s a link to eight of our previous blog posts on Greenspan and company: http://tradewithdave.com/?s=greenspan