Saturday, 14 June 2014

Greenspan On Price Inflation and The Gold Standard

Here are some interesting comments from former Fed chairman Alan Greenspan which I for some reason have never come across before (so this might be old news for you).

In this video, Greenspan explains that central banks have largely lost control over longer term interest rates which are the rates that create bubbles. The reporter then asks "So then, why do we need a central bank?" to which Greenspan explains that we have a fiat money....some mechanism need to be in place to restrict the amount of money that is produced, either a gold standard or a currency board or something of that nature. All of history suggests that otherwise [price] inflation will take hold. He concludes by explaining that we did very well during the 1870-1914 period when we were on an international gold standard.

Start listening at around 6 min 30 sec if you don't want to watch the whole video