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John Lee''s Gold Insider examines relationship between silver and uranium markets
By U.S. Rep. Ron Paul
Monday, February 21, 2005
http://www.house.gov/paul/tst/tst2005/tst022105.htm
Nearly 40 years ago, Federal Reserve Chairman Alan Greenspan wrote
persuasively in favor of a gold monetary standard in an essay
entitled "Gold and Economic Freedom."
In that essay he neatly summarized the fundamental problem with fiat
currency in a few short sentences:"The abandonment of the gold
standard made it possible for the welfare statists TO USE THE
BANKING SYSTEM as a means to an unlimited expansion of credit In
the absence of the gold standard, there is no way to protect savings
from confiscation through inflation. There is no safe store of
value. ... Deficit spending is simply a scheme for the 'hidden'
confiscation of wealth. Gold stands in the way of this insidious
process. It stands as a protector of property rights. If one grasps
this, one has no difficulty in understanding the statists'
antagonism toward the gold standard."
Today, however, Mr. Greenspan has become one of those central
planners he once denounced, and his views on fiat currency have
changed accordingly.As the ultimate insider, he cannot or will
not challenge the status quo, no matter what the consequences to the
American economy.To renounce the fiat system now would mean
renouncing the Fed itself, and his entire public career with it.
The only question is whether history will properly reflect the
destructive nature of Mr. Greenspan's tenure.
I had an opportunity to ask him about his change of heart when he
appeared before the House Financial Services committee last week.
Although Mr. Greenspan is a master of evasion, he was surprisingly
forthright in his responses to me. In short, he claimed he was wrong
about his predictions of calamity for the fiat U.S. dollar, that the
Federal Reserve does a good job of essentially mimicking a gold
standard, and that inflation is well under control. He even made the
preposterous assertion that the Fed does not facilitate government
expansion and deficit spending. In other words, he utterly
repudiated the arguments he made 40 years ago. Yet this begs the
question: If he was so wrong in the past, why should we listen to
him now?
First, the Federal Reserve does not mimic a gold standard by any
measure.The clearest example of this lies in our current account
deficit, which our fiat currency encourages.Under a gold standard
we would not have exchange rate distortions between the Chinese
renminbi and the U.S. dollar, for example.True currency stability
is impossible when fiat dollars can be produced at will and foreign
lenders bankroll our deficits.
Second, inflation is a much greater problem than the federal
government admits. Health care, housing, and energy are three areas
where costs have risen dramatically. The producer price index is
rising at the fastest rate in seven years. Bond prices are
rising. To suggest that rapid expansion of the money supply and
artificially low interest rates do not ultimately cause price
inflation is absurd.
Third, Fed policies do indeed have adverse political ramifications.
Fiat currency and big government go hand-in-hand.Without a gold
standard, Congress is free to spend recklessly and fall back on
monetary expansion to pay the bills. Politically, it's easier to
print new dollars than raise taxes or borrow overseas. The Fed in
essence creates paper reserves that enable Congress to undertake
spending measures that far exceed tax revenues. The ill effects of
this process are not felt by the politicians, who can always find
popular support for new spending. Average Americans suffer, however,
when their dollars are "confiscated through inflation," as Mr.
Greenspan termed it.
It's not enough to question the wisdom of Mr. Greenspan.Americans
should question why we have a central bank at all, and whose
interests it serves. The laws of supply and demand work better than
any central banker to determine both the correct supply of money in
the economy and the interest rate at which capital is available
without the political favoritism and secrecy that characterize
central banks. Americans should not tolerate the manipulation of our
economy and the inflation of our currency by an unaccountable
institution.
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