Henry Mark Holzer on Alan Greenspan


galtgulch

Recommended Posts

<<<"

HENRY MARK HOLZER LEGAL AND POLITICAL COMMENTARY www.henrymarkholzer.blogspot.com
The Alan Greenspan Story (Part II) The Long Way Home?


In March 2009I wrote and posted on this blog the article which appears under the asterisks below. Although it disappeared, thanks to some of the recipients of this blog I have it again. I’m reprinting it now for two reasons: First, because hundreds of people have joined this blog since I posted the essay five years ago and have never seen it. Second, because per the title of today’s blog, Alan Greenspan may in his old age be returning to a belief in first principles regarding “gold (and silver) and economic freedom.”
Here is an excerpt from Mr. Greenspan’s recent appearance at the Council on Foreign Relations. (Asterisks signify material I have omitted. For the entire transcript, seeTranscript. I have added the emphasis.)
Alan Greenspan on Central Banks, Stagnation, and Gold.
A Conversation with Alan Greenspan.
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
October 29, 2014, New York
Council on Foreign Relations
This is [an excerpt from] the corrected transcript of the meeting in its entirety.
TETT: OK, well, good morning, everybody, and welcome to this morning's breakfast debate with Chairman Greenspan. My name is Gillian Tett. I'm the U.S. managing editor of theFinancial Times, so I hope you've all got your free copy of the FT out in the lobby.
* * *
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 pose 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. Butdo 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 allevidences 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 intrinsic. 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 [with]out 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 banker, 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.
* * *
SUNDAY, MARCH 1, 2009
The Alan Greenspan Story: From Objectivist to Statist
In the mid-1960s my wife, Erika Holzer, and I were members of a small circle the hub of which was Ayn Rand, whose magnum opus, Atlas Shrugged, had been published in 1957.
Another member—who by then had been associated with Rand for several years—was Alan Greenspan.
In addition to our social relationship with Rand we were also her lawyers, so frequently we made “house calls” to her apartment to conduct legal business. On more than one occasion when Erika and I arrived, Ayn and her husband would be finishing a private dinner with Alan Greenspan. It was apparent to us that Ayn had a special relationship with him, an impression buttressed by comments Ayn made occasionally to the effect that Alan was a brilliant man.
In those days, Rand and her erstwhile “intellectual heir,” Nathaniel Branden, edited and published The Objectivist, a journal devoted to expounding and disseminating her ideas.
One was allowed to write for The Objectivist only if the content was in accordance with Rand’s philosophy, and could withstand the laser-like editorial scrutiny she unmercifully delivered (but to the great advantage of the essay’s author). Erika and I were victims/beneficiaries of Rand’s almost supernatural abilities as a non-fiction editor.
In the July 1966 issue of The Objectivist there appears an essay entitled “Gold and Economic Freedom.” Its opening paragraph is as follows: “An almost hysterical antagonism toward the gold standard is one issue that unites statists of all persuasions. They seem to sense—perhaps more clearly and subtly than many consistent defenders of laissez-faire—that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.” (My emphasis.)
The essay goes on to explain the role of gold in a free society, the meaning of money (see my Blog of February 12, 2009), and the history of the Federal Reserve System. Then, the author notes critically that “[w]hen business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. * * * The Fed succeeded: it stopped the [british] gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result the American economy collapsed.” (My emphasis.)
The balance of “Gold and Economic Freedom” emphatically endorses the gold standard, disdains government interference in the economy, and condemns the statists who repudiated the former while fostering the latter.
The essay’s penultimate and concluding paragraphs eloquently reiterate this point: “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. If there were, the government would have to make its holding illegal, as was done in the case of gold [see my Blog of January 25, 2009]. If everyone decided, for example, to convert all their bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. * * * (My emphasis.)
The author of “Gold and Economic Freedom” is, of course, Alan Greenspan.
The “statists” whom Dr. Greenspan rightly condemned are adherents to, and promoters of, “statism”: “concentration of economic controls and planning in the hands of a highly centralized government often extending to government ownership of industry.” (Merriam- Webster Dictionary, On Line).
Or, as Greenspan’s editor, Ayn Rand, once explained it: “The political expression of altruism is collectivism or statism, which holds that man’s life and work belong to the state—to society, to the group, the gang, the race, the nation—and that the state may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good”: (“Introducing Objectivism,” The Objectivist Newsletter, August 1962, p.35).
Since it was Ayn Rand herself speaking through Alan Greenspan in “Gold and Economic Freedom” in the author’s lauding of laissez-faire and condemnation of statism, it was incredible that he accepted Gerald Ford’s appointment as Chairman of the President’s Council of [three] Economic Advisers.
Putting aside four of the Council’s main duties and functions, the fifth is “[t]o develop and recommend to the President national economic policies, to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment.”
What?
An acolyte of the political philosopher who, among other achievements, built a moral foundation for capitalism, signing on with a statist President to “develop national economic policies” (like the bureaucrats in Atlas Shrugged?), “to foster and promote free competitive enterprise” (through stricter anti-business anti-trust laws?), “to avoid economic fluctuations” (by wage and price controls?), and “to maintain employment” (with FDR-like public works projects?)?
Not only did Greenspan sign on with Ford, but Rand signed on with the both of them—sanctioning the new Greenspan-Ford economic partnership by her glowing presence at the new Chairman’s White House swearing-in ceremony.
Soon after Rand died, President Reagan put Greenspan in charge of a boondoggle called the National Commission on Social Security Reform. One of its recommendations was an anti-laissez-faire, pro-statist, large tax increase.
Then came the Fed job, making Greenspan the world’s economic/financial puppet master.
According to a 2007 speech by a Federal Reserve Board member Frederic S. Mishkin, “In a democratic society like our own, the ultimate purpose of the central bank [the Fed] is to promote the public good by pursuing a course of monetary policy that fosters economic prosperity and social welfare. In the United States, as in virtually every other country, the central bank has a more specific set of objectives that have been established by the government. This mandate was originally specified by the Federal Reserve Act of 1913 and was most recently clarified by an amendment to the Federal Reserve Act in 1977. According to this legislation, the Federal Reserve's mandate is “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” (My emphasis.)
So for year after year, the fallen pro-laissez-faire, anti-statist, Objectivist, Chairman of the Fed, went about pulling on the Fed’s strings, doing the government’s business of “promoting the public good” and “fostering social welfare.”
Repudiating everything he had written, and Rand had sanctioned, in “Gold and Economic Freedom,” Greenspan manipulated the “creation” of “money,” opened and closed the credit valve, and virtually if not actually controlled the economic/financial system of the United States and thus of the world.
And then, finally, at the end of 2008 when the system imploded, Rand’s brilliant acolyte finally confessed . . . and his confession continues: Yes, he was wrong about self-regulating capitalism. Yes, this time laissez-faire didn’t work. Yes, the bailouts were/are necessary. Yes—and that noise you hear is Ayn Rand spinning in her grave—the government must now nationalize banks (in the “public interest, and only “temporarily,” of course).
And with these unrepentant anti-capitalism confessions, Alan Greenspan is nakedly exposed for what he became when first he drank from the inebriating waters of the Washington trough, abandoning not only “Gold and Economic Freedom,” but the moral principles which it implies, and about which he wrote with Rand’s approval those many years ago.
Alan Greenspan is a person whom he, and Ayn Rand, deplored: just another statist.

">>>

Link to comment
Share on other sites

Alan Greenspan took a blatantly statist job and became a statist playing the political game to keep his job and avoid visiting palpable pain on people affected by what he did. That dis-included old people living on their savings oblivious to how continually lowering interest rates were screwing them--that is, who and what were causing that.

No longer employed by the government, what could be more natural than to revert to his nice, free-market, pro-freedom, knowledgeable self for some nice back-slaps from his old free market buddies? Maybe as head of the Fed all that liquidity he kept pumping into the system was designed to end the world sooner so we could all start again from the ashes of our civilization. Don't believe that; he was just a Keynesian politician without the guts of a Paul Volker to do what was necessary. As such he should have had the grace not to take the job they tortured John Galt to take.

--Brant

his detailed knowledge of the economy as revealed in current interviews is quite sophisticated--as sophisticated as you will read anywhere

Link to comment
Share on other sites

It is tempting to suggest that Alan Greenspan never really understood Objectivism despite his grasp of the concept of gold as money and its significance to the functioning of the free market. I suppose it is possible for him to have been aware of the role of gold and the evil of government paper and the temptation of politicians to inflate it, yet not fully conscious of the philosophical nature of what he was doing. He might have been immersed in contemplating the economic consequences of his manipulations not the ethical significance of his actions. Just because he visited Ayn Rand and was present when others were discussing her ideas doesn't mean he grasped any of that or any of the effects of contrary ideas in the real world.

When the USSR fell I recall reading that some communists were saying that it was not their ideology which failed rather it was, because of the adoption of certain laissez-faire policies by previous leaders of the USSR, the failure of Capitalism!

There is blindness and there is the refusal to see.

It is conceivable that Alan Greenspan is not and never was even a Student of Objectivism. I doubt that he could even explain what Objectivism is in detail without the necessity of doing so while standing on one foot as Ayn Rand once did. I may be mistaken but it appears that he does not possess the comprehensive, integrated rational philosophy which Objectivism is.

gg

Link to comment
Share on other sites

It is tempting to suggest that Alan Greenspan never really understood Objectivism despite his grasp of the concept of gold as money and its significance to the functioning of the free market. I suppose it is possible for him to have been aware of the role of gold and the evil of government paper and the temptation of politicians to inflate it, yet not fully conscious of the philosophical nature of what he was doing. He might have been immersed in contemplating the economic consequences of his manipulations not the ethical significance of his actions. Just because he visited Ayn Rand and was present when others were discussing her ideas doesn't mean he grasped any of that or any of the effects of contrary ideas in the real world.

When the USSR fell I recall reading that some communists were saying that it was not their ideology which failed rather it was, because of the adoption of certain laissez-faire policies by previous leaders of the USSR, the failure of Capitalism!

There is blindness and there is the refusal to see.

It is conceivable that Alan Greenspan is not and never was even a Student of Objectivism. I doubt that he could even explain what Objectivism is in detail without the necessity of doing so while standing on one foot as Ayn Rand once did. I may be mistaken but it appears that he does not possess the comprehensive, integrated rational philosophy which Objectivism is.

gg

SPECULATIONS:

He's too smart, much too smart to support your thesis. He simply had a stronger context--a political context--and he always understood Rand and Objectivism quicker and better than others surrounding her and knew better than to contradict her; that would be anti-political. Townsend-Greenspan, when he controlled it--raked in the money (was successful) because of his ability to connect people economically-politically. When he left the firm to head the Fed in 1987, the firm didn't last.

In 1982 (or thereabouts) he was appointed to head the Social Security Commission--or what ever it was called. Did he call for privatization or the Chile model? Nope. Just some tax scheme that put SS tax money into the Treasury directly in exchange for worthless federal bonds that made SS "solvent" for a couple more decades. He went along to be along to be cheered along and now he's a retired elder statesman it's back to his succoring roots and it's like all the statism he was responsible for never happened and it's free market time once again!

He's a near genius. He's a coward. He's a social metaphysician. He's a statist. He's a liar. Or, maybe he's John Galt. John Galt, in the novel, lived in a compression of history unlikely in the real world. John Galt could stop the motor of the world. How could Greenspan do that? By accelerating history. His intent or not, he may have done Galt's job. No speech, however; it's already out there. Galt or not, both Galt and Greenspan are elitests. The hero, in this case, tortured the world, not vice versa.

--Brant

what's the difference?--the world gets tortured anyway--hoi polloi deserves it (Rand, BTW, was an elitest too--I'm pretty sure Greenspan took up on that)

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now