“In the absence of a 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. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the 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.”
– Alan Greenspan, Gold and Economic Freedom, 1966.
“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default”
– Alan Greenspan, on NBC’s Meet the Press, 7 August 2011
(Hat tip for the earlier quote to commenter “El Tut” in the comments to the later one.)
An awful U-turn. I suppose 45 years is a long time to hold onto sound principles against the pressures of public life.
I read somewhere that Greenspan’s conversion could possibly be explained by his marriage to a lefty (relatively speaking).
He was once of course, a disciple of Ayn Rand, and I suspect the quote is lifted from one of his contributions to one of her non-fiction books.
On his blog Friedman also mentions the second quote, arguing in effect that there is a point at which the inflationary cost of monetising debt will be so high that default may appear attractive by comparison. So it is false that the probability is zero. (Off topic, but I also found interesting Friedman’s exposure of Obama’s lies/ignorance on the effect of not lifting the debt ceiling on social security payments.)
It also seems a strange thing to say given that a fairly large chunk of the US electorate have already, recently and famously, expressed a preference for a default and/or enforced fiscal straightjacket over a continuation of the status quo.
Greenspan’s row-back from his strong principles of youth is very sad and hard to watch. Some people achieve wisdom in old age, but we forget that some people manage to lose it. I can think of a few examples.
Actually, there is no contradiction between the two statements.
Greenspan certainly understood things in 1966!
I guess he still does so I suppose that indicates that he has joined the thieves, and also, that the financial systems of the world are run by thieves.
I would really like to know what his personal portfolio consisted of.
fff, I take your point – going from the wording alone, a person of the strictest Randian or similar views, could make the second statement in regretful acknowledgement that it described the facts (if it does). However there is no doubt that Greenspan 2011 said it in a spirit of “crisis, what crisis?”
steve,
I don’t know what his portfolio is like today, but while Greenspan was Fed Chairman his entire investment portfolio was in long-term US Treasuries.
On Sunday (8/7/11) (here’s the link, but you will have to scroll down to “Probability of U.S. Default”) David Friedman commented on the latter of the two Greenspan quotes. His summary is “The first sentence is true. The second is not.”
As I (and many others) have pointed out – “Greenspan the good guy” was always a myth.
Yes he “followed Ayn Rand” – but only till he came out in favour of government support for the financial system (yes all those years ago) and the lady put a dinner plate in his face.
By the he was appointed Fed Chairman in 1987, Greenspan was already a fully fledged shit.
Nothing he has done since then should have astonished anyone.
By the way – he is “correct”.
There is a zero risk of “default” – as the government can print money.
So people would be paid.
They would just be paid in money that was not worth anything.