Fed Chairman Bernanke Says "Gold Is Not Money" ... But His Predecessor Alan Greenspan Disagrees

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Washington’s Blog


Fed Chairman Bernanke told congress today:

‘Gold isn’t money’

But Bernanke's predecessor - former Fed chair Alan Greenspan - disagrees.

As I noted in 2009:

Emeritus of Mathematics Antal Fekete has argued for years that gold is
the ultimate - and only - safe haven when things really hit the fan.

For example, in 2007 Fekete wrote:

grand old man of the New York Federal Reserve bank’s gold department,
the last Mohican, John Exter explained the devolution of money (not his
term) using the model of an inverted pyramid, delicately balanced on
its apex at the bottom consisting of pure gold. The pyramid has many
other layers of asset classes graded according to safety, from the
safest and least prolific at bottom to the least safe and most prolific
asset layer, electronic dollar credits on top. (When Exter developed
his model, electronic dollars had not yet existed; he talked about FR
deposits.) In between you find, in decreasing order of safety, as you
pass from the lower to the higher layer: silver, FR notes, T-bills,
T-bonds, agency paper, other loans and liabilities denominated in
dollars. In times of financial crisis people scramble downwards in the
pyramid trying to get to the next and nearest safer and less prolific
layer underneath. But down there the pyramid gets narrower. There is not
enough of the safer and less prolific kind of assets to accommodate
all who want to "devolve”. Devolution is also called "flight to

Darryl Schoon makes the same argument.


Here's a visual depiction Exeter's inverted pyramid, courtesy of FOFOA:



(Click here for full image)


Are Exeter, Fekete and Schoon right?


I don't know. But Alan Greenspan just lent some support to the theory.


prices that jumped above $1,000 an ounce this week are signaling that
investors are buying metals to hedge against declines in currencies,
former Federal Reserve Chairman Alan Greenspan said.


gains are “strictly a monetary phenomenon,” Greenspan said today at an
investment conference in New York. Rising prices of precious metals
and other commodities are “an indication of a very early stage of an
endeavor to move away from paper currencies,” he said...


“What is
fascinating is the extent to which gold still holds reign over the
financial system as the ultimate source of payment,” Greenspan said.

In other words, Greenspan is saying that
investors are moving out of the second-to-lowest step on the pyramid
(currencies and government bonds) and into the lowest step (gold).


is also verifying what goldbugs like Exeter, Fekete and Schoon have
been claiming: that "the barbarous relic" still holds an important
place in the modern investor's psyche.

Moreover, as I reported last year:

Alan Greenspan told the Council of Foreign Relations last week:

Fiat money has no place to go but gold.

Greenspan also said that supply and demand explanations treating gold like other commodities “simply don’t pan out."

also spoke of how, during World War II, the Allies going into North
Africa found gold was insisted on in the payment of bribes, and said:

all currencies are moving up or down together, the question is:
relative to what? Gold is the canary in the coal mine. It signals
problems with respect to currency markets. Central banks should pay
attention to it.

As I pointed out last month:

has declared gold and silver to be legal tender - with the value of
the coin determined by the weight of precious metal it contains

As the New York Times notes:

The law is the first of its kind in the United States. Several other
states, including Minnesota, Idaho and Georgia, have considered similar

World Bank president Robert Zoellick noted last year:

Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.

Moreover, as FT reported last year:

Exchange, the US futures exchange group, has followed rival CME Group
by allowing its European clearing house to accept gold bullion as
collateral for transactions.

Zero Hedge notes:

JP Morgan Accepts Gold Bullion As Collateral.

And Phoenix Capital Research argues that central banks are themselves loading up on gold because they know that the entire fiat money scam will soon collapse.