Greenspan Warns A Crisis Is Imminent, Urges A Return To The Gold Standard

Tyler Durden's picture

On Friday afternoon, after the shocking Brexit referendum, while being interviewed by CNBC Alan Greenspan stunned his hosts when he said that things are about as bad as he has ever seen.

"This is the worst period, I recall since I've been in public service. There's nothing like it, including the crisis — remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away. I'd love to find something positive to say."

Strangely enough, he was not refering to the British exodus but to America's own economic troubles.

Today, Greenspan was on Bloomberg Surveillance where in an extensive, 30 minutes interview he was urged to give his take on the British referendum outcome. According to Greenspan, David Cameron miscalculated and made a “terrible mistake” in holding a referendum. That decision led to a “terrible outcome in all respects,” Greenspan said. "It didn’t have to happen.” Greenspan then noted that as a result of Brexit, "we are in very early days a crisis which has got a way to go", and point to Scotland which he said will likely have another referendum on its own, predicting the vote would be successful, and Northern Ireland would “probably” go the same way.

His remarks then centered on the Eurozone which he defined as a truly “vulnerable institution,” primarily due to Greece’s inclusion in its structure. “Get Greece out. They’re a toxic liability sitting in the middle of a very important economic zone." Ironically, the same Eurozone has spent countless hours doing everything in its power to show just how unbreakable the union is by preserving Greece, while it took the UK just one overnight session to break away. Luckily the UK was not part of the monetary union or else it would be game over.

But speaking of crises, Greenspan warned that fundamentally it is not so much an issue of immigration, or even economics, but unsustainable welfare spending, or as Greenspan puts it, "entitlements."

The issue is essentially that entitlements are legal issues.  They have nothing to do with economics.  You reach a certain age or you are ill or something of that nature and you are entitled to certain expenditures out of the budget without any reference to how it's going to be funded.  Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate.  That annual growth rate of two percent is not adequate to finance the existing needs.

 

I don't know how it's going to resolve, but there's going to be a crisis.

 

This is one of the great problems of democracy.  It goes back to the founding fathers.  How do you handle a situation like this?  And it's very troublesome, but eventually you get things like Margaret Thatcher showing up in Britain.  Their situation is far worse than ours.  And what she did is she turned it all around essentially by, as I remember it, the miners were going to strike and she decided - she knew they were going to strike.  Since at that point, the government owned these coal mines, she built up a huge inventory so that when they went on strike, there was enough coal in Britain so that eventually the whole union structure collapsed.  She fundamentally changed Britain to this day.  The fact that we are doing so well in the E.U. is not altogether clear that it is the E.U. or whether it was Margaret Thatcher.

When asked if "we need an accident of history" to address this, Greenspan replied "Probably. In the United States, social benefits, which is the more generic term, or entitlements, are considered the third rail of American politics.  You touch them and you lose.  Now, that is a general view.  Republicans don't want to touch it.  Democrats don't want to touch it.  They don't even want to talk about.  This is what the election should be all about in the United States.  You will never hear one word from either side.  "

This is the same entitlements crisis that Stanley Druckenmiller has also been raging about for years, most recently in his "The Endgame" presentation delivered at the Ira Sohn conference.

Greenspan then went on to bash the false "recovery" narrative, warning that "the fundamental issue is the fact that productivity growth has ground to a halt." 

 We are running out of people.  In other words, everyone is very pleased at the fact that the employment rate is rising.  Well, statistics tell us that we need more and more people to produce less and less.  That is not a prescription for a viable political system.  And so what we have at this stage is stagnation.  I don't think that there is anything out there which suggests that there is a recession, but I don't know that.  What I do know is that the money supply, and too, which has always been a critical indicator of inflation, is for the first time going up remarkably steadily 6 percent, 7 percent, almost a straight line.  It's tilted up in the last several months.  It's added a percentage point or two.  The thing that we should be worrying about now, which we have actually given no thought to whatsoever, is that this type of economic environment ends with inflation.  Historically, fiat money has always ended up that way.

And here we get to the heart of the matter, because in not so many words, Greenspan effectively says that hyperinflation is coming:

I know if you look at human history, there are times and times again where we thought that there was no inflation and everything was just going fine.  And I just basically say, wait.  This is not the way this thing ordinarily comes up.  I don't know.  I cannot say I see it on the horizon.  In fact, commodity prices are soggy.  The oil prices has had a terrific impact on global inflation.  It's not about to emerge quickly, but I would not be surprised to see the next unexpected move to be on the inflation side.  You don't have inflation now.  And you don't have it until it happens.

Of course, Greenspan ignores his own role in the creation of the boom-bust cycle which has doomed the world to series of ever more destructive bubbles and ultimately, hyperinflation which will likely be unlashed once the helicopter money inevitably arrives. In retrospect, the 90-year-old, who clearly is looking forward not backward, has a simple solution: the gold standard.

If we went back on the gold standard and we adhered to the actual structure of the gold standard as it exited prior to 1913, we'd be fine.  Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we've had in the United States, and that was a golden period of the gold standard.  I'm known as a gold bug and everyone laughs at me, but why do central banks own gold now?

Why indeed. And of course, that's rhetorical.

* * *

His full interview is below.

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milo_hoffman's picture

Did I fall asleep and wake up on 4/1/17?

Perimetr's picture

Gold Standard fine, 

as long as they put Greenspan and all the banksters in prison, too.

nibiru's picture

They try to be first - before China will do it. Smart.

 

Unfortunately, this tectonic shift would mean a huge devaluation of fiat currencies and inevitable crisis. Plus only China and the US have enough gold to actually move in this direction and last time I checked Hillary has to print some more money to buy more banks to help her win the election. Sorry Alan you are too old and too late with good pieces of advice. Your time is over.

http://independenttrader.org/the-imf-and-the-post-dollar-world.html

jbvtme's picture

how do you say "nailgun" in yiddish?

froze25's picture

It must be nice to be 90 years old and not give a fuck and just speak your mind.

FL_Conservative's picture

AND ignore your contribution to this cluster-fuck.

greenskeeper carl's picture

Ya thats a big problem for me. I don't follow greenspan very closely because I don't fucking like him, so I may hae missed him doing this, but until he cops to his own culpability in the blowing of this final bubble he can fuck off. Funny how he didn't say a goddamn thing lke this when he was actually in a position to do something constructive about it. These lst couple interviews aren't going to save you, greenspan. Don't get me wrong, Im not threatening him, as I have no intention of "bankster hunting" if SHTF like some on here, Im just not a very forgiving person when it comes to someone like him seeming to think that he can make up for the damage and destruction he has wrought just by saying a couple of good things on TV now that he is retired. Fuck that.

Stuck on Zero's picture

Greenspan had better be very careful when he's bench pressing his usual 250 lbs. The weights could fall on his neck.

JohnG's picture

 

I stumbled across this the other day:

http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=291

Makes a lot of sense.

Never going to happen.

847328_3527's picture

Those Formaldehyde Baths have done wonders keeping this Krony Kleptocrat alive!

BaBaBouy's picture

Greenie has Always Told Us he's a GOLD Holder!

Way Way Back.

The fecker knows all the Secrets of the FED, and he chooses to hold GOLD.

Read between the lines, They Speak Volumes...

All Risk No Reward's picture

A deflationary depression was always part of the plan, people. That's how the TBTF&Jail mega-corporations strip mine society of its real assets!

Duh! Stop being so naive!

manontop's picture

As Brexit crisis intensifies, Trump celebrates his 'great timing'...

 

http://bit.ly/29a9vbt

jeff montanye's picture

his timing has been pretty good so far.  he hopes it can make up for how much more money hillary clinton has than he does, in spendable cash.  and can easily get by asking.

however, regarding the headline topic of this post, i am not sure what greenspan or the editor or whoever means by a gold standard but if it means pegging national currencies to a physical amount of gold i disagree.  imo what is needed are freer markets in assets, particularly those long-term assets that central banks have little real justification for buying and selling to manipulate prices.  for central banks, short-term money, treasury bills, currency: yes.  long term bonds, gold, equities: no.

fiat currencies with floating exchange rates are useful for transactions needs.  a free gold market is essential for stores of wealth and measures of value.  the only gold standard is gold itself.  contracts can be written with reference to it.  we've all got computers; the logistics are not rocket science.  knowing the future is always precarious.  in democracies currencies linked to physical gold are perpetually in danger of discontinuous devaluation.

to repeat: the only gold standard is free gold itself.

Déjà view's picture

Unfortunately not going to happen. Still waiting for tort reform. To many vested interests. Wall Street & Attorneys=parasites. Large portion of $19 trillion debt they 'booked' as income and CONTINUE so...

WordSmith2013's picture
BREXIT: The ‘Six-Sigma’ Black Swan of the Millennium

http://stateofthenation2012.com/?p=41160

 

For Greenspan to even go there means that this thing is sooooooooooooo BIG that ....

jskern's picture

If you're going to link to the Misbegotten Media, pls give us a warning.

ImGumbydmmt's picture

 

Private Banks (Quotation)

Quotation: "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.... I believe that banking institutions are more dangerous to our liberties than standing armies.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

 

- Thomas Jefferson

and he said it over 200 years ago. same as it ever was.

I explained this to a local bariista, with the intro of " do you want ot know why we are poor. This is why."

847328_3527's picture

My guess is Greeny has been buying those Kilo gold coins over the past few years and is ready to throw his full support for gold now.

McCormick No. 9's picture

Worthless piece of shit Greenspan CB'er scum. How dare that motherfucker say he wants go back to 1913? The fucking nerve! What an asshole! He's just fucking with us, and laughing up his fucking sleeve. What a dirtbag. He must come from a long line of dirtbags.

auricle's picture

He knows entitlements ie pensions are terminal. 6 Years of ZIRP, and now an eminent recession and free fall equities will blow up pensions this time around. Bailouts are not the solution. Pensions will need to be allowed to hold gold and then gold repriced much higher to save them. Reading the tea leaves of his speach. 

walküre's picture

hey, that's my personal pension plan all along!

don't trust anything else

Anasteus's picture

The tragedy of the persons like him is his total inability of self-reflection. Instead of admitting his essential failure he's crying over crisis and hard times depicting them as objective events with no connection to his own policy contribution. Such a person can never make any progress in realizing true reasons of the problem and his personal responsibility, making him doomed to repeat the same mistakes forever, just with a different flavor.

The tragedy of the society lies in placing such immature, irresponsible and therefore inherently incompetent individuals to leading positions.

ImGumbydmmt's picture

 

Greenspan is not being inconsistent. http://www.constitution.org/mon/greenspan_gold.htm

"

Gold and Economic Freedom

by Alan Greenspan

Published in Ayn Rand's "Objectivist" newsletter in 1966, and reprinted in her book, Capitalism: The Unknown Ideal, in 1967.

An almost hysterical antagonism toward the gold standard is one issue which 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. In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.”

1966

SO WTF happened when he was at the Federal Reserve?

He took a secure job to provide for himself and his family.

Do not think for a moment he "ran" the Federal Reserve. Neither Alan, not Volker before him or Bernanke nor Yellen after him "Run" the Federal Reserve. Folks its a public eyewash position. its the mouthpiece to the public. The FED is and has always been the stronghold of a CABAL of banking institutions, with unseen hands behind the curtain controlling them. The Fed Chainman is "selected" and they put on the public face to get grilled by congress a couple times a year and to make quarterly speeches which are preprogrammed. Its Kabuki theater. What Alan is guilty of is just being a "sell out" he sold out his true values of his lifetime for a shot at a very prestigious "mouth piece" position which has secured his place for paid interviews and royalties forever. Everyone has a price and the FED found his. That's all he did. What do WE need to do. read what he wrote in 1966 about gold, listen to what he says today. Find wisdom to protect our own families. Decide what you will and will not "sell out" for and stick to it. leave a proper legacy.

 

Bagbalm's picture

Yes but when he was serving he toed the line sucked ass like all the others.

BitchesBetterRecognize's picture

JohnG - thanks for the link.  Indeed It makes sense in all aspects - BUT I hesitate to think they would discard the idea IF China goes along with them by backing the Yuan with BOTH gold & Silver.  

Interesting proposition indeed 

clymer's picture

"Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we've had in the United States, and that was a golden period of the gold standard.  I'm known as a gold bug and everyone laughs at me, but why do central banks own gold now?"

..well it's tradition

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) JohnG Jun 28, 2016 1:26 AM

Interesting article. Salinas-Price in Russia, by invitation. I disagree, I think it could happen. Not only in Russia, but China, too. If the USSA and UK and Europe were smart we would steal the idea and implement it, now.

I agree with Greenspan. Fiat always fails (in fact the USSA has had a number of currencies since the inception of the republic). Either you know that and are aware of history or you are not. Sadly most people in the US are ill-informed and miseducated and thus will end up as victims.

Those that understand will do fine. Those that fail to understand, and act, will have to start over. Life is not fair. It never was and never will be.

Delving Eye's picture

There's a reptile on my screen. Shoo, you moronic fucktard.

Four chan's picture

epic flip flop 1967 to 2016 make up your fucking mind you evil heeb.

rcintc's picture

Why didn't he have this epiphany 15 years ago?

NoDebt's picture

They're always tough guys AFTER they are no longer in a position to do anything about it.  

 

Lonesome Crow's picture

Irrational exhuberance at DJI 5000.

 

Gold Standard at $1330.

 

Hmmm...

 

And don't forget when AG told the establishment what a principle is in the 60's and they did not listen,

he then set out to show them what a principle is...

 

"Well done!"

 

manofthenorth's picture

I can make it shorter and sweeter than the Maestro himself, read between the lines if you will, "as it existed before 1913."

END THE FED

tricorn teacup's picture

A precious metal standard, or similar, is a prerequisite to ending the central bank.

SWRichmond's picture

Yeah couldn't help but notice that too

Antifaschistische's picture

...and did he REALLY say "this is one of the problems with democracy"!

are you kidding me!!  Is he contrasting democracy to totalitarianism!!

Transformer's picture

Bankster hunting?  What's that?

Big_X's picture

[Greens]Pan's back! [Greens]Pan's back!

DerdyBulls's picture

Yes, what a laugh. It's called "white wash your legacy." What a load man.

Took Red Pill's picture

Exactly! He knows he won't be around much longer so he wants to look good on the way out. He helped get us into the mess we are in today!

StillSilence's picture

Or he is just still playing his role, which in this case happens to be assisting to usher in the purported gold standard that will supposedly save the system. If he starts talking about individuals demanding a currency that is fully backed, redeemable, accountable and transparent, then I might give him credit for trying to help.

Could be something else, too. I'm just no so sure a new "standard" wont be used to take even more out of (most of) our pockets in one way or another.

Took Red Pill's picture

Good point! We certainly can't trust his motives.

Citxmech's picture

Greenspan?  Gold standard?  Are you fucking kidding me?

FUCK YOU Greenspan!

PS  There's a crisis immanent?  Better move over Nostradamus - there's a new clairvoyant in town. . .

JFC. . . 

bruno_the's picture

Arr. He meant paper gold. Tungsten gold. You name it. Virtual gold.

https://en.wikipedia.org/wiki/Digital_gold_currency

nakki's picture

FigureFEDhead sat in the chair that started the largest ponzi ever and now wants to go back to a gold standard.

Too fuckin funny