Mallaby knifes Greenspan following gold comments

peterdiekmeyercontributor's picture

Mallaby knifes Greenspan following gold comments

Contributed by:  Sprott Money News

December 5th, 2016

Two years ago, Alan Greenspan humiliated America’s financial and political establishment by publicly highlighting the US dollar’s secondary role. "Gold is a currency,” Greenspan said, at a Council on Foreign Relations conference. “No fiat currency, including the (US) dollar, can match it."

The comments by Greenspan, - a former US Federal Reserve chair, Ayn Rand disciple, jazz musician and one of the country’s top economists, - were a shot across the bow of one of America’s primary foreign policy priorities: enforcement of the dollar’s role as the global reserve currency.

If the rest of the world stops accepting unbacked US paper and debt, in exchange for real goods and services, the country’s financial power and standard of living would tank by orders of magnitude.


Greenspan’s comments threatened that primacy.

It wasn’t just what Greenspan said that mattered, but where he said it. The Council on Foreign Relations is a pillar of US establishment thinking.

The council describes itself as an “independent, nonpartisan think tank whose researchers cover significant issues shaping today's international agenda.” A quick look at its board however, shows that at least half have visible connections to central banks, financial institutions and hedge funds.

The man who knew
There was no way this august body was going to let Greenspan’s comments stand. Last month, the financial establishment struck back, with the release of The Man Who Knew: The Life and Times of Alan Greenspan, a CFR-financed book that blames Greenspan for allowing financial bubbles to inflate during his tenure at the central bank, thus enabling the 2008 financial crisis.

Written, researched and documented by a multi-million-dollar team of Council of Foreign Relations staffers, assistants and interns, headed by Sebastian Mallaby, a former journalist, the book cites evidence, pulled from Greenpsan’s Ph.D. thesis, that he was well-aware of the dangers that asset bubbles present.

Mallaby

The Maestro, as the former Fed chair was known, during his nearly two decades in office, “was the man who knew,” not the man who “acted,” Mallaby writes.

That disingenuous charge, while partially based in reality, enables establishment players to set up Greenspan as the fall guy for a possible future crash, thus deflecting attention from the CFR and its backers. To understand why, it helps to take a step backward.

Hampered by a debt-growth model
The US economy that Greenspan inherited when he took over the Fed chairmanship in 1987 was already considerably hampered by hidden fragilities. These included too big to fail financial institutions, massive debts, - many of which were compiling off the books, - and the legacy of a slew of bailouts ranging from Continental Illinois to the City of New York.

A precedent had long been set. Starting with the abandonment of the gold peg in 1971, America adopted the debt-growth model, in which system-wide borrowing and unfunded liabilities growth – at a rate that out-paced GDP growth, - were needed to avoid sending the economy into persistent recessions. 

Bailouts and continued asset growth – even back then – were already needed to keep the system stable. Everyone knew what had happened to Paul Volcker, the previous Fed chair, who had tried to stem the accumulating sclerosis and was pushed out of office for his troubles.

Those who needed reminders had only to watch the fates of David Stockman (who pushed for spending cuts), Paul O’Neill (who opposed tax cuts) and Brooksley Born (who argued that derivatives should be regulated) and others who made similar attempts.

In fact the best conceivable result that any Fed chair could hope for, by the time Greenspan took office, just weeks before the 1987 stock market crash, would be to slow debt growth and maintain system stability as long as possible, in the hopes that the political climate would change and reforms – particularly entitlement reforms, - could be enacted1.

How has the US fiat money system held together for so long?
Many in the sound money community, - notably Bill Bonner, at the Daily Reckoning, but also Ron Paul, – have openly wondered how the US financial system has held together for so long. Whatever his faults – and there were many - Greenspan’s skills during his two decades as Fed chair had a lot to do with it.

Mallaby’s questionable thesis and the book’s numerous deficiencies, mostly escaped reviewers at The Economist, the Washington Post and Financial Times, (three papers where Mallaby previously worked).

Despite this, the Council on Foreign Relations’ attack on Greenspan remains a useful guide to how the US establishment views recent monetary policy history2.

Mallaby’s staffers combed the archives relentlessly, to dig up dirt on Greenspan. In addition to Greenspan’s Ph.D. thesis, which the Maestro had previously kept secret, and which Mallaby got him to hand over, they also managed to retrieve a dozen economic lectures that Greenspan gave during his days in Ayn Rand’s circle.

Less useful was Mallaby’s obsession with Greenspan’s private life, and his prying into the stories about every girl the Maestro dated, every skirt he looked at and every gay bar his band played in, during his days as a jazz musician.

Fabrication and misattribution of quotes, omission of key information, ignorance of basic financial concepts
Part of Mallaby’s effectiveness in making The Man Who Knew such an entertaining read, stems from his platform as Senior Fellow for International Economics, at the Council on Foreign Relations. Shorn of his obligations to adhere to journalistic standards, he was free to use tools many of his former colleagues would shun.

These include the fabrication of quotes (one which cites Ronald Reagan talking about Frederic Bastiat, an obscure French libertarian thinker, sounds particularly preposterous), misattribution of sources (notably a key Greenspan quote on gold), and omission of key information that does not suit his arguments.

In a style perfected by the Economist magazine (where his wife, the charming Zanny Minton Beddoes remains the editor) Mallaby leads readers through a swamp of conflicting arguments, carefully chosen to steer them to the Council on Foreign Relations’ management’s inevitable conclusion: that government, - and more specifically the US central bank - ought to have more power.

Laying the blame for the 2008 financial crisis at Greenspan’s feet, The Man Who Knew, thus sets the stage for future Fed chairmen to not only manage interest rates and employment levels, but to demand formal power to manipulate asset prices too (The Fed has already been doing this on a de facto basis since the Bernanke reign).

But how convincing is that indictment? Incredibly, for a journalist who worked for 13 years at the Economist, Mallaby appears to have a poor grasp of basic financial concepts. He conflates millions and billions, the difference between “earnings,” and “earnings growth,” and omits America’s unfunded liabilities from his analysis. Whether a country is accumulating hundreds of millions of dollars in debts per year, or trillions, - off the balance sheet, - matters.

Was Rubin behind the Greenspan hatchet job?
Robert Rubin and the other financial establishment players, who control the Council on Foreign Relations’ board, will be particularly pleased with Mallaby’s deflection of public attention from the role that repeal of Glass-Steagall legislation played in the 2008 crisis.

This crucial error, which enabled banks to use FDIC guaranteed funds for speculative purposes, during a time of grossly insufficient capital requirements, paved the way for the emergence of the “too big to fail” financial institutions, which ignited the contagion.

rubin
Indeed one person that Mallaby demonstrates no sign of having interviewed is Rubin himself, a former US Treasury Secretary and the man responsible for spearheading the overturn of Glass-Steagall3. This omission – which recalls the “dog that did not bark” in the old Sherlock Holmes tale, - stands out because Rubin is nominally Mallaby’s boss4.

In all fairness to Mallaby, the former journalist provides a clue as to what happened. Prior to publishing the book, he was forced to submit it for approval to a slew of editors and proofreaders, including two “anonymous,” CFR readers, who made various changes to his text. One of these, Mallaby must have suspected was Rubin himself. In this reading of events, Mallaby presumably self-edited any comments about Rubin, before submitting his final draft.

Ignorance of Greenspan’s record on gold
Where Mallaby slipped into unprofessionalism or incompetence (it’s hard to say which because neither he nor the Council on Foreign Relations responded to detailed requests for comments) was in his omission of any mention of Greenspan’s defining 1966 essay Gold and Economic Freedom. In this magisterial work the Maestro cites, in no uncertain terms, his philosophy on gold (and, by default, the consequences of its abandonment) as backing for the monetary system.

“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,” Greenspan wrote. “Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process5.”

Increasingly, the victims of this “confiscation” are foreign governments, who are obliged to hold increasingly-debased US dollars, which are the world’s reserve currency.

Mallaby’s omission of Greenspan’s CFR event comments and Gold and Economic Freedom insights enables the Council on Foreign Relations to downplay the impact of this public disparagement of this key US foreign policy priority. In fact, Greenspan’s Gold and Economic Freedom ideas, which he continued to affirm (sometimes subtly, sometime less so) long after he left the Fed, leave no room for confusion where he stands on the yellow metal.

The ultimate irony was that not only was Greenspan The Man Who Knew; he also appears to have known a lot more than Mallaby, his biographer, was able to discern.

-30-

1 Mallaby makes a crucial error, by assuming Greenspan’s move into public life, amounted to a repudiation of the “eccentric spell,” Ayn Rand cast on him. Rand was primarily a philosopher (not merely an economic thinker) whose philosophy, in essence, viewed “Man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.” Nothing in Greenspan’s work at the Fed, and afterwards, - during which he had to be very careful about what he said, - suggested that he stepped away from those values.
2 Mallaby, despite his numerous faults, blind spots, naivete regarding the US financial system, and constraints, is a fabulous writer and The Man Who Knew, is a wonderfully entertaining read. It is precisely these qualities which make the work such an effective hatchet job.
3 Greenspan’s support of Rubin’s efforts to repeal Glass-Steagall, during a time of weak capital requirements for banks, appears questionable in retrospect.
4 In “Silver Blaze,” Sherlock Holmes fingers the dog’s owner as the killer, because the “dog did not bark,” – as it would have for any other intruder. The absence of any references to Robert Rubin as a source, in Mallaby’s otherwise well-researched book, which has more than 60 pages  of highly detailed notes, makes it possible that Mallaby did indeed talk to him, but scrubbed all references. This leaves Rubin the ability to deny that he was behind this attack on Greenspan, his old ally.
5 Mallaby includes a partial quote from the essay, but misattributes it to a secondary source.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
dizzyfingers's picture

"Mallaby knives Greenspan following gold comments..."

Two knives

 

To knife...

peterdiekmeyercontributor's picture

______________

Touché!

I edited that darn piece 50 times, and the one mistake anyone has pointed out was in the title.

Nice call. I will make the correction.

highwaytoserfdom's picture

 

No the CFR is an extension of drug financed CIA and committed war crimes with partners Mao Bush Saudis Israel.   They have no moral compass  and have funded both sides of wars heck since the crusades.   

Financial scum are usury in bread criminals.  The information explosion is on but they are still at the wheel of the force violence machine.   Notice Kissinger  in China supporting Mao's largest democide and CFR trying to stir it up with Taiwan.  Don't worry no one reads FAKE News  

 

"The Rothschilds, and that class of money-lenders of whom they are the representatives and agents -- men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest -- stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved." by: Lysander Spooner
(1808-1887) Political theorist, activist, abolitionist
Source: "No Treason #6" (1870)

 

RaceToTheBottom's picture

They have been and will continue to fight reinstatement of Glass-Steagall till the end.  

They will fight Gold till the end.

Greenspam and any others will be thrown to the wolves.  While he should be ripped a new one, the committee to save the world, including Summer and Rubin should all be shot as terrorists.

The Financial scum look forward not backward.   

One of the better recent articles on ZH.

Crush the cube's picture

Shove a cigar between those fingers, get him some round glasses, and it's a George Burns comedy act.

Clock Crasher's picture

<< Hyperinflation complete Gold:oil going to 1:10 @ $5 gold per ounce and Dow to zero

<< Hyperinflation on the way

celticgold's picture

CFR is the "intellectual " arm of the good ole ... CIA

silverthorn's picture

The CFR is owned lock stock and barrel by David Rockefeller. Same old crime syndicate.

mary mary's picture

Too bad for Alan Greenspan that a man is remembered for what he does, not what he says. 

Alan Greenspan is speaking the truth now, as he spoke the truth before he became Fed Chair.

But I think that, when George W. Bush launched his greedy, criminal, idiotic Loot Iraq War, Greenspan decided (probably under some Neocon/Rothschild pressure) to give Americans a carrot to keep them quiet, to keep them from challenging the War.  That carrot was inflated resale values for their homes, their biggest investments.  Greenspan did that the easy way: massive inflation.  Of course, after the High is always the Cold Turkey.  The Cold Turkey came in 2008, and we will be in Withdrawal for many more years now.

But kudos to Alan Greenspan for at least returning to the truth now that he is too old to give a shi*t what they do to him.

sonoftx's picture

There was this surgeon and he practiced for about 24 years. He was a shitty surgeon and he literally killed several people due to his ineptitude. But, he made alot of money and he made the hospital alot of money.

He has retired now and he has changed. He goes around talking to other surgeons and telling them to report those "bad" surgeons who inhabit their ranks.

Kudos to him!!

How about fuck you Mary Mary and get your head out of your ass. This article is a cover and hit piece just like the book he is talking about. Greenspan and Rubin knew exactly what they were doing. What? Getting very fucking rich and having alot of POWER.

I truly can't believe you would say KUDOS and then put an asterisk in SHIT. Go back to better housekeeping. Or, better yet, be CONTRARY, like MARY was.

mary mary's picture

Sonoftx, I'm with you.

Greenspan was like a surgeon who lectured about operating room cleanliness, and then the rich folks gave him a big bucks job at the Little People's hospital, where, to save the rich folks lots and lots of money, he fired all the janitors, and of course the operating room got filthy, and patients started dieing, and he ignored it, and he killed most of his patients.  Finally, he retired, and the rich folks heaped honors on him.  He holed up for a few years, and then returned to lecturing about operating room cleanliness.

GRDguy's picture

Geez, more CFR fake news.  The fake news tsunami has arrived.

Lets Buy The Dip's picture

even zuckerbourg on FB is trying to stop that fake ass new crap. Its a little annoying. 

I would not trust the old geezer, when he talks gold. I would rather listen to guys like this, who know what they are talking about. we just had one of the biggest rallies in human history. SEE this report ==> http://www.bit.ly/2gKGA2Y People are now realising they are sick of the BS from hillary. and the DONALD might actually be good for the stock market.

RMolineaux's picture

Greenspan's alliance with Rubin to repeal Glass-Steagell is the defining action of his tenure, the consequences of which will haunt both.  

GRDguy's picture

These financial sociopaths simply do what they're told to do.

They're just puppets.

iAmerican3's picture
iAmerican3 (not verified) Dec 6, 2016 8:19 PM

The CFR was the vehicle by which Vatican bankers Rothschild and Rockefeller took over "Big Media" a hundred years ago...along with "more obvious" Organized Crime, AKA, "The Annenberg Gang;" and control it to this day...the "Fake News" effluent emitted by our satanic #pizzagate ruling false-elite.