Former Fed chairman Alan Greenspan says gold prices are going up ‘measurably’

Posted on 30 October 2014 with no comments from readers

Former Fed chairman Alan Greenspan told the New Orleans Investment Conference last weekend that the gold price was going ‘higher’ over the next five years and when asked how much higher he responded ‘measurably’.

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Always a cryptic commentator Dr. Greenspan noted that ‘gold has always been accepted without reference to any other guarantee.’ In short it is money without a central bank to print it.

Not independent?

He also pointed to the fallacy for blaming central banks for money printing because actually they are all under the control of politicians, adding: ‘I never said the central bank is independent!’

Contrarian investor Marc Faber was on the same conference panel and has been highly critical of Dr. Greenspan in the past. When he bashed central banks for printing money to fund social programs, Mr. Greenspan put him down with the remark: “You have it the wrong way around’.

In other words its the politicians making the social programs that the central bank is then told to fund. This is of course the democratic paradox: allow people to vote for a better life and they will do so until they create hyperinflation through excessive spending and borrowing.

But why should gold go up from here after three years of falling prices? Could it be that politicians will once again tell the central bankers to print money to pay for their massive debts and inflate their value away?

QE on hold?

If so the ending of QE this week is just a hit on the ‘pause’ button that won’t last for long. Gold would be the most obvious beneficiary of such an inflationary policy and the dollar would resume its long-term decline.

Then again if the bond market blows up in the faces of all the central bankers you would also want to hold gold and that would be the only place for money to go. It’s a good two-way bet and Dr. Greenspan has always like to stand on both sides of the coin at the same time.

On the other hand, gold bugs might also consider his appalling investment prediction record and sell up!