Long ago, before becoming Federal Reserve Inflater-in-Chief, Alan Greenspan advocated a gold standard.
The idea is that everybody pays for things in gold, a natural medium of exchange. Receipts for gold used for convenience in trade are “backed” and can be easily redeemed. With appropriate protections in place, politicians can’t dilute the value of money by printing more receipts or by shuffling phosphor dots on a computer screen.
But our world is very different.
At the Fed, Greenspan oversaw a lot of credit expansion, encouraging a horde of folks who couldn’t afford homes to take out mortgages. Any discussion of the financial crisis of 2007 – 2008, or why “we” “failed to predict” it, must discuss Fed policies and other government interventions.
Not, though, if you’re a former Federal Reserve chairman intimately aware of those policies and fully capable of grasping their baleful effects. Then you blather about “irrational exuberance,” or, in a new article for Foreign Affairs magazine, Keynes’s “animal spirits.”
Not a word about how monetary inflation spawns malinvestments that must eventually be washed away. Indeed, the best interpretation of Greenspan’s new book, or his appearance on The Daily Show with Jon Stewart, is that Greenspan is doing his utmost to deflect attention from his own disastrous record.
He’d rather have us believe that “free markets” failed in 2008, not — oh, no! — the policies he himself had pushed since obtaining his seat as head honcho at America’s inflationary central bank.
This is Common Sense. I’m Paul Jacob.