Goodbye Alan Greenspan, Remembering NYT and FT Gold Hokum

Alan Greenspan (March 6, 1926 – June 22, 2026), KBE (Knight Commander of the British Empire) and Former Chairman of the Federal Reserve

Alan Greenspan died last week at the age of 100 - the same Greenspan who became Chairman of the US Federal Reserve back in August 1987.

In December 1987, the London Bullion Market Association (LBMA) was incorporated and operated under the oversight of the Bank of England (BoE) - the UK’s central bank fiat currency operators. Then the LBMA, under the oversight of the BoE, created their London Code of Conduct for Non-Investment Products (NIPS Code) that include gold and silver bullion.

With the creation of the NIPS Code, the world’s dominant physical gold and silver market in the City of London endorsed and spurred trading of ‘promissory note’ unallocated gold and silver cash/spot metal contracts, that did not need to have metal backing to be created or traded, allowing ‘metal’ to be created without limit and sold into the London market.

The Greenspan central banking era thus saw currency central planners given free reign to run loose monetary (currency) policy without the rising gold and silver currency inflation warning signals sounding - so long as physical metal delivery was not demanded in size by disillusioned investors.

The 1990s with its declining precious metals prices and repeatedly defined-down CPI inflation measures, that started with the Boskin Commission, became the era of the ‘Great Moderation’ according to the Wall Street Journal.

The Maestro Greenspan had allegedly solved the currency Rubik’s cube allowing the financial markets to soar as the M2 currency supply ran sharply higher, price inflation slept, and investors lost interest in gold and silver. Who needs that stuff?

The Gold As A Jalopy Media Theme

Gold reached its post 1980 low in August 1999 near $250 /oz. In May 1999, in the midst of the central bank monetary legerdemain, the New York Times pounced:

“… Who Needs Gold When We Have Greenspan?

Is gold on its way to becoming just another commodity? The people who run the world’s financial system are doing their best to secure that fate for the metal that once was viewed as the only real money.

The process of removing the glitter from gold has been a gradual but inexorable one, and is one of the most telling counters to the argument that national governments are less important in this era of globalization. Much of the world is now quite happy to accept the idea that a greenback backed by Alan Greenspan is just as good as one backed by gold.

Certainly gold’s reputation as a store of value has eroded. At the peak of the gold frenzy in 1980, an ounce of gold cost $873, precisely that day’s level of the Dow Jones industrial average. Now the Dow is at 11,014.69, about 38 times higher than the $287.60 price of gold. …”

Yeah, after 4,000 years, Greenspan had killed sound money. What nonsense.

The NYT further opined:

“… The argument against retaining gold is that its day is past. Once it was useful as a hedge against inflation that would hold its value when paper currencies did not. Now financial markets have their own sophisticated ways, using exotic derivative securities, to hedge against inflation.

Once gold served as protection for investors against governments that debased their currencies. Now there is plenty of debasing going on -- the Brazilian real is down 27 percent this year -- but the lesson people have drawn is to believe in the dollar. There is growing support for the idea that all of Latin America should adopt the dollar as a currency.

Dollarization, as that idea is called, amounts to a sort of a gold standard without gold. There would be a universal money whose value was based not on gold in the vaults, but on the wisdom of Mr. Greenspan and his successors at the Federal Reserve. Few fear that one of those successors might resemble G. William Miller, the Fed chairman in the late 1970’s who seemed to have no idea how to slow inflation. …”

The NYT even seems to tag the late 70s wild price inflation on the Fed’s Miller when the prior Fed Chairman Burns (1970 - 1978) had ramped M2 currency supply as hot as 14% YoY.

In fact, gold was not down on the wisdom of Greenspan but on the ability to create limitless gold for sale in the world’s largest physical gold market in the City of London manipulating investor perception.

A few years later in April 2004, the City of London’s Financial Times took its turn dancing on the grave of gold both as a monetary unit and investment in its editorial “Going, Going, Gold; The pointlessness of holding bullion continues to sink in” * :

“… The fetishisation of shiny yellow metal, decades after it ceased to be used as the anchor of the international monetary system, is a lingering anomaly in modern financial markets. Perhaps Rothschild’s last service to the bullion market could be to keep a live gold trader on display behind glass as a reminder of a bygone age, like the former coal miners who now make a living giving tours of defunct pits.

The one advantage of gold as a reserve asset is that, unlike assets based on fiat money (ed. - currency, actually) governments cannot make it worthless by inflating it away. But in an era of low inflation and given that independent inflation-targeting central banks are the norm across the industrialized world, that risk has very sharply diminished.

Indeed, for both private and official investors, gold is now a rather risky asset with a nil or low return. … … The gold price hangs precariously by its own bootstraps.

For private investors to hold gold on this basis is their own foolish affair. For central banks and governments to hold it as a reserve asset is a betrayal of the public on whose behalf they are acting. …

… Whatever the speed, the direction is clear. Gold is on its way out as an investment and a reserve asset. Three cheers for that. …”

The price of gold was $400.65 /oz. at the time of the FT editorial.

Let’s see how accurate NYT and FT guidance on gold to investors turned out:

Figure 1 - Gold Spot Price (USD/oz.) May 1999 to Present (NYT & FT Article Dates Marked In Red); source: TradingView.com

Greenspan Out, Bernanke In

Financial sleight of hand was not over when Greenspan retired as Fed Chairman in January 2006. In came Ben Bernanke with his Quantitative Easing that saw the Fed creating trillions of USD currency from nothing and buying bonds and stocks to fake their prices as the Fed’s asset bubbles crashed in late 2008.

Bernanke claimed QE “worked in practice but not in theory”. More central planner nonsense.

What started in 1987 as a short circuiting of the global currency inflation warning system in the London gold and silver market, assisted by the Bank for International Settlements (BIS) coordination of central bank gold leasing, has now metastasized to a global ‘everything bubble’.

Augmenting the coming asset and currency crash is the War on Iran quickly driving price inflation and ultimately interest rates higher that will level much of what has taken centuries to build in Europe and North America.

However, let’s give credit to the source and ultimate growth of the global bubbles - central planners and market subterfuge.

Best regards,

David Jensen

* Thank you to Mario Inneco for saving this FT editorial back in 2004.