First Things First

I've been seriously studying world economics for about 2 years now. At this point, I am convinced that Alan Greenspan, is not only far from being an outstanding central bank chief , but also is taking the U.S. down a financial path we'll never recover from. I'm not saying Alan is completely to blame for all our deficit spending, but to say that the politicians are completely to blame for the mess is a bit like the principal saying the children are the reason the grade school is out of control. We put the principal in control to rein in the students and enforce discipline, as we put the Fed Chairman in charge to enforce discipline. Not to stand idly by while hedonics is used for inflation indexing, not to remain silent while budget deficits bulge, and certainly not to drive interest rates to a 40 year low just to avoid a recession we need to clear out our excesses.

Reading Mises, Rothbard, James Grant, Marc Faber, Stephen Roach has convinced me that the public has largely fallen asleep at the investment switch only 2-3 years removed from our previous trough. The difference this time is that the deficits are larger and that little economic stimulation is available. The history of world economies suggests that from the Roman Empire to 18th Century France to the Weimar Republic to Yugoslavia, the preferred attempt to forestall economic disaster has been to devalue the currency, usually to worthlessness. The US Dollar seems to be in the beginning stages of the same course, and Greenspan bears more responsibility than any other single person. This selfsame person is famously known as the author of a 1966 piece, "Gold and Economic Freedom."

http://www.321gold.com/fed/greenspan/1966.html

Far from following his own advice, he has tried to create an illusion that fiat money policy has effectively mirrored the gold standard. While no proof exists, several commentators have remarked that it is likely that Greenspan has attempted to move the spot market in gold via the use of derivatives executed with the help of money center banks such as JP Morgan, as well as hedging as conducted by Barrick. It is therefore not surprising that he went on an unusually strong opposition to the regulation of derivatives.



Rather than create these illusory scenarios which are doomed to failure, Greenspan should target an interest rate he's approaching and clearly state it to the public - currency speculators be damned. Second, he should publicly and loudly chastise the Congress for deficit spending. Third, he should publicly disavow any attempt to influence the gold or currency markets. OK, he did it once in 3/2000, but doubts remain.

http://www.goldensextant.com/commentary11.html

Fourth, he should reverse course and call for public regulation of the derivatives market, especially in light of Fannie Mae's abuses.

Fifth, he should call for accounting for derivatives to be based on "mark to market", not "mark to model".

http://www.iht.com/articles/95721.html