"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Friday, September 17, 2010

Fiat and Gold.... the current conflict

Greenspan of all people, has recently discussed the rising price of gold.  At a meeting at the Council of Foreign Relations, in NYC, Greenspan had this to say:

“Fiat money has no place to go but gold,”

Responding to a question on gold's recent spike, the article continues with:

Mr. Greenspan replied that he’d thought a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities “simply don’t pan out,” as Mr. Malpass characterized Mr. Greenspan. “He’d concluded that gold is simply different,” Mr. Malpass wrote. At one point Mr. Greenspan spoke of how, during World War II, the Allies going into North Africa found gold was insisted on in the payment of bribes.* Said the former Fed chairman: “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”

Also in the news, one of my favorite analysts, James Rikards on the US-Chinese yuan revaluation dilemma. At the end of the interview, he too discusses gold and the status of the US Dollar. Yet unlike Greenspan's characterization, Rickards is more negative... he says the US Dollar is collapsing:

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