Former Fed Chief Greenspan On The Economy and Gold

It is surprising how quickly Greenspan has changed his tune since he left the Fed. While at the Fed he was responsible for numerous bailouts (e.g LTCM), despised gold, and blew economic bubbles. Now that he is away from the Fed he has returned to his free market Ayn Rand ways. He said today that government stimulus measures had failed and should be stopped because it is interfering with the private sector. On gold the former Fed chairman noted it was indicating a potential problem in the currency markets. As for a double dip, he does not see it happening but warns if home prices fall then "all bets are off." Considering that home prices are already declining this must be some of his old Fed speak for I expect a double dip but don't want to actually say it. From Dow Jones:

At this point, "we'd probably be better off doing less than more" because "you'd be far better off to allow the normal market forces to operate here," Greenspan said. That's largely because stimulus spending is not proving as effective as many had hoped. "To the extent the evidence suggests very large deficits concurrently crowd out capital investment, there is a debit to the stimulus program that is somewhere between a third and a half of what the gross stimulus is," he said.
The former central banker noted that gold,the price of which has been surging, still represents the "ultimate means of payment." What is happening in that market "is a signal there is a problem with respect to currency markets." He reckons the problem is not a large one, but the jump in gold prices could be "the canary in the coal mine to keep an eye on."
 ...when it comes to a double-dip recession, "the probability of that is going down." Given all the ground the economy has lost, "the tinder for a double-dip is not readily available," although he added if housing goes down "all bets are off."


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