Augie,
You're right that gold is not mentioned beyond Greenspan's opening remarks. And I agree that Greenspan mentioned gold only while giving a short history of monetary policy. But he does credit the gold standard with price stability, and a few paragraphs later he states:
Central bankers have long believed that price stability is conducive to achieving maximum sustainable growth. Historically, debilitating risk premiums have tended to rise with both expected inflation and deflation, and they have been minimized during conditions of approximate price stability.
Greenspan makes it clear in his speech that the money supply will be inflated to remove any chance of price deflation in our economy. So, the dollar is going to lose value in the coming months in relation to other currencies, including gold.
Sinclair, IMO, extrapolated that gold will become linked to the dollar after the Fed has devalued the dollar enough to make our current accounts deficit manageable. He based this extrapolation on the gold standard being mentioned by Greenspan as responsible for relative price stability in the USA from 1800 til 1929, the fact that Greenspan stated that price stability is "conducive to achieving maximum sustainable growth", and that the Fed is currently inflating the money supply until they can achieve some price inflation.
My questions to you, and the thread in general:
Could Greenspan have made the point of his opening remarks without mentioning the gold standard?
Once Greenspan determines that the dollar has been devalued enough what are his options to restore confidence in the greenback?
Thanks to all for your comments,
Phil |
