Gold: Greenspan’s shock admission

  • Setting the scene
  • Greenspan said what?
  • Hot shoot
  • Out of trousers

So, did Dr Alan Greenspan confess to the errors of his ways?

We’ll reveal below. [Hint: he didn’t!]

But before we even get to that, Platinum Alliance member, Michael M, writes:

Well this takes the biscuit. An interview with Alan Greenspan, [redacted], [redacted], [redacted] and a thoroughly [redacted] individual.

This is something on the lines of Rickards’ “conversations with Ben Bernanke”.

How can anything these people say possibly be of any benefit to your subscribers?

I have no doubt that somewhere in this arrangement there is a substantial fee for said [redacted].

Why stop there? Could we have an interview with Bernie Madoff [Ed note: Now there’s an idea], or perhaps Charles Manson [Ed note: Not so keen on that one].

I’m sure anything they can tell you would be as relevant as Greenspan’s contribution and at least there would be some entertainment value.

Have you people read nothing about this man? How he completely went against all his principles when he took [the] position as Fed Chairman.

The lasting damage he did in that position.

And Vern Gowdie of all people to be involved in this fiasco, the most down to earth of all financial advisors.

This is obviously a “feather in our cap” situation and I for one am disgusted.

This really has made me question my Platinum Alliance membership.

We’ll answer Michael’s email in full below, along with revealing a thing or two of what Dr Greenspan had to say…

Markets

Overnight, the Dow Jones Industrial Average fell 58.96 points, or 0.3%.

The S&P 500 fell 6.75 points, or 0.3%.

In Europe, the Euro Stoxx 50 index closed down by 9.49 points, for a 0.29% drop. Meanwhile, the FTSE 100 fell 1.46%, and Germany’s DAX index fell 0.13%.

In Asian markets, Japan’s Nikkei 225 index is down 99.33 points, or 0.53%. China’s CSI 300 is up 0.44%.

In Australia, the S&P/ASX 200 is down 34.12 points, or 0.6%.

On the commodities markets, West Texas Intermediate crude oil is US$52.59 per barrel. Brent crude is US$55.63 per barrel.

Gold is trading for US$1,214.53 (AU$1,609.54) per troy ounce. Silver is US$17.15 (AU$22.73) per troy ounce.

The Aussie dollar is worth 75.44 US cents.

Setting the scene

Where shall we begin?

OK. First, with the idea behind the gathering itself. As far as we’re aware, the Agora group of publishing companies (of which Port Phillip Publishing is a part) is the world’s biggest financial newsletter publishing company.

The business has representation in the US, Argentina, Brazil, Chile, Portugal, Spain, France, Germany, UK, India, China, and right here in Australia.

Specifically in Australia, we believe we are the biggest financial newsletter publishing company here. We don’t know it for a fact, but we believe it to be the case. We have over 35,000 individual subscribers, who have a total of 90,000 paid subscriptions between them (not including Alliance members).

If we’re not the biggest, our competitors at Motley Fool, Intelligent Investor, Fat Prophets, and others are welcome to drop us a line to correct the record.

The point of this isn’t to boast, it’s to recognise that Port Phillip Publishing and the larger group of Agora companies are no longer the relatively small, nuisance, fringe-dwelling business that we were as recently as seven years ago.

For that reason, Agora founder, Bill Bonner, figured it was time to start putting that clout to use. That’s why, just over two years ago, Bill had the idea of creating a new group called Agora Economics.

The idea was to publish mostly macroeconomic writing. The ideas would be broadly in line with the Austrian School of economic theory.

It was about that time that I took over as publisher of Port Phillip Publishing. And it was then, following discussions with Bill and Vern Gowdie, that we decided to launch The Gowdie Letter.

Two years later, and the Gowdie Letter ‘franchise’ within our business has grown. Earlier this year we employed Selva Freigedo to help work with Vern on that service, and also to launch Port Phillip Insider Extra, which also has a heavy macroeconomic bent.

It’s grown overseas too. After writing a daily email for the past 17 years, in 2014 Bill himself decided to launch his own newsletter, The Bill Bonner Letter. And elsewhere, in the countries mentioned above, each has launched their own macroeconomic investment service as a way to help investors figure out some of the major themes and events happening in the world today.

But that’s not where the idea of Agora Economics ends. Bill’s vision was to engage with ‘outsiders’. Those with a broadly similar mindset, who could provide insight and their own view of the markets from their various locations.

So, aside from representatives from each of the Agora companies, our guests included, Richard Duncan. If you attended our 2014 investment conference in Melbourne, World War D, you’ll know that Richard was a popular guest speaker. Richard is based in Singapore, where he is the chief economist for Blackhorse Asset Management, and operates the Macro Watch service.

Also present was David Stockman. Mr Stockman was a Republican member of the US House of Representatives for Michigan, serving from 1977–1981. He was also Director of the Office of Management and Budget under President Ronald Reagan from 1981–1985.

Bill also invited Jim Walker, the founder and chief economist for Hong Kong-based Asianomics Group Ltd. Jim is a devotee of the Austrian School of economics, and provides research and consultancy to the funds management business.

Finally, author Mike Lofgren was in attendance. His book, The Deep State, was a bestseller in 2016. Lofgren is a Washington DC insider. From 1995–2004, he was budget analyst for national security on the majority staff of the House Budget Committee. From 2005–2011 he was chief analyst for military spending on the Senate Budget Committee.

That’s a great line-up. And just having all those people there would have made for a pretty good event.

But, as you know, we don’t go for ‘pretty good’. We want great. Whatever we do, we want it to be the best it can possibly be. Now, that doesn’t always mean we succeed. Sometimes we fail miserably.

But when we do something, we don’t do it with the intention to fail — no Springtime for Hitler situation here. We do it because we believe it will be a raging success. Most of the time it is, but sometimes it isn’t.

Another thing. Let’s say we didn’t invite Dr Greenspan. How much benefit would we or you have gotten if we had just all sat around a table agreeing with each other and saying how wonderful we are?

That wouldn’t have been very good at all. That’s why, whenever you have a protagonist, you must have an antagonist. A ‘hero’ film wouldn’t be half as good if it didn’t have a ‘villain’.

A love story wouldn’t be half the story if it didn’t have an antagonistic character or events interfering to try and break things up.

And an event about economics without an antagonist wouldn’t be anywhere as near as good as an event about economics with an antagonist.

So when it came to thinking of someone to invite, Bill Bonner was clear in his opening address that there could be only one person worthy of inviting to our inaugural event — Dr Alan Greenspan.

As Bill said:

‘[Greenspan] is the most important single figure in the bubble era.

He’s right, and we would challenge Michael, or anyone else to say otherwise.

Some may say that Dr Ben S Bernanke has assumed that role. But we could argue that Bernanke and his deeds only ‘exist’ because of Greenspan.

Anyway, the point is, if you want to talk to someone in authority about the expansion of credit, bubble financing, debt, fiat money, gold, and interest rates, who else would be better to invite?

At some point, if you’re making a list of people, and you put them in order of most to least important, odds are that Greenspan will head the list. It’s then just a case of trying to think of someone more important. I doubt if anyone could do that.

Before we get on to Greenspan’s appearance, we’ll make one comment about subscriber, Michael’s last line. If Michael thinks he can get access to the thoughts of the likes of Duncan, Walker, Lofgren, Stockman, or Greenspan from any other financial advisory in Australia, then good luck.

I doubt it’s possible. Is it a feather in our cap? Maybe. But to be honest, I don’t think of it that way. I have no interest in putting feathers in my cap. My only interests are in running the best financial publishing business in Australia, and providing what we believe is the best financial advice any investor can get anywhere.

I believe our analysts are world class — streets ahead of the mainstream drones you’ll find at the broking houses and funds management business in Australia.

If our subscribers disagree with that, well, as I always say, our relationship with our readers is voluntary. We don’t force or coerce anyone to pay us money. We simply put ideas (sometimes confronting ideas) in front of you, and then leave the decision to you.

If you like what we do, you’ll subscribe and then renew. If you don’t, you’ll cancel and leave. Honestly, I’m fine whatever your decision. Obviously, the more folks who stay around, the better. But we know our services aren’t for everyone. If it’s not for them, better to leave on good terms and move on. That’s what I say.

Finally, there was the question of how to treat Dr Greenspan. Should the interviewers be aggressive and confrontational, putting him on the spot about his record, or should they try to coax answers from him by being polite and respectful?

From what I could hear, they went for the latter. I think that was the right decision. It was effective too, based on the answers he gave below. The interviewers could have been aggressive and put him on the spot, but what would that have achieved?

Not much. And if there was a fee involved for his appearance, how much value for money would we or you have gotten if it turned into a slanging match?

Was the interview perfect? No. But it was useful and interesting. I hope you agree. Now on to that Greenspan meeting…

Greenspan said what?

In all honesty, our expectations for the meeting were relatively low.

We’re not a Greenspan fan. We don’t tune in to watch him interviewed on CNBC or Bloomberg. In fact, we’re not sure we’ve followed a single thing he’s done since he left the US Federal Reserve in 2006.

But when Dr Greenspan began to talk, we were somewhat surprised. As background, Greenspan was a hard money proponent of the gold standard in the years before he joined the Fed.

So Bill Bonner asked him, what changed? Greenspan said that when offered the chance to join the Fed, he thought to himself:

Do you want to be on the outside looking in and complaining, or on the inside and biting my tongue?

As an addendum to that answer, Greenspan then said, ‘If you’re asking if I’ve changed, then no.

By that, Greenspan says that the views he held before becoming Fed chairman are the views he still holds today. He went on:

I cannot think of any time in history when gold has not been accepted in exchange for real goods. Gold is a currency. You cannot say the same about anything else.

As I say, I’m not a Greenspan ‘groupie’, so I don’t know what he says in other interviews. But do you think it’s likely he would have said the following in a CNBC or Bloomberg interview? Because this is exactly what he revealed to us:

If you look at how closely we implemented monetary policy, we were trying to replicate a gold standard.

That was a jaw-dropper. You can argue whether it’s actually possible for a central bank to replicate a gold standard without using gold. And you can argue about the effectiveness of such a policy, and about whether Greenspan’s Fed achieved it…or even whether he really tried to replicate it at the time.

But we really don’t think you can argue that it’s not a stunning admission.

Of course, if your editor had been given the opportunity, we would have asked Dr Greenspan why he didn’t just return the US to a gold standard, rather than trying to replicate one? After all, everyone knows that real gold is better than fake gold.

But never mind. More from Greenspan, this time on the subject of fiat money:

We were creating an indefinite amount of legal tender currency. It has worked. It always does for a while…

Fiat currencies have always ruined the economy.

Talk about another jaw-dropper. And if you need to back up an argument with a story, what better than relying on a dead man…especially a dead former president:

Andrew Jackson was the only president to oversee zero debt, for three years. Jackson hated fiat currencies.

Central bank aficionados will know that Andrew Jackson is also the president who allowed the charter of the Second Bank of the United States to expire in 1824. A true sound money hero (just forget about all that stuff with the Indians).

Finally, still on the matter of fiat money, Greenspan was clear that fiat money has nothing to support it except the trust in the government. The legal tender laws help ensure that.

It’s against the law to refuse payment in legal tender. And what’s more, as long as the government accepts the payment of debts to it in the form of the legal tender money, the people will continue to trust it.

As Greenspan said, (paraphrasing), fiat money would not exist if it were turned down by those accepting it.

There was much more. But honestly, our hand was sore from taking notes. Apparently, we will have a transcript available within the next few weeks. If we’re able to distribute it, we’ll find out how to get it to you.

In short, it was a worthwhile visit, and a worthwhile event. Bill Bonner told us today that he hopes to make this an annual event, with a different guest each year.

Whoever it is next year, we only hope it will be an antagonist. There are enough of us here singing from the same proverbial hymn sheet. It’s nice to get someone with an opposing view, or whom will reveal something you didn’t expect.

Hot shoot

We grabbed this snap from our sideline vantage point of Vern Gowdie and Dr Greenspan:

Vern will share his views of the meeting with Greenspan in his Gowdie Letter and Gowdie Family Wealth services.

As for your editor, we declined a photo opportunity. We always do. Why? Because we figure it’s they who should be asking your editor for a photo opportunity, not the other way around.

We’ve no interest in buttering up their ego, when our own ego is deserving of attention first.

Out of trousers

We’re in Baltimore for one more day on Wednesday, before heading back to New York for a day. With any luck, our luggage will finally meet us at the hotel before we leave.

A consequence of having delayed luggage is that we’ve had to visit a couple of shopping malls in order to have a wardrobe of clothes for the duration of our trip.

What we’ve realised is that it’s no wonder the US retail industry is on the verge of extinction. We’ll admit that it’s taken us a while to realise it, but we’ve finally gotten there.

The saddest thing of all is that the people staffing the stores don’t seem to realise it. Their general ineptitude and lack of urgency makes one realise how much easier it is to just shop online.

The advantage of a physical store is that you can get the goods you want now. You don’t have to wait for it to be mailed to you. However, the experience of trudging around a store…finding the right items…being told in a suit shop that they don’t sell trousers…being told in GAP that they only have up to a certain waist size in the store (modesty prevents us from revealing any more)…finding only one shoe in the shoe box and being told to look for the other myself on the shelf…and waiting 15 minutes to use the only changing room booth on the entire shop floor…

…makes you realise that getting something now isn’t as important as buying what you want now, without hassle, and then patiently waiting a few days for delivery.

Perhaps one day retail staff will get it. Hopefully, it’s before they find out their jobs are no longer required.

Cheers,
Kris