This is something that is truly amazing. There is no way that it could ever be "made up". AS the old saying goes - truth is indeed stranger than fiction. How much stranger? The Associated Press has reported that Fed Chief Alan Greenspan has made a pitch for "improving financial literacy" amongst American children and adults.
Apparently, Mr Greenspan would like all Americans, young and old alike, to understand such basic financial concepts as BUDGETING and SAVING. What a very good idea, I wonder why nobody thought of that before. It would seem that nobody has, since Mr Greenspan delivered this plea in the course of a speech given to the National Council on Economic Education.
Before going any further, allow us to point out the following facts. "Budgeting" and "saving" have been conspicuously absent from the financial undertakings of Americans (and most other people around the world) for the past decade or so. Why? Because it seemed to most people that doing these things was a one way ticket to the poorhouse. That became especially poignant in the last half of the 1990s, when anyone who endeavored to "budget" or "save" watched everyone get rich while they remained comparatively poor.
Mr Greenspan has the hide of a rhinocerous. The Fed, under his control and command, has done more than ANY OTHER FINANCIAL INSTITUTION IN THE WORLD to depreciate, discourage, and actively denigrate any semblance of "living within one's means". The panacea to all economic problems, as seen from the wheelhouse of the Fed, is BORROWING. The great driving force behind the U.S. economy, as seen from the same perspective, is SPENDING. And it goes without saying that this spending is not to be done within any kind of a rational "budget". No, it is to be done with BORROWED money.
Any relapse into "budgeting" and "saving" by Americans would quickly turn what is (to put this as kindly as possible) a "shaky" U.S. economy into an economic disaster. The Fed never tires of telling us that. The Fed also never tires of lowering interest rates and/or pumping up the U.S. money supply. The purpose is not so people can "budget" and "save". It is so that people can go on borrowing and spending.
It has now become the "patriotic duty" of all Americans to get out there and SPEND. This message has come from everywhere, most definitely including the Fed. The head of the New York Fed Bank, amongst others, has said so in recent days.
The truth of the matter, as Mr Greenspan knows full well, is that the ability to budget and save was dealt a blow from which it has never recovered by the onset of the global "floating currency" regime in 1973. Ever since then, the vast majority of people have not saved, they have borrowed. And the only "budgeting" they have done is to figure out how much debt they can afford to service. Mr Greenspan knows that too. He also knows that he is running an ultimately losing race with his rate cuts. America, and most other western nations, is fast nearing the point where current debt will not be "serviceable" at any rate of interest, no matter how low.
What a time to start talking about "budgeting" and "saving".
If a national turning over of a new leaf were to occur, and people decided to live WITHIN their means, we leave it to your imagination to picture what would happen to the present U.S. economy. If the Fed decided to actually reward "saving", but refraining from artificially lowering interest rates and letting them find their own MARKET level - well, we'll leave the results of THAT to your imagination too.
The ability to budget and save requires a medium of exchange whose purchasing power does not fluctuate unpredictably at the whim of those in political power. It does not require "stable prices", which are an economic chimera, impossible and undesirable in practice. What it requires is SOUND MONEY.
There is NO institution on the face of the earth which has done more to hamstring any attempt to return to sound money than the Fed. And the culmination of the Fed's efforts in this direction have taken place since the crash of 1987. Who has been the Chairman of the Fed throughout that period? That's right, Alan Greenspan.
Many people, but nowhere near enough of them, know that Alan Greenspan, in an earlier incarnation as a more than useful economist, was a firm advocate of Gold as money and the Gold Standard. We do not think that Mr Greenspan has forgotten the arguments he used in those days. We cannot help but wonder if, knowing that the spending and borrowing of the past three decades cannot go on much longer, he has plans to resurrect them.
This is most likely wishful thinking. But the fact remains that SOMEONE has to resurrect them. If "improving financial literacy" is indeed crucial - and it is - then these are the arguments which must once again see the light of day. We can't think of a more unlikely source than the Fed. Can you?
In the meantime, if YOU want to budget and save, Gold is the answer.