But at today's exchange with the Senate's goldbug Ron Paul from Texas Greenspan veered off this respectable course.
When Senator Paul asked him why the central banks still held gold although they had gone off the gold standard, Greenspan replied "central bankers have behaved as though we were on the gold standard," and added, "we are acting as we were then."
Sorry, a look at the two charts below paints a very different picture.
GRAPH: Inflation has taken off since the inception of the Federal Reserve after consumers enjoyed stable prices in the 110 years before. Note the bends upward after the abolition of the gold standard in 1933 and after the closing of the gold window in 1971. Alan Greenspan does not like to be reminded of his essay from 1967, when he wrote, "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation."
GRAPH: Money supply has been steadily accelerating since the closing of the gold window in 1971 with one exception at the beginning of the 1990's.Greenspan said further that the gold standard is no option nowadays. But he conceded, "in 1981 the answer would have been yes," giving the reasons that gold was then trading at $850 per ounce and that there were huge imbalances.
Leaving the argument of the gold price aside - gold is the second best investment since 1971 with a gain of 1,105 percent compared to Dow which gained 1,160 percent in the same period (dividends excluded) - the answer could be at least "maybe" again. There are more than enough imbalances around now, even when the economy is not contracting. But inflation is accelerating faster than the official CPI figures reveal.
Debt is rising at its fastest pace ever. Not even scarce ink will be limiting future liquidity supply. President Bush's chief economic adviser, Ben "printing press" Bernanke, tipped as one of the three top contenders for Greenspan's succession, has said that in 2001 already.
The world is rapidly approaching the time when other concepts than the one of "the highest possible growth" have to be applied. It won't work for the reason of limited resources that will have to be shared by 6.5 billion people and not only the roughly 800 million who until now have seen the exclusive use of the world's resources as a given birthright.
Looking again at the charts above one also has to question Greenspan's statement, "I think central banking has learned the dangers of fiat money." The charts tell a truly different story.