Gold & Economic Freedom

Libertarian Ayn Rand and her former devotee - Alan Greenspan

Libertarian Ayn Rand and her former devotee - Alan Greenspan

Dear Readers,

Imagine for a moment that you are in charge of one of the biggest criminal operations in human history – the Privately Owned “Federal Reserve Bank” (which is no more “Federal” than Federal Express!  Don’t believe me?  Well GOOGLE it and read for yourself).

Furthermore, imagine that a brilliant young mind is actively campaigning against you, writing intellectual essays targeted to the power elite that exposes the tremendous (and extremely lucrative) fraud you have been running since 1913.

Now what do you *do* about this smart, insightful troublemaker?

Well you offer him a JOB that is what you do!

You buy him out!  Put him in charge of your money-making operation and suddenly he *shuts-up* about the fraud you are inflicting every minute on the unsuspecting public.

Such is the story of Alan Greenspan.

Here is an essay I hope you will read carefully.  The truth of these words cannot be denied.  Today, the fraud and corruption is so blatant, the thieving so bold, that the only protection afforded the “little guy” is found in GOLD!



Gold and Economic Freedom

by Alan Greenspan

[Editor’s note – It may surprise more than a few gold devotees to learn they have an ideological friend in none other than former Federal Reserve Board chairman Alan Greenspan. Starting in the 1950s, in fact, Greenspan was a stalwart member of Ayn Rand’s intellectual inner circle. A self-designated “objectivist”, Rand preached a strongly libertarian view, applying it to politics and economics, as well as to religion and popular culture. Under her influence, Greenspan wrote for the first issue of what was to become the widely-circulated Objectivist Newsletter. When Gerald Ford appointed him to the Council of Economic Advisors, Greenspan invited Rand to his swearing-in ceremony. He even attended her funeral in 1982.

In 1967, Rand published her non-fiction book, Capitalism, the Unknown Ideal. In it, she included Gold and Economic Freedom, the essay by Alan Greenspan which appears below. Drawing heavily from Murray Rothbard’s much longer The Mystery of Banking, Greenspan argues persuasively in favor of a gold standard and against the concept of a central bank.

Can this be the same Alan Greenspan who formerly chaired the most important central bank of them all? Again, you might be surprised. R.W. Bradford writes in Liberty magazine that, as Fed chairman, “Greenspan (once) recommended to a Senate committee that all economic regulations should have fixed lifespans. Senator Paul Sarbanes (D-Md.) accused him of ‘playing with fire, or indeed throwing gasoline on the fire,’ and asked him whether he favored a similar provision in the Fed’s authorization. Greenspan coolly answered that he did. Do you actually mean, demanded the senator, that the Fed ‘should cease to function unless affirmatively continued?’ ‘That is correct, sir,’ Greenspan responded.”

Bradford continues, “The Senator could scarcely believe his ears. ‘Now my next question is, is it your intention that the report of this hearing should be that Greenspan recommends a return to the gold standard?’ Greenspan responded, ‘I’ve been recommending that for years, there’s nothing new about that. It would probably mean there is only one vote in the Federal Open Market Committee for that, but it is mine.'” — Editor, The Gilded Opinion ]


An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense-perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term “luxury good” implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society’s divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth.

When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one — so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the “easy money” country, inducing tighter credit standards and a return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists — why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely — it was claimed — there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks (“paper reserves”) could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates.

The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market — triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain’s abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed “a mixed gold standard”; yet it is gold that took the blame.) But the opposition to the gold standard in any form — from a growing number of welfare-state advocates — was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which — through a complex series of steps — the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

by Alan Greenspan

Reprinted by USAGOLD with editorial content on July 6, 2001.

The Elites happily motor away while America sinks under the fraud of the Federal Reserve

The Elites happily motor away while America sinks under the fraud of the Federal Reserve


6 Responses to “Gold & Economic Freedom”

  1. MC Shalom P. Hamou Says:

    Prof. Benjamin Shalom Bernanke Exposed

    “The debate about the ultimate causes of the prolonged Japanese slump has been heated. There are questions, for example, about whether the Japanese economic model, constrained as it is by the inherent conservatism of a society that places so much value on consensus, is well-equippedto deal with the increasing pace of technological, social, and economic change we see in the world today.

    The problems of the Japanese banking system, for example, can be interpreted as arising in part from the collision of a traditional, relationship-based financial system with the forces of globalization, deregulation, and technological innovation (Hoshi and Kashyap, forthcoming). Indeed, it seems fairly safe to say that, in the long run, Japan’s economic success will depend largely on whether the country can achieve a structural transformation that increases its economic flexibility and openness to change, without sacrificing its traditional strengths.

    In the short-to-medium run, however, macroeconomic policy has played, and will continue to play, a major role in Japan’s macroeconomic (mis) fortunes. My focus in this essay will be on monetary policy in particular. Although it is not essential to the arguments I want to make—-which concern what monetary policy should do now, not what it has done in the past—-I tend to agree with the conventional wisdom that attributes much of Japan’s current dilemma to exceptionally poor monetary policy-making over the past fifteen years (see Bernanke and Gertler, 1999, for a formal econometric analysis).

    Among the more important monetary-policy mistakes were 1) the failure to tighten policy during 1987-89, despite evidence of growing inflationary pressures, a failure that contributed to the development of the “bubble economy”; 2) the apparent attempt to “prick” the stock market bubble in 1989-91, which helped to induce an asset-price crash; and 3) the failure to ease adequately during the 1991-94 period, as asset prices, the banking system, and the economy declined precipitously

    Bernanke and Gertler (1999) argue that if the Japanese monetary policy after 1985 had focused on stabilizing aggregate demand and inflation, rather than being distracted by the exchange rate or asset prices, the results would have been much better. Bank of Japan officials would not necessarily deny that monetary policy has some culpability for the current situation. But they would also argue that now, at least, the Bank of Japan is doing all it can to promote economic recovery.

    For example, in his vigorous defense of current Bank of Japan (BOJ) policies, Okina (1999, p. 1) applauds the “BOJ’s historically unprecedented accommodative monetary policy”. He refers, of course, to the fact that the BOJ has for some time now pursued a policy of setting the call rate, its instrument rate, virtually at zero, its practical floor. Having pushed monetary ease to 2 Posen (1998) discusses the somewhat spotty record of Japanese fiscal policy; see especially his Chapter 2.its seeming limit, what more could the BOJ do? Isn’t Japan stuck in what Keynes called a “liquidity trap”?

    I will argue here that, to the contrary, there is much that the Bank of Japan, in cooperation with other government agencies, could do to help promote economic recovery in Japan. Most of my arguments will not be new to the policy board and staff of the BOJ, which of course has discussed these questions extensively. However, their responses, when not confused or inconsistent, have generally relied on various technical or legal objections—- objections which, I will argue, could be overcome if the will to do so existed.

    My objective here is not to score academic debating points. Rather it is to try in a straightforward way to make the case that, far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.”

    Prof. Benjamin Shalom Bernanke
    Japanese Monetary Policy: A Case of Self-Induced Paralysis?
    For presentation at the ASSA meetings, Boston MA, January 9, 2000.

    A Credit Free, Free Market Economy will correct all of those dysfunctions.

    The alternative would be, on the long run, to wait for the physical destruction (through war or rust) of most of our productive assets. It will be at a cost none of us can afford to pay.

    A Specific Application of Employment, Interest and Money

    Press release of my open letter to Chairman Ben S. Bernanke:

    Sorry, Chairman Ben S. Bernanke, But Quantitative Easing Won’t Work.

    Yours Sincerely,

    MC Shalom P. Hamou
    Chief Economist & Master Conductor
    1776 – Annuit Cœptis.

  2. Ralph C Whaley MD Says:

    Ayn Rand held Libertarians in contempt for their unintegrated ideas. She would categorically deny any sympathy for their views and reject any association of her views with theirs. For those who care to comment on Miss Rand I recommend going to the source and read her works, both fiction and non-fiction, which are widely available in libraries and book stores. You have an enlightening and uplifting experience ahead.

  3. Ralph C Whaley MD Says:

    My previous comment was in reference to the following from the Google alerts for Ayn Rand

    Rand preached a strongly libertarian view, applying it to politics and economics, …

  4. foundingfather1776 Says:


    Thank-You for your input.

    Semantics and labels are always tricky – especially when applied to a philosophical outlook.

    I think the point the Editor of the “Gilded Opinion” was trying to make was that the young Alan Greenspan, who was an ardent follower of Ayn Rand – would NOT have supported the actions of the older Alan Greenspan who ran the Federal Reserve Private Bank cartel and inflated the fiat currency every chance he got, thereby initiating the “confiscation through inflation” that he warned about in his own essay!

    This cannot be dismissed as incompetence.

    I submit the betrayal of his earlier ideas, and of the “Randian Philosophy” stems from his own corruption of the soul. The selling out was done for power or fame or wealth (only Alan knows for sure).

    Your comments are appreciated and I hope you will stop back often.



  5. Lynda Says:

    Dear Ralph,

    I think Illuminated (rather than “enlightening”) is the word that describes Ms Rand.

    Ayn Rand was the mistress of Phillip Rothschild – one of many, I am sure. And her work is replete with the kind of language and symbolism that only someone who is highly initiated into the Occult would know.

    Yes she is a liberal (small l). As an ideology, liberalism, originated in the workshops of Those Who Intend to Rule the World. Liberalism was forged as an ideology by the Dynasts who are the Trustees of The Plan – which is succinctly precised in The Protocols of the Learned Elders of Zion 33rd Degree.

    In that document it is clear that the doctrines / policies of economic liberalism are the camaflouge for the operations of Adam Smith’s ‘Invisible Hand’. Laissez-faire principles hold that the free (not necessarily fair) Market simply works of Itself. This is a lot of Kosher Baloney. It has a big fat K right on it and a Kosher tax banged on as well.

    If you have Private Banks (and just who does own the Consuls of the Bank of England, by the way) that in fact own nations, then the Market – does not just ‘work by itself.’ Economic liberalism – just ‘Let it be’ – means de facto that sovereign (ha ha) nations will not make rules to prevent the Invisbile Hand (of the Banks) from doing as they please through their corporate infastructure.

    I am sure there are Readers out there in TV land who think: “yeah. That’s cool. Just let the Banks do what they want. Let everyone be free.” If you are one of those Readers: please rethink this idea in terms of the real world.

    For example, a democratic free and fun loving nation, decides to raise a tariff to prevent imported goods made with slave labor from coming into their DFFL nation, underselling the local product and bankrupting their own industry. Ayn Rand – the liberal would of course be against that tariff. So would the Elders of the Protocols, so would the cartelized Banks.

    Of course, they want to to bankrupt the manufacturing base of our DFFL nation. That is why they do not want tariff barriers from preventing them (under the liberal banner of ‘Free Trade’) from using slave labor, cheap imports as mere tools to destroy that manufacturing base – so they can buy it up for pennies on the dollar, create monopolies and so forth.

    Karl Marx called this process (in The Kapital) – economic rationalism. Through ‘free trade’ and economic liberalism, the wealth of nations ‘rationalizes’ to the cartelized banks.

    Ms Rand, of course, is all for it. On my bookshelf, Atlas Shrugged stands right next to my copy of The Protocols of the Elders of Zion, which Alexander Solzhenitzen described as a work of genius, so complex that not even he could get to the bottom of it. Well, I would not claim to have gotten to the bottom of it. But I do consider Atlas Shrugged to be the ‘Cliff Notes.’ Note: skip the first 200 pages or so – that is just the ‘outer court’.

    Once, she starts describing how the Owners will collapse their own banks / their corporate structures we are in back into The Protocols. I hope that none who are reading this think all those Enron Accountants and Hedge Fund Brokers all just badgering away 24 / 7 just happen to be there by accident.

    This is an important part of the strategy, because – as the Titans sink – that is the cover for ( 1 ) transfer real wealth into their global cartel and ( 2 ) sale of toxic debt to national populations. The idea is that the people will never dig their way out, they are sold and sold-out. All that’s needed is the application of stimulus to herd them into the cattle trains.

    They want to implode those nations into civil wars with the private banks backing all factions. Rand writes about Helter Skelter. It’s all there.

    Populations who understand Atlas Shrugged need more than self defense (that is the basics), they need leadership, command structure, economy. They need to figure out all the logistics of Ground. Above all else they need a Spiritual vision for the nation that will unite races and classes against the common enemy of the nation – which is an Elite dynasty initiated into Luciferian religion. They camoflauge their Agenda in religions, classes, nations – especially elites that are no more than overseers which they have under Mind Control. But really, we are not talking about a large group of people. We are talking about a dynasty and its operatives in secret societies bound by blood oaths.

  6. foundingfather1776 Says:


    Thank-you for your well-written and informative comments!

    It is always a pleasure to encounter other people that understand the “big picture” and are able to recognize the underlying reality of what is really going on.



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