A Gold Bug Grades Greenspan
Credit goes to James Hamilton for what may be the best takedown of the gold bugs over at the National Review I’ve seen yet:
What’s behind the ongoing run-up in gold prices? One popular interpretation is that investors fear a resurgence of U.S. inflation. But that story just doesn’t square with the facts … I often hear stories along the lines of, “the bond market doesn’t expect inflation but the gold market does.” But this makes no sense. Markets are fully integrated, and there’s no reason why somebody with a particular world view wouldn’t try to grab spectacular returns wherever they might be found … We’ve seen a pretty impressive surge in commodity prices relative to other prices. But that is not quite the same thing as inflation, in which the price of a broader basket of goods and services (such as the CPI) goes up at a faster rate. If you want to claim that the current gold price reflects a fear about the latter, you have to reconcile it with the way that nominal and inflation-indexed bonds are currently priced.
While taking down things like the latest from Fuzzcharts was not the explicit purpose of Dr. Hamilton’s post, it allowed me to skip reacting to the following nonsense:
While many credit Greenspan for the booming economy of the late 1990s, his term should be evaluated on how well he fulfilled his core duty: maintaining the value of the dollar. When judged against that goal, the Maestro’s record is mixed. The CRB Spot Index is an inflation index based on 22 commodities and prepared daily by the Commodity Research Bureau. As the chart above shows, former Fed chairs Arthur Burns and G. William Miller both tried (and failed) to fight the pervasive inflation of the 1970s. Paul Volcker, who took over at the Fed in 1979, put an end to it in the early 1980s.
Jerry Bowyer is not qualified to grade the Greenspan FED – so I’m deferring to the views of economists such as James Hamilton.