Referring to the record of outgoing Federal Reserve chair Alan Greenspan:

When Congressman Ron Paul reminded Greenspan of (his own past statements on) “Gold and Economic Freedom,” Greenspan said he now realizes he had been wrong, and that as Fed Chairman he was able to pursue policies that mimic the gold standard.

That however is a preposterous claim. As Mark Skousen showed in his book The Economics of a Pure Gold Standard, the global supply of gold has historically tended to grow 1-2% per year. Since gold supply would be the basis of money supply under a pure gold standard (or at least the monetary base under the weaker version with fractional reserve banking), then it follows that under a “mimic gold standard” the money supply would grow at the same low rate. Yet between August 1987, when Greenspan became Fed Chairman, and November 2005, the monetary base rose from $233.5 billion to $782.5 billion, a 235% total increase or 6.8% at an annual rate. The M3 measure of money supply rose during the same period from $3.62 trillion to over $10 trillion, a 179% increase or 5.8% at an annual rate. Money supply growth has thus been far in excess of gold standard conditions. (emphasis mine)

It’s a pity that the current political climate doesn’t allow us to fill his office with cement instead of another body when he leaves….
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