Marc Faber, who was also on the panel, expressed his view, and displeasure, that the Fed has been financing social programs. The comment earned Faber applause from the audience, but Greenspan shrugged off the criticism, saying: “you have it backwards.”
Greenspan argued that it’s the fiscal side that’s to blame. The Fed merely reacts. Doubling down on the notion, when asked how a 25-fold increase in the Consumer Price Index or a 60-fold increase in the price of gold since the inception of the Fed can be considered a success, he said the Fed does what Congress requires of it. He lamented that Fed policies are dictated by culture rather than economics.
So doesn’t this jeopardize the Fed’s independence? Independence of a central bank is important, for example, so that there isn’t reckless financing of government deficits.
Greenspan: “I never said the central bank is independent!”
And what about QE? He made the following comments on the subject:
Greenspan: “The Fed’s balance sheet is a pile of tinder, but it hasn’t been lit … inflation will eventually have to rise.”
Q: Why do central banks (still) own gold?
Greenspan: “This is a fascinating question.”
He did not answer the question, but he did point out: “Gold has always been accepted without reference to any other guarantee.”
Greenspan: Price of Gold will rise
Q: “Where will the price of gold be in 5 years?”
Q: “How much?”