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As Bitcoin Becomes New Gold, Ex Fed Chairman Calls for Return to Gold Standard

February 23, 2017 - Bitcoin
As Bitcoin Becomes New Gold, Ex Fed Chairman Calls for Return to Gold Standard

 

Former US Federal Reserve Chairman Alan Greenspan calls for a return to the gold standard as Bitcoin becomes positioned to take gold’s place as the world’s reserve store of value.

Greenspan, who was the chairman of the US central bank from 1987 to 2006, presided over a period of “easy money policy” of low interest rates to provoke economic growth. This policy drew criticism from business leaders such as Steve Forbes for weakening the dollar and pushing commodities such as gold past its 12-year moving average in 2004.

Since retirement, however, Greenspan has come out in favor of a more sound monetary policy, including a favorable view of gold as the world’s reserve currency:

“I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature.”

Sound money as a defense against looming stagflation

Last year, Greenspan had adopted a similar position on currency, urging a return to the gold standard to combat a potential future hyperinflation. At that time Bitcoin’s place was in a much less certain spot, yet still offered competition to gold.

According to Greenspan, the national debt in the US would never have reached such untenable levels if the country had adhered to the gold standard:

“We are already in danger of seeing the ratio of federal debt to GDP edging toward triple digits. We would never have reached this position of extreme indebtedness were we on the gold standard because the gold standard is a way of ensuring that fiscal policy never gets out of line.”

He notes that at the same time, the risk of inflation is beginning to rise. In the United States, the unemployment rate is below five percent, which has put upward pressure on wages and unit costs generally.

“Demand is picking up, as manifested by the recent marked, broad increase in the money supply, which is stoking inflationary pressures,” Greenspan continues. “To date, wage increases have largely been absorbed by employers but if costs are moving up, prices ultimately have to follow suit. If you impose inflation on stagnation, you get stagflation.”

Bitcoin is poised to become the new gold

As the need for sound money and a solid store of value grows, Bitcoin is increasingly set to replace gold as a hedge against uncertainty.

Michael Dunworth, CEO of Blockchain-based financial transfer service Wyre, believes that Bitcoin will replace gold and US dollars as the world reserve currency over the next 20 years, due to what he believes to be a superior store of value and usability.

Vinny Lingham, the CEO of identity protection service Civic.com, believes that Bitcoin will see a price of up to $3,000 this year, leapfrogging gold. At a current value of over $1,100, very close to its all-time high of $1,155 back in 2013, that prediction may not be very far off.

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