Former chairman of the Federal Reserve Paul Volcker passed away this month. DataTrek co-founder Nicholas Colas once met US Fed Chief Paul Volcker and this is what he told me about the future of the world economy. Colas depicts a very candid Volcker who notes that a nation’s monetary system is central to its citizens’ confidence in all government. He goes on to say “it (bad monetary policy) corrodes trust, particularly trust in government. It is a governmental responsibility to maintain the value of the currency they issue. And when they fail to do that, it is something that undermines an essential trust in government.” I wonder if Volcker understood the irony of this comment given that he helped pave the way for the lifting of the gold standard in 71′. In the absence of a gold standard, Volcker’s fed had to take drastic action to instill confidence in the U.S. Dollar. Something that would not have had to happen if the gold standard was kept in place.
Continuing the theme of candid former fed chairs, Alan Greenspan told CNBC this week that “inflation is inevitably going to rise and pose larger threats to the economy”. This is due to larger budget deficits which have surged under Trump, coupled with stagnation in many areas of the global economy.
Since CNBC was daring to let Greenspan issue inflation warnings it seems even more curious that they let their own Rick Santelli discuss De-Dollarization with Bankor Market Strategist Mark Chandler. Out the gate the idea of a weaponized dollar as undermining the dollar is mentioned. Followed by the topic of central bank gold. Ironically Chandler says early in the interview that gold could go to $15,000 in a world where gold brings confidence. Only, then he back tracks to say that there is not enough gold to absorb the large FX markets. Sorry Mr. Chandler, there is always enough gold, at the right price; and you even said what the price would be.