Dr. Alan Greenspan was interviewed on CNN this week. His advice to investors? Run for cover! That’s right this former Fed chairman is not pulling punches and is telling people to prepare for the worst. Greenspan has publicly stated that gold is the ultimate insurance policy. The value of fiat currencies depends on their credit rating, fiscal health, and government or central bank policies. Gold requires no counter-party signature, does not depend on national fiscal or economic policy and is therefore the most effective hedge against geo-political risk.
Greenspan isn’t the only form Fed chair to be ringing the alarm on a potential crisis. Some may remember when Janet Yellen insisted that she would never see another financial crisis in her lifetime. Well, now that she is no long Fed chairwoman she is also warning that another financial crisis could be brewing. She says “I think things have improved, but then I think there are gigantic holes in the system,” Yellen told a New York audience Monday night, as quoted by CNBC. “I’m not sure we’re working on [the leverage loan issue] in the way we should, and then there remain holes, and then there’s regulatory pushback. So I do worry that we could have another financial crisis.” In other words, now that she is no longer at the helm of the Fed, she can comfortably blame others for the impending crisis. This way she can not be viewed as having lied about never seeing a crisis.
After a year of volatility and downward movement in the stock market, and with two former Fed heads warning of major financial risks it is time to run for cover. Take it from Greenspan “The very nature of finance is that it cannot be profitable unless it is significantly leveraged… and as long as there is debt, there can be failure and contagion.” & “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”