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Folks
Speach by Greenspan.
http://www.federalreserve.gov/boarddocs/speeches/2002/200201163/default.htm

The history of money is the history of civilization or, more exactly, of some important civilizing values. Its form at any particular period of history reflects the degree of confidence, or the degree of trust, that market participants have in the institutions that govern every market system, whether centrally planned or free.

In the twentieth century, bank reputation receded in importance and capital ratios decreased as government programs, especially the discount window and deposit insurance, provided support for bank promises to pay. And, at the base of the financial system, with the abandonment of gold convertibility in the 1930s, legal tender became backed--if that is the proper term--by the fiat of the state.

The value of fiat money can be inferred only from the values of the present and future goods and services it can command. And that, in turn, has largely rested on the quantity of fiat money created relative to demand. The early history of the post-Bretton Woods system of generalized fiat money was plagued, as we all remember, by excess money issuance and the resultant inflationary instability.

Central bankers' success, however, in containing inflation during the past two decades raises hopes that fiat money can be managed in a responsible way. This has been the case in the United States, and the dollar, despite many challenges to its status, remains the principal international currency.


With a classic end
If the evident recent success of fiat money regimes falters, we may have to go back to seashells or oxen as our medium of exchange. In that unlikely event, I trust, the discount window of the Federal Reserve Bank of New York will have an adequate inventory of oxen.

One of those nightmares Greenspan has......oxen = gold.

JR




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