Former Fed Chair Alan Greenspan Says Decreasing Supply of Greenbacks Makes the US Dollar a ‘Better Store of Value’ – Economics Bitcoin News

On Nov. 2, 2022, the American economist and 13th chairman of the U.S. Federal Reserve, Alan Greenspan, published an opinion editorial that says he envisions a monetary “tailwind” for the U.S. dollar next year. Greenspan believes this will happen regardless of whether the Fed changes its restrictive monetary policies to reduce rate hikes, or eliminate them entirely.

Greenspan Discusses Gresham’s Law and the Monetary ‘Tailwind’ Behind the U.S. Dollar

Alan Greenspan shared his opinion on Wednesday in a blog post called “Gresham’s Law.” The former Federal Reserve chair described Gresham’s law in his op-ed, and he noted that it can be “colloquially simplified to ‘bad money drives out good.’” Greenspan now serves as a senior economic adviser to Advisors Capital Management, and he believes a strong wind blowing in the direction of the greenback will continue to bolster the U.S. dollar.

“Even if, as some prognosticators expect, U.S. inflation crests in the first half of 2023, and the Federal Reserve can slow or even stop the pace of rate increases, the U.S. dollar will still have a monetary tailwind to support it,” Greenspan wrote on Wednesday. He also said that fiat currencies have made examples of Gresham’s law a lot more scarce.

“No longer are there [differences] in intrinsic (commodity) value causing one currency to be favored over another,” Greenspan’s blog post details. “However, foreign exchange rates do reflect some of the forces Gresham originally recognized at work.”

Former Fed Chairman added:

The present strength in the U.S. dollar in relation to the other traditional reserve currencies is one example of market participants choosing to hoard what they view as “good money” – or at least better money.

Unlike the members of the United Nations, execs in the private sector, and U.S. politicians, Greenspan believes the Fed’s quantitative tightening (QT) schemes are helpful. The economic adviser further explained that while some people view the QT as restrictive, some have perceived the dollar’s disappearing act as a strong store of value (SoV). Based on metrics from the U.S. Dollar Currency Index(DXY), after experiencing a minor slump in the previous week, the greenback has recovered over the past 24hrs.

“The elephant in the room with respect to continued strength in the US dollar going forward may turn out to be the $95 billion per month reduction in the Federal Reserve’s balance sheet,” Greenspan’s op-ed further notes. “The fact that the supply of U.S. dollars can be expected to steadily decrease makes it a better store of value,” the former Fed chair added.

Greenspan’s commentary follows the recent fourth consecutive 75 basis point rate hike by the U.S. central bank, and Jerome Powell’s comments that followed when he said it would be “very premature” to slow down the rate hikes right now.

In this story, tags
13th Fed Chair, Advisors Capital Management, Alan Greenspan, American economist, Bad Money, Central Banks, comments, economics, Economist, fed rate hikes, Federal Reserve, Former Fed Chair, Good Money, Greenback, Greenspan, Greenspan Op-Ed, Gresham’s Law, inflation, jerome powell, Monetary Tailwind, op-ed, SOV, store of value, U.S. dollar, US Central Bank, USD, worlds reserve currency

Do you agree with the statement by the ex-Fed chief that he expected a monetary tailwind in support of the greenback next fiscal year? Comment below and let us know how you feel about the subject.

Jamie Redman

Jamie Redman, a Florida-based financial journalist and news lead at News is Jamie Redman. Redman joined the cryptocurrency community in 2011 and has been an active participant ever since. Since 2011, Redman has been an active member of the cryptocurrency community. Redman has contributed more than 6000 articles to News since September 2015. These articles are about disruptive protocols that are emerging.

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