Greenspan argued that, âThere is no reason to believe either equity swaps or credit derivatives can influence the price of the underlying assets any more than conventional securities trading does.â
One might think the chairman guilty of a surprising naïveté, or perhaps something a bit more sinister, but thatâs a topic for another day. The relevance here is that gold, in addition to being a fundamental currency, is also a commodity, and as such the CFTC is responsible for oversight of its market.
Greenspan waved off the necessity for the CFTC to regulate gold derivatives, telling Congress to fear not, that the âcentral banks stand ready to lease gold in increasing quantities should the price rise.â
Oops. Bet he wishes he hadnât let that slip. As Chris points out, âGreenspan was telling Congress that the purpose of gold leasing was not what the central banks had been telling the worldâto earn a little money on a dead asset. The real purpose of gold leasing was to suppress the gold price. His remarks are still posted on the Federal Reserveâs Internet site.â