For Greenspan, Gold Once Glittered

As the housing bubble burst and turmoil in the credit markets spread last summer, the central bank played a key role in brokering the sale of Bear Stearns (BSC Quote), the fifth-largest U.S. investment bank, to JPMorgan Chase (JPM Quote). Bear had been on the brink of bankruptcy.

Additionally, the Fed set up a series of new lending facilities to provide liquidity to other investment banks -- like Goldman Sachs(GS Quote), Lehman Brothers (LEH Quote), Citigroup (C Quote) and Merrill Lynch (MER Quote) -- to prevent a similar situation.

Former Fed Chairman Paul Volcker said at a recent speech at the Economic Club of New York that the central bank's recent actions raised political concerns about "the proper use and allocation of government power" and "embedded economic interests and lobbying."

Volcker's comments echoed Paul's assertion that Fed policies favor the wealthy at the expense of the poor and middle class.

"The price increases that take place as a result of inflation do not occur all at once and to the same degree," writes Paul. "Those who receive the new money first receive it before prices have yet risen. They enjoy a windfall. Meanwhile, as they spend the new money, and the next wave of recipients spend it, and so on, prices begin to rise throughout the economy -- well before the new money has trickled down to most people."

Paul's anti-Fed stance strikes a populist tone, but his analysis echoes that of Greenspan's own criticisms in the 1960s.

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation," wrote Greenspan back then. "There is no safe store of value.

"This is the shabby secret of the welfare statists' tirades against gold," he adds. "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."