Did Greenspan Just Confirm Exeter’s Theory of Gold?

Professor Emeritus of Mathematics Antal Fekete has argued for years that gold is the ultimate – and only – safe haven when things really hit the fan.

For example, in 2007 Fekete wrote:

The grand old man of the New York Federal Reserve bank’s gold department, the last Mohican, John Exter explained the devolution of money (not his term) using the model of an inverted pyramid, delicately balanced on its apex at the bottom consisting of pure gold. The pyramid has many other layers of asset classes graded according to safety, from the safest and least prolific at bottom to the least safe and most prolific asset layer, electronic dollar credits on top. (When Exter developed his model, electronic dollars had not yet existed; he talked about FR deposits.) In between you find, in decreasing order of safety, as you pass from the lower to the higher layer: silver, FR notes, T-bills, T-bonds, agency paper, other loans and liabilities denominated in dollars. In times of financial crisis people scramble downwards in the pyramid trying to get to the next and nearest safer and less prolific layer underneath. But down there the pyramid gets narrower. There is not enough of the safer and less prolific kind of assets to accommodate all who want to “devolve”. Devolution is also called “flight to

Darryl Schoon makes the same argument.

Here’s a visual depiction Exeter’s inverted pyramid, courtesy of FOFOA:

(Click here for full image)

Are Exeter, Fekete and Schoon right?

I don’t know. But Alan Greenspan just lent some support to the theory.


Gold prices that jumped above $1,000 an ounce this week are signaling that investors are buying metals to hedge against declines in currencies, former Federal Reserve Chairman Alan Greenspan said.

The gains are “strictly a monetary phenomenon,” Greenspan said today at an investment conference in New York. Rising prices of precious metals and other commodities are “an indication of a very early stage of an endeavor to move away from paper currencies,” he said…

“What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment,” Greenspan said.

In other words, Greenspan is saying that investors are moving out of the second-to-lowest step on the pyramid (currencies and government bonds) and into the lowest step (gold).

Greenspan is also verifying what goldbugs like Exeter, Fekete and Schoon have been claiming: that “the barbarous relic” still holds an important place in the modern investor’s psyche.

Note: Of course, Greenspan might be wrong, or trying to excuse weakness in the dollar (as opposed to all paper currencies).

In addition, I cannot vouch for the exact order in which FOFOA placed the middle and top steps in the pyramid, and Greenspan only talks about the lowest steps. I included the FOFOA diagram solely for illustrative purposes.

Print this post
This entry was posted in Uncategorized. Bookmark the permalink.
  • Since Alan Greenspan just lent some support to the theory, then it's still a theory and meaningless.

  • And what about the US citizens if the Federal suddenly government decide to confiscate all the gold they privately detain to save the federal finance from bankrupcy .It happened on April 5 1933 .Gold, the safest investment, really ?The Roosevelt Gold Confiscation Order Of April 3 1933. Franklin D Roosevelt, under Presidential Executive Order number 6102, confiscated all privately held Gold in the United States on April 5, 1933. Why do Greenspan and others encourage people to buy gold when it is very expensive ? Just to spoliate them in a few weeks or months ?