But it didn't have to end this way, because earlier in his tenure the maestro was clearly on to something. That something was gold.

You may not know this, but Greenspan was a gold bug.

He wrote a paper about the gleaming metal in 1967 called "Gold and Economic Freedom."

In it he argued the virtues of the gold standard.

Among other things he wrote that, "...gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other."

He went on to write that, "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."

But more stunningly he also wrote this:

"The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means of an unlimited expansion of credit. They created paper reserves in the form of government bonds which-through a complex series of steps- the banks accept in place of tangible assets and treat them as if they were an actual deposit, i.e. as the equivalent of what was formerly a deposit of gold. The holder of a government bond or bank deposit created by paper reserves believes that he has a claim on a real asset. But the fact is there are now more claims outstanding than there are real assets. The laws of supply and demand cannot be conned. As the supply of money (claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise."

While these are certainly words of wisdom they are the last thing you would expect to hear from a central banker.

And while he said this some 20 years before he took the helm of the greatest money creating machine of all time, it was a belief that he carried with him to the Fed.

In fact, in his 1999 testimony before the US Banking Committee, Greenspan had this to say about the metal, "Gold still represents the ultimate form of payment in the world."

But there is more.

In a famous exchange with Sen. Paul Sarbanes, Greenspan responded to a query from the Senator in regards to whether or not he recommended a return to the gold standard with this: "I've been recommending that for years, there is nothing new about that."

So herein lays the ultimate irony- a gold standard bearer at the helm of the Fed.

Now how his belief in the gold standard manifested itself in his tenure at the Fed is interesting to say the least.

It has been pointed out by Donald Luskin of Trend Macrolytics, and it goes like this.

According to Luskin, Greenspan views on gold led him to impose a "virtual gold standard". In essence the Fed adjusted its rates up or down in relation to the amount of inflation that gold was forecasting to the economy.

In short, when gold went up in price its movement foretold inflation. When it did, Greenspan raised rates along with the price movement of the commodity.

Conversely, when gold dropped, rates dropped.

A simple premise to be sure but it worked.

Take a look at Luskin's chart.

As you can see, from 1987 to 1996 the maestro was at the top of his game. The Fed funds rate moved in conjunction with gold and the economy held steady.

But in 1996 the maestro did the unthinkable: He abandoned his formula altogether.

When gold fell, he raised. When gold rose, he cut.

And as you can see from the chart, the price of gold has skyrocketed beyond the Fed Funds rate. In fact, its not even close and we've paused.

The results have been disastrous to say the least. Inflation is on the march and our credit induced boom is quickly turning to a bust.

Nobody can quite figure out why Greenspan reversed, but maybe it had something to do with Ayn Rand.

You see the former Fed Chairman and Rand were old pals. They were so close that when she wrote her famous novel "Atlas Shrugged" the Fed Chairman read them as they came off the typewriter.

The novel, while controversial, is based upon the idea that there are leaders in society that are like the god Atlas. They hold the precious world on their shoulders. But when it all becomes too much, they withdraw.

It's played out in prose in the following exchange between two protagonists Francisco d'Anconia and Hank Reardon.

Mr. Rearden," said Francisco, his voice solemnly calm, "if you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of this strength, and the greater his effort the heavier the world bore down on his shoulders - what would you tell him to do?"

"I ... don't know. What ... could he do? What would you tell him?"

"To shrug."

And shrug he did. In 1996 Greenspan abandoned his "virtual gold standard" for good.

And since then, credit and consumption bubbles have sprung up like mushrooms.

First the internet bubble and now housing.

But that is the problem with money that's created out of thin air. Since it's not tied to a tangible asset, the result is inflation just as Greenspan himself predicted in 1967.

And that is what the price of gold is telling us. Our dollar is being devalued. It's called inflation and its eating away at the dollar.

Unfortunately, Mr. Bernanke doesn't quite see it this way.

With his pause, he has merely put his finger in the dike.

But the leaks are now more numerous and massive cracks are starting form.

And unless the Fed begins to raise rates in a manner that is consistent with the "virtual gold standard" the price of the metal will continue to rise.

We cannot print our way to prosperity.

Greenspan knew this and he caved.

- Steve Christ