Bernanke Says Gold is Not Money
Ben Bernanke, the Chairman of the Federal Reserve was once heralded as the man who averted the second Great Depression but today things might look a bit different. Most people are aware that gold has value and has been used as money for thousands of years, even in the US in the not so distant past.
Until 1975, gold backed the US dollar. This meant that the paper money we carried then could be exchanged for a set amount of gold. The paper bills weren’t the money, they represented the real money…gold. While Bernanke might be considered an educated man, his is responsible for the continued devaluation of the US dollar by continuing to implement his predecessor’s (Alan Greenspan) inflationary printing policies.
Ron Paul, a long time critic of both Greenspan and Bernanke has never missed a chance to question either of the Fed Chairmen about monetary and fiscal policies. On Wednesday, July 13th, the Texas Republican Congressman Paul did it again during a hearing where he asked Chairman Bernanke if gold was money. As typical of Bernanke when questioned by Congressman Paul, he began to squirm during his pause before responding in the negative. Here is a sample of their entertaining and enlightening exchange.
MR. PAUL: The dollar during these last three years was devalued almost 50 per cent. When you wake up in the morning, do you care about the price of gold?
MR. BERNANKE: Well, I pay attention to the price of gold, but I think it reflects a lot of things. It reflects global uncertainties. I think people are — the reason people hold gold is as a protection against what we call tail risk, really, really bad outcomes. And to the extent that the last few years have made people more worried about potential of a major crisis, then they have gold as a protection.
MR. PAUL: Do you think gold is money?
(Pause.)
MR. BERNANKE: No. It’s not money, it’s a precious metal…
MR. PAUL: Even if it has been money for 6,000 years, somebody reversed that and eliminated that economic law?
MR. BERNANKE: Well, it’s — you know, it’s an asset. I mean, it’s the same — would you say Treasury bills are money? I don’t think they’re money either, but they’re a financial asset.
MR. PAUL: Well, why do — why do — why do central banks hold it if it’s not…
MR. BERNANKE: Well, it’s a form of reserves. It’s a form…
MR. PAUL: Why don’t they hold diamonds?
MR. BERNANKE: Well, it’s tradition, long-term tradition.
MR. PAUL: (Chuckles.) Well, some people still think it’s money. I yield back. My time is up.
It would seem like an innocent blunder on the part of Bernanke if one could really think that the Fed Chairman misspoke. However, his history shows otherwise. That same history is likely to see Bernanke named the one who ushered in hyperinflation in the US making the Great Depression look like a bump in the road by comparison.
