Professor Bernanke rails against gold standard

[bluesc]

Federal Reserve Chairman Ben Bernanke headed back to the classroom Tuesday, and defended the Fed against its most outspoken critic, Ron Paul.

In a lecture otherwise about Fed history and the Great Depression, Bernanke devoted four slides to discussing "problems of the gold standard."

For years, Congressman (and now presidential candidate) Ron Paul has argued to abolish the Fed and revert back to a system where U.S. dollars can be redeemed for gold.

Read more: http://economy.money.cnn.com/2012/03/20/professor-bernanke-rails-on-gold-standard-6/?iid=HP_LN

 

[jkr]

but is gold money?

 

[JorgeStevenson]

Wait...he really used the "there's not enough gold to go back to the gold standard" argument?

 

[AngryCanadian]

Bernanke trashes gold standard

Ron Paul needs to Spank Ben Again!

http://blogs.marketwatch.com/election/2012/03/20/federal-reserve-101-with-professor-bernanke/

Under gold standard, a central bank has no flexibility to lower rates in recession and raise them during periods of inflation, Fed chief says

 

[thequietkid10]

Ron Paul needs to Spank Ben Again!

http://blogs.marketwatch.com/election/2012/03/20/federal-reserve-101-with-professor-bernanke/

Which of course begs to question...why does the fed need to do this?

 

[AngryCanadian]

Wait...he really used the "there's not enough gold to go back to the gold standard" argument?

Yes thats what he used.

 

[pmbug]

The fact that he mentioned it shows that the Fed is getting very nervous about their political support. This is a good thing IMO. HR 1098 holla!

 

[xFiFtyOnE]

I'm not very good with monetary and economics and all that but wouldn't a simple solution to the "not enough gold for a gold standard" problem be to change the amount of dollars tied to an ounce of gold? Say instead of a $20 gold coin like back in the day, they made the same size coin but worth $1000 face value or more for example?

 

[jkr]

gold is useful at a nano scale...HOW is there not enough gold?

 

[rockerrockstar]

The biggest problem I can see with returning to the gold standard would be other countries trading their fiat money for our gold. Second is how would you have something like FDIC insurance on your bank account? Third we need laws to protect people from getting their gold taken by the government otherwise history could repeat.

The Government likes to go off of gold currency to help fund wars via printing money or electronically printing money. That is one reason Ron would have such a hard time getting them to change their ways. Another reason they would not want to do it is that there would be a power shit to countries that have gold. I also wonder if we have enough gold to support gold as a standard since the population of the world is so large now.

 

[bluesc]

I'm not very good with monetary and economics and all that but wouldn't a simple solution to the "not enough gold for a gold standard" problem be to change the amount of dollars tied to an ounce of gold? Say instead of a $20 gold coin like back in the day, they made the same size coin but worth $1000 face value or more for example?

Here is a good FAQ: http://mises.org/Community/wikis/economics/gold-as-money-faq.aspx

Although I'm sick of the media saying Ron wants to return to the gold standard. He doesn't. He wants competing (market) currencies.

 

[xFiFtyOnE]

The biggest problem I can see with returning to the gold standard would be other countries trading their fiat money for our gold. Second is how would you have something like FDIC insurance on your bank account? Third we need laws to protect people from getting their gold taken by the government otherwise history could repeat. The Government likes to go off of gold currency to help fund wars via printing money or electronically printing money. That is one reason Ron would have such a hard time getting them to change their ways.

Couldn't they just make a law where only a U.S. citizen could redeem dollars in gold?

 

[WilliamC]

As usual, the 'gold standard' that Bernake is describing isn't a free-market gold standard as would result from repeal of legal tender laws and allowance of competing currencies without any imposed exchange tax, but rather a government mandated gold standard in which the government still sets the rate of exchange of gold with whatever currency it uses and taxes the use of other commodities as money.

Ron Paul does not advocate a government mandated gold standard but rather a free-market gold standard.

Bernake knows this but he's willing to bet that most of his audience isn't sophisticated to distinguish between the two.

 

[rockerrockstar]

Ron Paul does not advocate a government mandated gold standard but rather a free-market gold standard.

Bernake knows this but he's willing to bet that most of his audience isn't sophisticated to distinguish between the two.

The idea of competing currencies allows you to hold other currency without paying taxes on the increase value of the currency when the Fed inflates the dollar. I believe that is what Ron wants right?

 

[w2992]

rockerstar let the market choose. u like paper go ahead. i will stick with gold.

 

[rockerrockstar]

Ron wants to get rid of having to pay taxes on any increase value of the competing currency, I believe. Remember that Gold is a competing currency.

w2992 I never said I don't like gold. I am just trying to point out the issues of the Gold Standard in the posts above.

 

[WilliamC]

The idea of competing currencies allows you to hold other currency without paying taxes on the increase value of the currency when the Fed inflates the dollar. I believe that is what Ron wants right?

There would be no capital gains tax on increase in value of some other currency with respect to the number of dollars, yes.

Right now if you have gold you were fortunate to buy when it was $500/oz and tried to 'spend' it you would have to first sell it for it's value in FRNs then pay taxes on the increase, or on ~$1,150/oz. Even if you barter with it instead the value of all items must be converted into equivalent current FRN amount in order to calculate what taxes you owe to the IRS.

Of course it is possible to avoid this but it is illegal to do so, thus the barrier to competing currencies.

 

[thoughtomator]

In other news, Lestat is due for a speech on the evils of holy water and garlic.

 

[Diurdi]

The biggest problem I can see with returning to the gold standard would be other countries trading their fiat money for our gold.

That's not a problem at all. It would be the same as the foreigners buying gold at the open market.

The US can't go back to the shitty gold standard it had pre 1971. It would have to go back to gold standard where gold is the currency. The paper bills people would use in daily life would just be bank receipts for the gold.

 

[smithtg]

Bernanke rips gold standard at GW lecture

http://news.goldseek.com/GATA/1332272890.php

Its almost like he is poking your eye and twisting hard if you even think about the gold standard.

This guy needs to go away









With college kids, Bernanke gets away with dissing gold

By: Chris Powell, Secretary/Treasurer, GATA



-- Posted Tuesday, 20 March 2012 | Share this article| Source: GoldSeek.com



Dow Jones Newswires reports below how Federal Reserve Chairman Ben Bernanke criticized the gold standard during a lecture today at George Washington University in Washington, D.C. While GATA is not a gold standard advocacy organization, we can only wish that Bernanke would engage this subject where he risked a more informed and critical audience.

This is not just because we'd love the chairman to be asked how he squares the Fed's "transparency" campaign with its refusal to provide public access to the central bank's records involving gold:

http://www.gata.org/node/9917

It's also because some of Bernanke's arguments today, as reported below, are so pathetic.

Echoing Warren Buffett, Bernanke says the gold standard is stupid because it's a matter of digging gold up only to bury it in a hole somewhere else. And yet gold was and, thanks to the Internet, today has been restored as a regular circulating currency like any other.

"Since the gold standard determines the money supply," Bernanke said, "there's not much scope for the central bank to use monetary policy to stabilize the economy." You bet, there isn't! That's the whole #@*^!#$ point! Half the world is screaming at the Fed, "Spare us your 'stabilization'!" And the Fed is "stabilizing" only what it messed up in the first place.

Then, with supreme cheek, Bernanke blames the gold standard for spreading to the rest of the world the U.S. central bank's "policy errors," as if spreading policy errors around quite without the gold standard hasn't lately been the Fed's main business.

Well, that's American college education for you. And people come here from all around the world to get it.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Bernanke Defends Country's Break with Gold Standard

By Kristina Peterson
Dow Jones Newswires
via The Wall Street Journal
Tuesday, March 20, 2012

http://online.wsj.com/article/BT-CO-20120320-711511.html

WASHINGTON -- Federal Reserve Chairman Ben Bernanke on Tuesday defended the country's break with a gold standard at the first of his four lectures at George Washington University.

Bernanke explained to a packed lecture hall why a gold standard harmed the global economy during the Great Depression. Some recent critics of the Fed have pushed for a return to the gold standard, in which paper money is backed by gold. The U.S. was on the gold standard between the Civil War until the 1930s, and the tie was fully severed by President Richard Nixon in 1971.

The gold standard poses both practical and policy problems, Bernanke said. On the practical side, it can be a waste of resources to secure all the gold needed to back currency, moving it from South Africa to the basement of the Federal Reserve Bank of New York, for example, or as he put it, "all this gold is being dug up and being put back into another hole."

More significantly, a country on a gold standard will see more short-term volatility, Bernanke said.

"Since the gold standard determines the money supply, there's not much scope for the central bank to use monetary policy to stabilize the economy," he said. Bernanke noted the gold standard did not prevent frequent financial panics.

During the Great Depression, "policy errors" in the United States spread to other countries that were also on the gold standard, Bernanke said. Countries on the gold standard must maintain fixed exchange rates, making it easy for bad policies in one country to spread to another on the gold standard, he noted.

The gold standard can also cause both periods of deflation and inflation in the medium term, Bernanke said. If not "perfectly credible," the gold standard can be subject to speculative attack and ultimately collapse as people try to exchange paper money for gold. However, he did acknowledge that over decades, prices are very stable for countries using the gold standard.

Part of the reason the Fed failed in its managing of the Great Depression were its attempts to stay on the gold standard, he noted. One of Franklin Delano Roosevelt's most successful moves as president was to begin to take the country off the gold standard, he said.

* * *

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