Ron Paul v. Ben Benanke: Is Gold Money?

The difference between Ron Paul and every other politician in Washington is that he sticks to his guns, and like our founding generations, goes after centralized power with a vengeance. Looking to strike at the root.

The following video is yesterday's quick exchange between Ron Paul and Federal Reserve Chairman Ben "the" Bernanke, about the "stimulus," gold and money.

Paul asked Bernanke directly, why the Fed's injecting (read printing money) $5.3 trillion into the economy failed to boost the economy, noting that unemployment continued to get worse while the federal debt increased by $5.1 trillion. He further pointed out the fact that prices are rising faster than the government's CPI indicates, and that we could have given every American $17,000 with the $5.1 million the Congress and Fed spent buying worthless assets and other such shenanigans. Then Paul ended by asking rhetorically, why they gave money to banks and corporations under a policy of too big to fail instead of giving the money directly to the people?

Not being able to answer directly without exposing the true nature of the bailouts, Bernanke replied that the Fed not only hadn't spent any money, but made profits which they returned to the U.S. Treasury to boot. he then pivoted into a propaganda-version history of the Federal Reserve.

Bernanke's answer is best explained by what economist Murray Rothbard called, "creative economic semantics." Sure, the Fed doesn't spend the money itself, however, by printing up whatever amount of money is necessary to buy government bonds, the Fed becomes the sole enabler of Congress' spending addiction. Adding insult to injury, like a dirty crack-dealer Bernanke brags about profiting from this addiction.

"Is Gold Money?"

The Fed Chairman, Ron Paul Clash Over the Dollar

[N]oting that his five minutes were running out, and asked about the collapse in the value of the dollar by almost 50% in the past three years to less than a 1,580th of an ounce of gold. "When you wake up in the morning, do you care about the price of gold?" he asked Mr. Bernanke.

"Well," the chairman replied. "I pay attention to the price of gold. But I think it reflects a lot of things. It reflects global uncertainties. I think the reason people hold gold is as protection against of what we call tail risks, really, really bad outcomes. And to the extent that the last few years have made people more worried about the potential of a major crisis then they have gold as a protection."

"Do you think gold is money?"

Here the chairman paused awkwardly, before, finally, replying.

"No, it's not money. It’s a precious metal."

"Even if it's been money for the past 6,000 years, somebody reversed that, eliminated that economic law?"

"Well, it's an asset. Would you say treasury bills are money? I don't think they're money, either. They're an asset."

"Why do central banks hold it?"

"Well, it's a form of reserve."

"Why don't they hold diamonds?"

"Well, it's tradition, long term tradition."

Yeah, that's it. Just a family tradition ...

As legendary investor Jim Rogers often ask, why does anybody listen to this man? He doesn't know anything!

Gold is, always has been, and always will be money. Think U.S. Gold Eagle, Canadian Maple Leaf, and Chinese Panda for example. Abu Dhabi's Emirates Palace hotel has an ATM that dispenses pure gold. The governor of Utah recently signed a bill that "recognizes gold and silver coins issued by the federal government to be legal tender in the state" and allows for the "… possibility of establishing an alternative form of legal tender." In fact, more than a dozen states are looking to follow Utah's lead.

That's right, the gold economy has already arrived.

Here's Ron Paul explaining gold on The Kudlow Report:

Bernanke was employing "creative economic semantics" in the hopes of protecting the Fed's fiat monopoly - a monopoly that exists only via the aggressive enforcement of restricted trade. As Paul notes, following the Constitution is even illegal thanks to the Federal Reserve Act. Like all central planners, central banks hate competition!

In the meantime, and contra Bernanke, central banks across the globe are loading up on gold.

If Central Banks Believe in Paper Money Why Are They Loading Up On Gold?

I've been warning for years that an inflationary storm was coming ...

Indeed, even the biggest proponents of paper money (central banks) have begun to realize that their grand experiment is coming to an end. Central banks officially became net buyers of Gold last year. And we now find that they have acquired the most Gold in over a decade.

The Financial Times reports:

Central banks have pulled 635 tonnes of gold from the Bank for International Settlements in the past year, the largest withdrawal in more than a decade.

The move, disclosed in the BIS's annual report, marks a sharp reversal from the previous year, when central banks added to deposits of gold at the so-called "bank for central banks" rather than lending it directly to the private sector amid growing concerns over counterparty risk.

Let's consider this. If you're a central bank and you actually believe in the value of paper money and your ability to create wealth by printing it…why would you be loading up on Gold?

The answer is simple: you see the writing on the wall.

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Ron Paul v. Ben Benanke: Is Gold Money? is a post from: The Classic Liberal Blog

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