Bernanke: Gold Isn’t Money, Gold Is Tradition

July 13th, 2011 by invasive · 21 Comments · all ur bankz, bailout, bernanke, breaking news, commodities, fail, markets

Bernanke: Gold Is Tradition

FED Chairman Ben Bernanke told Congress today that the economy is growing more slowly than expected, and should this anemic growth continue, the FED is ready to launch more stimulus.

“given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate.”

Source: CNBC

I translated this statement and out came QE3.

The markets seem to have come to the same conclusion, as the major indexes are all up over 1% as of 1:30pm. Gold has jumped to 1585.60.

Speaking of Gold, Ron Paul asked the Bernank an interesting question:

Paul: Do you think gold is money?
Bernanke: (pause) .. No.
Paul: Even if it’s been used as money for 6,000 years… somebody reversed that? Eliminated that economic law?
Bernanke: Well, it’s an asset. Would you say treasury bills are money? I don’t think they’re money either.
Paul: Why do central banks hold it? Why don’t they hold diamonds?
Bernanke: Well it’s tradition. Long term tradition.
Paul: Well, some people still think it’s money.

Classic Bernank!! Sure, the banks could hold gold out of “tradition” but we never really got an answer from Ben on why he thinks gold isn’t money. Is gold a medium of exchange? Is it a store of value? Does Ben even understand this, or is gold just an intrusion on his fiat-money fantasyland? Who knows?

-Bill

PS: Alyx just informed me that we went through something similar in March.

21 Comments so far ↓

  • LOLBernanke

    He CRUMBLED. That’s awesome. Ron Paul gets it.

  • jesse

    Paul doesn’t get it. Gold is shiny but that’s about it and it’s prone to speculation just like everything else.

    Anyone wondering about how and why gold pegs break down hasn’t studied history.

    Remember the Goldfinger trade? Loves only gold, expects Bond to die.

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  • Hairy Herry

    I’m sorry Jesse, but GOLD and SILVER will be the sole soldiers standing. Give it time, grasshopper…
    Of course these metals can be speculated on. JPM has speculated against silver in a gigantic way and is now betting their own stock value against the shiny sideline, with only the CME and CRIMEX buddies to bail him out when the parabola kicked in. Speculation is indeed in the eye of the beholder, just like one can be a lawyer. One need only question the ying and yang; “Rights? Which are you good at? Giving ‘em or takin’ em?”
    I know matter of factly that both these metals have preserved my wealth. As a recent college grad, I don’t have any worries about paying back my student loans. As silver skyrockets with gold, a mere 100 Oz bar will easily extinguish my debt within 3 years, even with so-called “capital gains” taxes being illegally placed on this so-called collectible. Perhaps the Senate will follow Utah’s lead soon. :)

  • jesse

    Gold is money? Go ask your employer to be paid in gold doubloons and count the hours until he stops laughing hysterically.

    You know the best part? Paul comparing gold to diamonds. That was flawless errr… priceless.

  • Hairy Herry

    You want to know the truth? Would this truth hurt? Would it make your head explode?

    I actually use my voice talent nowdays and am regularly paid in silver by one client. Something shiny and keeps an intrinsic value! Of course a regular employer will laugh at an employee because the Sheeple of this nation are very asleep and haven’t taken initiative to request their pay in these metals. History points that Americans were regularly paid in both gold and silver during the first 140 years or so. Just because you’ve never been paid in either metal for your work doesn’t mean that it isn’t viable, although physical silver is very difficult to obtain except at higher fiat prices, and only the metal which isn’t being used in other silver applications such as flat-screen TV’s, CD’s, RF-ID chips, computer motherboards, various electronic hardware, mirrors, specific medicines, or any of the other 2,500 known uses for the pretty #47.

    p.s., As long as it’s either pure silver or gold as that client has paid me, I won’t turn it down – because when you’re paid with it, by God, you got paid! These are silver rounds, greater than 99% purity and not at all “clad” or surface-plated, nor are they the new Chinese fake “Morgan Dollars” they’re salting the American landscape with recently. I’m no idiot

    p.p.s., Yes, taxes will likely be owed on such “collectibles.” Total nonsense, but gold and silver’s true days to shine are on the horizon. Hold onto your worthless paper while the Ponzi burns it up. I use worthless paper money only to pay the basic bills and other worldly needs, but Monopoly Money backed with Washington Hot Air is nothing to take pride in with the Fabiously Ridiculous Buffoons running the cartel there.
    The only paper silver I own is a fantastic junior miner in Mexico that had gone up five-fold last year. Their recent drill results indicate I made the right choice when I paid but .06/share and they today trade just north of .60 and are becoming more a buyout (by a major miner) candidate. W00T!!

  • invasive

    Just curious, Jesse, does your employer pay you in cash?

    Seriously, though, you may be right about gold not being money. Unless you are a central banker, then it most assuredly is. But not for us regular peons.

    Here’s an article from a few years ago that may shed light on the subject.

  • jesse

    @invasive, my employer gets paid with cash and pays me in cash. Likewise, I get paid in cash and have expenses that are paid with cash.

    Don’t get me wrong, gold has intrinsic value. In terms of running day-to-day operations of a business it simply doesn’t make sense to revert to gold. Bernanke did well holding his tongue and not speaking in as condescending a way to Paul as Paul displayed playing begging the question with Bernanke.

  • jesse

    “Just because you’ve never been paid in either metal for your work doesn’t mean that it isn’t viable”

    Sure. You provide human capital, they provide metal, which you accept as payment. No problem. Doesn’t work very well when buying a fleet of newly-minted B787s. But good luck with the periodic table!

  • Hairy Herry

    My point? Given time, don’t be at all surprised if you see more and more people “get it” and request payment in these metals, even if years away as the hole that Washington has dug is wayyyy too deep.
    Until we get honesty back into the monetary equation, can we truly rely on paper being printed through Helicopter Ben’s presses? The government and parties who pay off the politicians are very much to blame, with elitists taking advantage whenever possible to keep their happy status-quo. This should have the kibosh put on it for everyone’s sake because I’d love to again trust paper scrip and my government. For now, neither are possible. :(

  • Alyx

    Hell, if models and rappers can request their salary in euros, why would requesting it in gold or any other material be a stretch?

    The only thing that matters is that it has value to the recipient. We’ve done web design and marketing work where we’ve been paid in restaurant/bar tabs. Cash would not have tasted nearly as good.

  • Hugh G. Rection

    I feel sorry for you Americans and you joker politicians nd central bankers. Anyways the matter is that Gold and Silver are money and always will be. Bernankes confetti manufacturing scheme with the dollar is damaging the very value of what the USA stands for, even the forefathers of America (way bak in the 1700s) could see what damage a money prinitn on crack will do to an economy. In 5 years time Jesse lets compare 1oz of gold to your dollar then ull really understand that its u who got shafted.
    I bet ecen bernanke knows the dollar won’t be around this decade nd has a hoard of gold stashed away somewhere

  • Doodyhead

    Alyx, you’d accept payment in shoes. Am I right?

  • jesse

    “ets compare 1oz of gold to your dollar”

    I don’t have many dollars. If I were to buy resources I’d be buying share of a resource corporation, not the physical stuff. My money’s on Scarface, not the user.

  • jfwellspdx

    And here I was expecting to see some Bernank Fiddler on the Roof….

  • rungakutta

    He told you why he said its not money — its just an asset. The ‘somebody’ that reversed the 6000 years of economic law was our country when we went off the gold standard. And they could hold silver, but it’d take up more space as it traditionally has not been worth as much. Diamonds are too variable and are not based on weight but instead are based on grade and its market is virtually a monopoly through debeers. So yes, tradition plays a very large role. They could hold tulips in reserves except for it’d be an extremely poor choice when they wither and die. Platinum could be used but its actually a useful metal and having central banks store massive amounts of it would make the price go up for lots of things (gold is used in some applications outside jewelery but very small comparatively).

    It amazes me people want a gold standard anymore. And people talk about the massive printing of money and inflation, but have they looked at our core CPI and bond rates for this country? Apparently they haven’t. We are in a liquidity trap!

    And Ron Paul never explained why he thought it was money other than ‘some people thought that before and some people still do.’ Well, some people still think the sun rotates around the earth but that doesn’t make it so and that’s a distinction that is lost on a lot of people, with much harm done to the world.

  • Alyx

    @Doodyhead: Depends on the shoes but yeah, I would in general accept some sort of “n hours per pair of Louboutins” labor contract.

  • gravity

    It seems to me that in the near future, that only REAL goods such as bullets, guns, gallons of gas, canned food, tools, medicine, etc., will be worth anything. The dollar is in real trouble as the world reserve currency. When that happens is likely that it will be devalued soon. This is already happening. Look at how much a trip to the grocery store costs today versus a couple of years ago. Gold and silver may hold value to some, but I am beginning to think that only REAL goods that can be traded, will be worth anything.

  • mr3

    The labels of “not money” and “money” on things of value can fuel arguments to the end of time, but one fact remains clear–value can not be fabricated out of thin air. The foundation of an entire economic policy on the exact opposite–while the footsoldiers of that policy openly protect themselves from its consequence–only yields the natural to-be-expected results: our current situation. I think Ron Paul has at least a rudimentary grasp on the concept of value at least, which is a world better than I can say for Bernanke…who seems to have buried that simple fact under years and reams of fake, failed, broken theory…much of which seems gleaned from the strategy of a poker player on perpetual tilt.

  • OldFinger

    Ron Paul wants constant reassurance that gold is money because he’s been investing in it and the gold standard since Nixon was president. He didn’t like the truth coming from Bernanke. Ron Paul would love to see a time way back in the those thrilling days of Yesteryear when a man who couldn’t afford a human doctor, could get a bullet pulled from a horse doctor. He’s nuts nuts nuts and evil.

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