Paul Vs Bernanke

Putin's against Bernanke too.
http://tinyurl.com/5rqjyfc

The pregnant pause when asked about gold being money was hilarious. It was as if Bernanke had heard that question for the first time and had to consider it.

In actuality, I believe he was saying in his mind yes, but having to revert back to give the answer from the script. The heart knows, the brain follows, but the brain can over-ride when well trained. He aint' that well trained!!!

Thanks for posting this Kate. Ron Paul is one of my heroes.

KABLAM!!! He punched him right in the mind. Hilarious.

It's hard to change once the lie has been perpetrated. Greenspan knew what gold was and he knew why it had been officially used as money.

But Keynes and Friedman convinced governments it was a relic standing in the way of the miracles governors could perform once they were free of its restrictions. And who doesn't want to perform miracles?

Now, after thousands of too many miracles, each greater than than the previous one, the chickens are coming home to roost.

Too bad the bag of tricks is empty.

Sorry for the o/t...
Right now opening credits live on CBC 2:40 pm est.,
Womens semi-final World Cup soccer, Sweden Vs Japan.
If you haven't been following, check it out, sit back, crack a beer you're in for a treat.
These ladies got talent!

His advice has caused a great deal of financial harm, put him back into the coffin he crawled out of please.

The question about why banks don't hold diamonds instead of Gold was great. Bernanke knows exactly why - Gold is held because it is fungible, as all ounces of pure Gold are equal. The same cannot be said for diamonds. He didn't say so, because to admit the fungibility of Gold would be to admit that it is indeed money.

Someone should tell Ben about Gold coins . . . .

Ron Paul: "Gold is money."

Ben Bernake: "Gold is an asset."

Both are wrong, Bernake less so.

Is gold money?
Depends on the definition of money.

Do people use gold as a medium of exchange?

Ed Minchau: "...to admit the fungibility of Gold would be to admit that it is indeed money."

Petroleum is also fungible. That doesn't make it money.

Kablam nothing. Not agreeing with Bernake's approach in any way but anybody who thinks that RP slamdunked Bernake belongs in the same miasmic pile of historical kaka as the OOH-OOH air-fisters of the Arsenio Hall. Gold can be money - as can sea-shells, coconuts or frozen dog turds - as long as someone is willing to accept whatever you want to define as money as currency but the real question is - so what? What RP is trying to say is that gold has some "special status" that makes it "more real money" than other kinds of currency. It does have a special place historically but if someone were able to economically vastly increase the supply of gold, then we would really see how "special" gold is. Not possible? - look at the history of aluminum. Hey your foil-wrapped burrito was once only fit for a king.

http://acswebcontent.acs.org/landmarks/landmarks/al/revolution.html

Quite right, Bubba. Once we left the gold standard it became just another commodity. What it is is a hedge against the inflation of money or fall in the value of securities. Some of the folks above have misread the clip. Bernanke isn't hesitating because he's stumped by the question. He's hesitating because he can't believe a supposedly intelligent Congressman could ask such a stupid question.

Of course gold is money. It is referred to as "commodity money". (Remember the gold standard?) Indeed, there are many gold coins which carry a face value which is the minimum value of the coin. The coin retains its value if it is melted and physically altered, while in a fiat money it does not.

Gold is money, but money is not gold. Paper is a promise....and as the hundred trillion dollar notes of Marxist Zimbabwe show, worth nothing.

Supporting Oz and Davenport. Money defined as "a unit of account, a store of value, and a medium of exchange" is an imperfect match to Gold. Rules making it illegal to opt for gold to settle a transaction are a problem.

Milton Freidman isn't to blame for the current morass. He wanted the fed eliminated - replaced by a system based on several economic indicators that everyone would know and be able to run scenarios and nor worry about which side of the bed the head of the fed woke up on or whether that person was trying to curry favour with the POTUS or the media or anyone else.

A gold standard is very problematic not least because a mammoth new discovery - say the discovery of the main ore body that spawned the Buchan's Lucky Strike - could throw the whole system into chaos.

I understand the desire on the part of may to return to gold as the standard, but that would be enormously problematic and difficult to do and comes with its own serious limitations.

joey: "Of course gold is money."

For those stuck in the past, perhaps. For the rest of us living in reality, gold was (commodity) money, but hasn't been since the world switched to fiat money systems.

Kind of like the problems with the Fed printing "money" out of thin air and dumping into the economy. When the dollar is used as toilet paper, gold WILL be the standard and all the fiat in the world won't buy an ounce of it.

I'm with Bernanke on this one and his answer was exactly right. Bubba and cgh above comments are spot on above as well.

I like Ron Paul in so many ways but this gold fixation he has would sink him for me if I had a vote for the US presidency.

is gold "money"...nope

is fiat curency money....nope

they are, and are only , representative of some human designated value...actully, it's work preformed that they represent

now gold can be used for many things other than it's representative value, fiat money can only be burned or used as a$$wipe when it's valued disapates into thin air

A gold standard is very problematic not least because a mammoth new discovery - say the discovery of the main ore body that spawned the Buchan's Lucky Strike - could throw the whole system into chaos.
~Gord Tulk

50% of all gold ever produced was produced since 1960
80% of all gold ever produced was produced since 1900

http://tinyurl.com/6bhwb

Guess who was the #1 producer of gold in 2010?
People's Republic of China.

Guess who is likely to have the most gold overall?

-Russia is considered the world's largest unexplored gold territory, with many of its sizable deposits having been only recently discovered. Estimates vary quite widely, but Russia likely holds 25-40% of the world's unmined gold supply. Russia is currently the sixth largest gold producer in the world and is tenth on the list of the world's largest gold reserves.

http://tinyurl.com/5rvsk5l

Yep....gold is money. You will find that out very quickly when you get off the North American continent. Many vendors know the gold price by the hour and will sell you anything if you pay them in gold.

Gold functions as "shadow money" around the world. Many would take it much quicker than any paper currency.

But at the end of the day if things get really bad, the metal that will really have value is lead.

The price of gold was forecast by economists to fall drastically when the gold standard was dropped. It did exactly the opposite. The gold standard continued to exist (although informally) and has really never gone away. Gold is money. Paper money is merely a government decree of value....except the 100 trillion dollar bills in Zimbabwe show just how illusory that is.

The real question is, does Kate think that gold is money?

I can tell coach potato hasn't thought since 3rd grade

No....the REAL question is do the parties in a transaction think that gold is money. What government thinks is not relevant.

Paper money is merely a government decree of value.
~Joey

Wrong.
If that were so, then the inflation that Ron Paul was confronting Bernanke with could be swept away by Obama's decree.
The value of money is reflected by people's perception of the potential productivity of a nation and the people of that nation.

The value of gold is the same.
It is the perception of gold as a commodity for the storage of value that gives it it's value.

As Gord Tulk said, "A gold standard is very problematic not least because a mammoth new discovery - say the discovery of the main ore body that spawned the Buchan's Lucky Strike - could throw the whole system into chaos."
This very true because of gold being a commodity unconnected to a people's or nation's potential productivity.

Ron Paul made an excellent point when he noted that costs for the average household are rising year over year.

This is exactly the case in Canada, and yet salaries have mostly been stagnant. Thus in short, people have less and less.

For example here in BC Fortis raises their rates well above inflation year after year, and the BC government turns a blind eye to it. Indeed the government happily encourages it. Then the BC government grabs their carbon tax, and so on it goes.

People will not accept these two different realities - stagnant wages plus price increases - for much longer.

If there could be one President for domestic, and one for foreign, the Ron Paul might be a very good bet.

Meanwhile, back in the real world where Ben, Tim & Barry churn & burn

"U.S.’s Aaa Debt Rating Placed on Review for Possible Downgrade by Moody’s

By Greg Chang - Jul 13, 2011 2:02 PM PT

The U.S. had its Aaa bond rating placed on review for possible downgrade by Moody’s Investors Service, which cited the “rising possibility” that the debt limit won’t be raised on a timely basis.

“There is a small but rising risk of a short-lived default,” Moody’s said"'

Gold holds an inherent value with the occasional blips in the economy.

One ounce of gold has been able to buy a good quality man's attire (tunic-suit, belt and shoes) through the ages. It still holds true. A good quality business suit, shoes and belt will run close to $1500, just like it did 500-1000-2000 or 5000 years ago. It will continue to be so in the future.

No matter what Bernanke, Geithner, Soros, or Obama say.

"but hasn't been since the world switched to fiat money systems"

So now that Fiat owns Chrysler does that mean the lira will become the reserve currency? ;)

That was a trick question by Ron Paul. Did he mean money as currency or as a store of value? The answer is yes and no. As a currency, gold is presently not money because you can't go to Walmart and pay for your merchandise in gold. It could be of course but you would need to chop up the ounce into much smaller denominations for it to be practical.

As a store of value, though it is most certainly money, and has always been. If the question instead had been "is the equity in your house money? You can see that the answer is yes and no. NO if you don't sell the house and YES if you do sell the house.

A good quality business suit, shoes and belt will run close to $1500, just like it did 500-1000-2000 or 5000 years ago.
~glacierman

Yes, you can buy a good quality business suit, shoes and belt for close to $1500 CDN today.(folding cash)
When gold was $340/oz June 23 1997 you couldn't buy those things good quality for $430 gold or folding.
Respectfully glacierman, apart from the fact that ounces only became standard measure in 13th century England(a mere 700 years ago not 1000-2000 or 5000 years ago), the Ron Paul meme that you are echoing above is imperically false on it's face.

There isn't enough physical gold to circulate as currency.
I know prior to going off the gold standard that governments on the gold standard printed notes theoretically redeemable in gold while hoarding the gold in fortified safe places.

If some governments went back on the gold standard, such hoarding would occur again and that could have a result opposite from what Gord Tulk posits.
Instability would occur and high tech products using gold would skyrocket in price because everybody, not just governments would hoard it removing gold from circulation like the do with pennys today

Ronulans like to talk about going back to the gold standard with the reasoning that this would limit the amount of paper(gold notes) in circulation because the notes represent the gold that their government would have in reserve, but they seem to either forget or do not know that the reason that the government went off of the gold standard was because the government printed more gold notes than the gold they had to back them up thus devaluing the notes just as the so-called "fiat" currency is being devalued today by printing too much of it.

There is no difference between passing a law restricting the printing of government backed gold notes to the physical national gold reserve and passing a law restricting the amount of non-gold backed currency in circulation.

Other than it's value as a commodity, gold is as much a fiat currency as the paper dollar is.
The difference is that being a commodity, gold isn't directly or singley connected to productivity.
(which is the "P" in GNP and GDP)

Do you want to see GNP and GDP improve?
Get the government out of the way, cut regulation and programs/services and taxes, stop susidizing idle lifestyles and let ordinary private people get back to work being productive again.

Maybe some economists can help me on this one about gold.

I hear a lot of people saying "buy gold".

Where, pray tell does one buy gold? Via the stock market? How good is that?

Meaning, are we just talking about simple market correction like 2009, or a major implosion of economies as we know it?

How would you 'redeem' your gold stock? Sell the stock, but then did one make enough to justify tying up that much money?

I made maybe $1,000 on gold, but when I cash out, $1000 isn't going to go too far, because then what? I have to buy more no?

Interesting, 5.1Trillion only gives us $17,000 each.

Nice to have, but what would it do in say a half year time when everyone's blown it on booze?

;-)

I suspect Paul intended his question to mean, "what is gold?" but it might as easily have meant, "what is money."
In fact that question might have meant a lot of different things, all philosophical and esoteric. Any really accurate and meaningful answer is going to be 1000+ words and complicated.

My best attempt at a brief, simple and accurate answer, "Gold has sometimes been used as money and retains some properties but currently, in the US, it does not does not have all the properties of money."

If that is too complicated, then "No."

Much as I hate to side with Bernanke, he wins this round.

johnbrooks at July 13, 2011 7:19 PM

Hic! I represent that fella, Hic!!!!

A lot of great, well-informed comments above.
Much semantical silliness too, unfortunately, starting with Ron Paul himself who never hits it out of the park for me, tho I too self-identify as an austro-libertarian [rank amateur division].

Hayek didn't feel that a gold standard would be workable, but he did favour a basket of commodities benchmark.

He also argued against the nationalization of money. Denationalization of Money: The Argument Refined. It's out there, but extremely stimulating. It's a difficult concept to warm too, but in the final analysis the nationalization of money is as dumb as every other kind of industrial nationalization.

This is the core issue: we need a separation of money and state, just like church and state. Moneys arose spontaneously with NO central planning of any kind and historically settled on gold and silver for many of the reasons outlined above.

That's a red herring, the argument that a sudden increase in the gold supply would be inflationary. Of course it would be: but we're not looking for perfection here, are we? Clearly the risk of gold supply inflation is way, way, way less than the risk of fiat infinity.

Shame on youse who defended the lying bastard Bernanke. If you can't say something nasty about Bernanke say nothing!

FACTOID: (can't vouch for it). All the gold ever mined makes a 27 meter cube.

Speaking of gold, check this Indian hoard out at the telegraph: http://tgr.ph/j0QjuD

I believe in commodity based currency because I do not trust "people" in general who can control the direction of the "fiat" money. The bank you work with is going broke? They get the low interest loan. 1,000,000 people's dollars are worth less? They better ask for a raise.

I have to agree that the question and the definition of gold as money is largely a semantic one. Gold is money if there is mutual agreement between those entering into a transaction to use it as such. Stones with holes in the middle could also be used; so could chickens or pieces of paper with someone's grinning mug on it. Money is essentially any agreed upon surrogate for exchange which the parties to a transaction accept as having value, vis cigarettes in Europe post WWII, or Czarist rubles in early Stalinist Russia.

I've read many interesting points on this post, possibly one of Kate's Top Ten perhaps?

The question is philosophical: Is gold money? Yes, it is when exchanged for things, such as paper currencies, vegetables, or oil. But, as one person pointed out, so are, or were, sea-shells in certain Pacific locations. If you are in Ottawa, be sure to visit the Bank Of Canada building on Sparkes Street and the Mint on Sussex Drive.

Anything can be money and yes, currently gold is more trusted than paper currencies. No sudden new discoveries of gold can deflate the currency at as fast a rate as the state controlled currencies are doing; therefore gold will hold it's value in the mid-term.

But there is nothing sacrosanct about gold; any desired resource, commodity or item can be considered as money. I currently invest in oil, coal and bank companies. The things they produce will always be in demand. Gold may lose it's flavour, as will bank-notes.

I've read many interesting points on this post, possibly one of Kate's Top Ten perhaps?

The question is philosophical: Is gold money? Yes, it is when exchanged for things, such as paper currencies, vegetables, or oil. But, as one person pointed out, so are, or were, sea-shells in certain Pacific locations. If you are in Ottawa, be sure to visit the Bank Of Canada building on Sparkes Street and the Mint on Sussex Drive.

Anything can be money and yes, currently gold is more trusted than paper currencies. No sudden new discoveries of gold can deflate the currency at as fast a rate as the state controlled currencies are doing; therefore gold will hold it's value in the mid-term.

But there is nothing sacrosanct about gold; any desired resource, commodity or item can be considered as money. I currently invest in oil, coal and bank companies. The things they produce will always be in demand. Gold may lose it's flavour, as will bank-notes.

Some may have read recently that Utah made gold to be a valid finantial transaction. There are a number of other states in the process of making gold into money, whatever shape that may take.

Then you have the underground gold storage in NY where, inspite of the condition of the US economical troubles, most of the other nations still trust the US.

Can't remember the name of the place, non the less, they have these dollies there and every day they move gold from one country to another, to process balance of payments for trade surplus and deficit and other such transactions.

Gold is the real money, paper not so much.
People obviously must agree with the government, they have no choice but use paper, much like canadian tire money although that is purely voluntary.

Gold is money. Just because schools don't teach real economics and you have not been taught the gold standard does not mean it is bogus. What is bogus is trusting liars and cheaters (elected politicians) to keep their faith with the public.

The world went off the gold standard because governments could not cover their mistakes, corruption and the cost of wars by taxes alone. They needed to print money (inflation) to keep the rubes happy.

Gold is the only money that can keep the system honest. If there is too much paper around, people would cash it in for the metal. If they had confidence in the government, they would buy bonds to earn interest.

By the way, gold also keeps interest rates from fluctuating, saving the world from the huge transfers of wealth caused by high or low interest rates.

Of all the commenters, I suspect that only glacierman understands the theory of money.

Me No Dhimmi

In the UK, in the 18th century, and the early 19th I think, private companies used to issue their own currency, which was accepted as legitimate currency, and not just in the company store.

If gold is money, when was the last time anyone used it at Safeway, Starbucks, or to buy a car. How big is your safe? How do you keep it secure when you travel? Why will your jeweler deduct 30-40% when he buys it from you? How can you use gold to pay your telephone bill?

Let's face it - it isn't money.