Bernanke Against Gold

Recently, Ben Bernanke, the FED chairman gave a talk at Washington University speaking against "the gold standard"; http://www.nytimes.com/2012/03/21/b...professor-debunks-the-gold-standard.html?_r=3

Today, Gary North debunks Bernanke's assertions: http://lewrockwell.com/north/north1134.html


As readers at "Zero Hedge" have found, they can be quite incisive when it comes to identifying who the culprits are responsible for the 2008 economic crisis and beyond:


http://www.zerohedge.com/news/blyth...n-its-gold-axed-clients-and-doing-wrong-thing

"Is Blythe Masters and JP Morgan the worst in terms of bearing the most blame for the economic crisis as some have asserted or is she just one of many?

"If Warren Buffett is to be believed in his verdict that derivatives are "financial weapons of mass destruction" then Blythe Masters is one of the destroyers of worlds.British-born Masters is one of the most powerful women on Wall Street and is widely recognised as one of an elite group dubbed the "JP Morgan mafia" that fostered the creation of the complex credit derivatives at the heart of the current crisis ripping through Wall Street. Many of the highly qualified mathematicians and academics who worked on the credit derivatives market in the early days have gone on to run hedge funds and into high-powered jobs at other investment banks, but most of them started out at JP Morgan.
Masters sees things slightly differently. In a brief email exchange with the Guardian, she said: 'I do believe CDSs [credit default swaps] have been miscast, much as poor workmen tend to blame their tools.'"

http://www.guardian.co.uk/business/2008/sep/20/wallstreet.banking

 

Log in or Sign up to hide this ad.

I'd be interesting in the opinion of others. I've been under the impression that a large part of the financial crisis was on the hands of the American People. After all who wanted the deregulation? Sure there were lobbyists and the Grahm-Leech-Bliley Act, but where was the source?

 

This isn't news. It would be news if Bernanke did a 180 degree turn and came out in support of a gold standard. In fact, it is Congress and not the Fed that determines what will be money. So a Fed chairman really can't come out in support of gold any more than you can come out publically and trash your employer - and expect to stay employed.

 

How could we go back to a gold or silver standard? To do that would necessitate fixing the price of gold or silver. It would have to be a world wide price fix, too. If the price is not fixed, the value of a dollar would vary widely on a daily or even hourly basis. Imagine going to the store and not knowing how much your gallon of milk might cost, or paying a different price than the customer ahead of you because the value of gold just changed.

 

But that is the situation you are in today with floating exchange rates. The value of the dollar changes from minute to minute, but prices change more slowly and in response to other factors [e.g., supply and demand]. If anything, the [anticipated and expected] stability of gold should result in less volitility in prices than you have to deal with now.

 

But how do we fix the price to prevent instability?

 

If you fix the price, you have moved away from the free market economic model that gold money was supposed to foster in the first place. Why do you think the government should fix the price of money?

 

If the price of gold is not fixed, prices of other goods (bread, milk, gasoline, rent, etc.) will fluctuate as the price of gold moves.
If your monthly rent is $XXX and the value of your $ notes varies with the price of gold, how many $ notes do you pay?

 

He did this already.

 

If we are going to play the blame game then yes, it is on the people. It's our job to participate in government to ensure it is running properly. The hands off approach that many disenfranchised citizens have is only making the problem worse.

That being said, the repeal of the Glass-Steagle act is what specifically allowed this problem to occur. This was allowed because of the mutual goals between government and banks to use derivatives to suppress the prices of gold and silver. Don't take my word for it - read the wealth of information at gata.org. Government's reasoning is to maintain dollar dominance, and the banks' reasoning is because otherwise they don't get free money or immunity to law enforcement. This was necessary because money printing was unavoidable, and since gold is a barometer for currency value its rise must be fettered to avoid attracting too much attention or too much wealth transfer. This was the evolution of a self-reinforcing symbiotic relationship that grew out of the inability or unwillingness to reign in debt. Whether that inability or unwillingness was the result of the initial relationship is a matter of the chicken and the egg.

 

Price fixing is not the answer. Rather, fixing the ratio of gold to dollars is. The price can be anything, and it will determine the buying power associated with the gold pegged currency. It would not have to be worldwide. It would be based on each nation's currency, and those fixed to gold would be a much stronger currency than those that can inflate at will.

 

I wouldn't put the blame on the "American" or any other people specifically. Very few of us benefited that much from the inside Wall Street game, or could have prevented the economic crises that have come out of a fiat currency and undisciplined and uncontrolled government spending which sound money backed by precious metals would prevent. With all the energy expended by those who want to bring the financial system back to a semblance of accountability, we are still a long way from that. As I pointed out in the initial post, people like Blythe Masters of JP Morgan are responsible for much of the crisis. But many people at the center of the crisis were promoted, some are the President's financial advisers. They don't believe in hard assets or sound money in the classical sense. Ben Bernanke is probably trying his best in a difficult situation. The problem ultimately is not him but the FED.

 

I don't disagree with you Owle. I guess I'm just saying that all it takes for evil to prosper is for good men to do nothing. I think Bernanke is doing the only thing he can do because politicians can't stop spending, but I wouldn't say that absolves him. We can blame the Fed all day, and I am all for getting rid of it, but when it comes down to it the recent policies of the Fed are merely mitigation in response to the consequences of runaway debt. Now, has this debt accumulated because the Fed's control of our money has given them influence over who enters into government and what policies were shaped over the last 100 years? Quite possibly.

 

There is still a solution. This from friend in response:

The pundits make the mistake that the gold is dug up and placed in a vault underground such as The Federal Reserve. That is still central banking.

Edited~political

You can still issue gold and silver coins minted by The US Treasury(via the Mint) of standard weight and fineness. Place them in circulation. Our country did this until 1933 for gold, and 1964 for silver.

Negative pundits use a false straw-man substitute as their basis for an arugment for a person having in his possession an asset of real value.
Making the false assumption gold is kept in the sub-basement of the Federal Reserve building in NYC, instead of having gold and silver circulate amongst the people.

 

LOL. Private ownership of gold has created a different standard. People over the entire globe are distrustful of their nation's abilities to maintain stableized currency. Just look at how much pressure the Fed has placed on banks to sell gold when the prices began to spike again recently. Even with that there seems to be an elevated resistance level ?

In any case, people are buying what PMs they can afford as insurance on what I believe is at new higher levels. Put a roll of dimes on eBay and see how fast the get snatched up !

Bernicke has to say something, that's his job. But he's not always right. and the PM standard seems to be being set by people who aren;t paying a lot of attention to what he says. IMHO

 

Owle, stay clear of political statements that do not stick to the topic of the thread.

They wouldn't last one day in circulation.

Something must be out of context as this is one of the most incomprehensible paragraphs I have read, even for bullion sites. But then again I guess he would consider me a negative pundit
​

​

 

Prices in a free market economy are always changing. That's the way the system is supposed to work. If this bothers you, you would have loved living in the old Soviet Union where prices were fixed and people didn't have to worry about fluctuation, only the shortages that stable prices produced.

 

Thanks for the comment and editing. "Turtlehat trader" I have seen at a number of NY shows and he sends me his emails.

"When ever we were wrong we promptly admitted it".

The mint is minting and distributing precious metals as it did pre-1965. And they do circulate, not as "currency" in the old sense, but as precious metals of a given weight and measure.

 

In 1932, as a result of the banking crashes, the larger, more solvent banks went to the exchange window and traded their cash reserves for gold. This resulted in a reduction of gold in the Federal reserves and by law, a reduction was made to the money supply which required a ratio of 40% gold to reserve notes. This turned a really nasty recession into what we call today "The Great Depression". In 1933, in order to counter the move by the banks and increase the money supply, the federal government confiscated the gold and set a limit on the personal ownership of gold coins.

In order to have a "gold standard", the federal gold reserves will need to be protected and periodically increased. This means no free exchange of "gold notes" to gold and a reduction in the private ownership of gold. Do you really want to go there?

 

Good post! It explains the situation very well. There is a significant difference between a gold standard and using gold as money that some folks don't appreciate.