Quote of the Day: "Why do central banks hold it (gold)? . . . Why don't they hold diamonds?" - Ron Paul
I recently saw two interesting videos:
- At a Congressional hearing, Rep. Ron Paul asks Fed Chairman Ben Bernake if gold is money, beginning at about the 4:20 mark here: http://www.youtube.com/watch?v=2NJnL10vZ1Y
- Paul discusses this exchange on the Kudlow Report: http://www.youtube.com/watch?v=N5jaG3w1-pY
You may borrow from or copy this letter . . .
Should a Fed Chairman who doesn't even know what money is, have monopoly control over money?
When asked by Ron Paul at a July 13 hearing if gold is money, Bernanke said "No" and later said "It's an asset." He later said people purchase it in times of economic uncertainty. There are two things wrong with this.
First, gold isn't an "asset" like real estate, valuable for its utility. In fact, just a tiny percentage of gold is used for industry. Most gold is kept as jewelry, coin, or bullion. http://www.csmonitor.com/World/2011/0716/The-price-of-gold-as-influential-as-a-global-power/%28page%29/2
Second, if gold is purchased in times of uncertainty, then investors would have bought gold during the meltdown of September, 2008. Instead, they bought Treasury bills because they had a safe return on investment, whereas the gold market can be highly speculative from day to day. http://www.lewrockwell.com/schiff/schiff130.html
The reason people buy gold is because it is a hedge against MONETARY INFLATION. Which means . . .
Gold is the money that doesn't inflate.
Which means . . .
Gold is the REAL money.
When people see that their dollars aren't buying as much as they used to, and their incomes and savings aren't keeping up with inflation, they buy gold. That's because, over time, a unit of gold INCREASES in purchasing power, while the dollar buys less and less.
You would do the American people a tremendous amount of good if you accepted the reality that gold is money, and passed Ron Paul's Free Competition in Currency Act . . .
* People would be free to make contracts where purchases are made in gold, silver, or another precious metal directly, without being taxed
* This would induce the Fed to protect the dollar's purchasing power, and the Fed would stop inflating
* And this would keep prices down and preserve the value of my savings
I don't want an unelected bureaucrat who doesn't even know economic history to determine the value of the money I earn. The Free Competition in Currency Act would be a check on the powers of the Fed, and force it to behave more responsibly or go out of business.
And we recommend you read these related posts from the Downsize DC Foundation
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Policy Research Director