These are always entertaining exchanges. It’s like watching the lord of fiat money battle with the lord of metallic money. In today’s Congressional Testimony Ron Paul lectured Ben Bernanke on the ways of the world and the economy. He made some very interesting points along the lines that I generally make. The most important point was that the government should have focused on households rather than banks during the recovery process. Clearly, Ron Paul is right in this regards although I don’t believe I’ve ever seen him openly discuss the fact that this is a balance sheet recession (though I could certainly be wrong).
But his most interesting question was with regards to gold. He asked:
“Do you think gold is money?”
To which Ben Bernanke replied:
“No, it’s a precious metal. Well, it’s an asset. Would you say treasury bills are money? I don’t think they’re money either.”
Both men are wrong in a strict legal sense. What Ben Bernanke should have said is:
“Money is a subjective term. It means different things to different people. What matters to you and I is whether we can use gold to pay our taxes. So, in this very strict definition as it pertains to what the U.S. government deems to be “money”, gold does not qualify whereas U.S. Treasuries do.”*
So naturally, it appears as though both men have a rather skewed perception of the reality of our fiat currency system.
Full video attached:
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.