Ben Bernanke just attacked the gold standard

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Paladex
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Ben Bernanke just attacked the gold standard

Ben Bernanke just finished part 1 of his 4 part lecture series on the Fed. http://www.businessinsider.com/live-video-bernankes-lecture-to-college-students-on-the-fed-and-the-financial-crisis-2012-3

He spent a LOT of time attacking the gold standard.

Among his points (via BusinessInsider.com):

  • To have a gold standard, you have to go dig up gold in South Africa and put it in a basement in New York. It's nonsensical.
  • The gold standard ends up linking everyone's currencies, causing policy in one country to transmit to another country (sort of how U.S. policy now transmits to China, because they've fixed the yuan price to the dollar). So for example, if the U.K. fixes the number of pounds to an ounce of gold, and the U.S. fixes the number of dollars to an ounce of gold, then the pound and the U.S. dollar inadvertently become linked.
  • It creates deflation, as William Jennings Bryan noted. The meaning of the "cross of gold" speech: Because farmers had debts fixed in gold, loss of pricing power in commodities killed them.
  • The gold standard tends to cause interest rates to rise during downturns and interest rates to fall during good times, the exact opposite of what monetary policy should be doing.
  • The economy was far more volatile under the gold standard (all the depressions and recessions back in the pre-Fed days).
  • The only way the gold standard works is if people are convinced that the central bank ONLY cares about maintaining the gold standard. The moment there's a hint of another priority (leaking falling unemployment) it all falls apart.
  • Gold standards leave central banks open to speculative runs, since they usually don't hold all the gold.
 

From http://www.businessinsider.com/ben-bernanke-murders-the-gold-standard-2012-3

Edited by admin on 11/08/2014 - 06:02

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Ron Paul vs Bernanke: Is Gold Money?

Hope You enjoy this one, made me laugh.....

Video Source : Here

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Fed earned $77 billion last year, 2nd-highest ever

The Federal Reserve and its district banks said Tuesday it earned $77.4 billion last year, down from $81.7 billion in 2010 but the second-highest level in the central bank's history. The bumper earnings allowed the Fed to distribute $75.4 billion to the U.S. Treasury, also the second-highest level ever. The earnings was derived primarily from $83.6 billion in interest income on securities acquired through open market operations, from Treasury securities, federal agency and government-sponsored enterprise mortgage-backed securities, and GSE debt securities. The Fed repeated that it doesn't expect to record a loss on any of its emergency loan programs. On its portfolio of assets, unrealized losses totaled $4.3 billion, which the Fed attributed to "instrument-specific credit risk" on commercial and residential mortgage loans; the Fed earned $428 million on the securities it did sell.

Source : http://www.marketwatch.com/story/fed-earned-77-billion-last-year-2nd-highest-ever-2012-03-20

lilbromarky1
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To be honest the gold

To be honest the gold standard is not the real long term solution that we are looking for.  Yes its better than what we have now by leaps and bounds.  Yes its a good outcome for metals holders. 

In my opinion, the only real solution is to completely remove government from the business of creating money and instead turn this over to the private sector.   This idea is nailed home in Rothbard's "What Has Government Done To OUR Money" book.   I could write pages on this.

The main problem with a gold standard is that it pegs a certain dollar value to a certain weight of gold.  The flaw is that sooner or later, either the gold becomes overvalued and the dollar undervalued, or vice versa.  

Free Market Money is what we need.  I beg you all to consider what the world would be like if government were not involved in money creation.  Roll one up, hit it hard, and then let this idea bounce around your mind for awhile.   Its totally plausible.  The answer is simple and right in front of our eyes.

We should use whatever money WE want to use.  It could be any metal or some other form of money we havent yet explored.  The market would likely settle on precious metals in combination such as Gold/Silver/Copper, but the point is that we dont want to limit our thinking to just this.  We need to explore all options and let the market decide.  Not some group of powerful shmucks on an island having secret meetings.

Prices at the ground level need to be set in terms of the weights of whatever we choose as money.  As soon as we start adding an additional abstract layer in between the metal and the money (such as the concept of a dollar or euro), we've already taken a step in the wrong direction.  

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Gold price would have to multiply by 10 to back U.S. dollar

U.S. Federal Reserve Chairman Ben Bernanke’s rejection of a return to the gold standard this week got some analysts at Brown Brothers Harriman thinking.

They asked how much gold would have to rise to back up the U.S. money supply as well as supplies in the euro zone and Japan.

The answer? It would take “at least a 10-fold increase in gold prices,” the analysts said. “Less than that would risk triggering a depression and deflation,” they added...............

Market Watch Source

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