When Federal Reserve Chairman Ben Bernanke donned his professorial cap and addressed 30 undergraduate students at George Washington University on Tuesday, he claimed it was all in the interest of transparency. According to the New York Times, “The Fed is concerned that it is neither loved nor understood by many Americans, and that public anger could lead to constraints on its powers.”
A close look at his actual presentation, augmented by slides, confirms his attempt to direct the students’ attention away from the Fed’s obvious dangers, faults, and failures and instead concentrate on its alleged virtues.
For example, his attack on the gold standard was filled with falsehoods and half-truths that failed to convince, only to confuse:
The gold standard as an alternative to a central bank: The gold standard sets the money supply and [the] price level generally with limited central bank intervention.
What the professor fails to state is that there is the gold standard and there is a paper standard that can only be enforced when a central bank is given a monopoly over what citizens may use as money. He fails to make clear that it’s the quantity of gold that “sets the money supply” and from that is derived the value of each piece, which is reflected in its purchasing power in the marketplace. It’s the citizen, freely accepting, using and exchanging gold for goods and services in the marketplace, who sets the price level. Buried in the comment “with limited central bank intervention” is the core of the problem: Bernanke doesn’t want people making those choices and decisions for themselves. Those decisions must be left to experts like himself to tell the citizens what is allowed to be used as money and what is not. It’s that beautiful limitation that the gold standard places on banks that Bernanke doesn’t like.
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