News & Analysis
Bernanke Fights Back Against a Gold Standard
Bernanke says gold standard wouldn't solve problems ... Federal Reserve Chairman Ben Bernanke on Tuesday took aim at proponents of the gold standard, saying that such a system handicaps the government's ability to address economic conditions. Bernanke spoke in the first of a series of four public lectures at George Washington University that is the central bank's latest effort to counter a raft of negative public sentiment that has arisen from its handling of the financial crisis. The former Princeton economics professor delivers a second lecture on Thursday and two more next week. – Reuters
Dominant Social Theme: Take your gold standard and shove it.
Free-Market Analysis: Ben Bernanke has come out forcefully against what may be seen as a burgeoning support for a monetary gold standard in the financial community and among the alternative media. This is newsworthy, because it begins to show what the power elite REALLY thinks about a gold standard.
The power elite that wants to create world government certainly does want a universal money. But, what it likely doesn't want is a money that is available to anyone who can dig it up.
We know this is anathema to the power elite because they spend considerable time and energy shutting the door to methodologies of money generation that are NOT controlled by them.
Whether it is Wall Street itself or a myriad of other monetary and financial activities, the elites make it difficult to generate capital in ways that are not supervised by their agents and enforcement officials whenever they can.
The elites do this via mercantilism, by controlling governments and creating laws that support their own enterprises at the expense of others. They then create support for these manipulations via dominant social themes.
These dominant social themes are fear-based promotions that frighten middle classes into giving up power and wealth to facilities that provide global governance. The goal of the elites seems to be a new world order with a new money and a universal government. There are indications that the elites wish to cull the larger human population dramatically as part of this evolution (see Georgia Guidestones).
While some in the alternative media community have claimed with increasing fervor that the elites DO want a universal gold standard, this has never been commensurate with the way the elites operate.
The powers-that-be have been fighting for fiat money (under their control) for centuries. Beginning with European and British central banking perhaps 500 years ago, the elites have been steadily moving away from commodity-based money and toward pure paper that is easy to print and easy to inflate.
The most significant movement to oppose the elites' affection for paper money has been the Austrian, free-market economic movement with its emphasis on "honest money" – a full-fledged, one-to-one gold standard.
In the past decade, however, as the Austrian movement has gained considerable popularity and clout, the preferred position on money seems to have evolved to one of monetary competition, which this modest paper (the Daily Bell) favors.
Money is what people make of it, and while we believe that societies at least in part would settle on some sort of private, fractional gold and silver standard, it is only through the free market itself (monetary competition) that a utile and useful monetary standard can be ascertained.
It is surely not the advantage of central banking generally to face monetary competition, as the only thing that keeps central banks in business is their monopoly control of money production.
Central banks – especially the Federal Reserve – are private in one sense and public in another. This is the way the elites work in fact. They use mercantilism, the conflation of private goals with public mandates, in order to cement control of society.
By ensuring their own goals and desires are enshrined into law, elites make their success mandatory and criminalize its failure. Thus, a private money-making machine like the Federal Reserve has been enshrined into law.
Congress passed an enabling act for the Fed in 1913 and subjects the Fed to considerable scrutiny while also controlling, along with the president, the appointment of its head. Without Congress, there IS no Fed, and this is true around the world. Everywhere you go, central banks have gained the willing or unwilling support of the governments they supposedly support.
Of course, in reality, central banks are apparently controlled by a handful of dynastic families that use the hundreds of trillions within their control to push the world toward global governance.
It is not in their best interest, of course, for these families and their enablers and associates to give up fiat money. At best, these families may wish to subject the world to an ARTIFICIAL gold standard controlled by THEM. But a free-market gold standard is not something that is in their interest.
We know this because the US itself was on a gold and silver standard once upon a time before the Civil War. Certain sophists and wily ones will make the argument that a gold standard especially is sought by the elites, but we know this is not true because the elites destabilized the US gold and silver standard and, in fact, fought a US war in the mid-1800s to implement paper money.
The argument is that the elites control all the gold (they don't) and therefore any gold standard will inevitably be controlled by them. But if this were truly the case, why did the elites evidently and obviously create a war (between the states) to implement paper money?
In fact, within the context of a private marketplace, it is impossible to sustain a monopoly. It is sophistry to maintain that people, freely trading, will support a monopoly not to their liking. The only way an elite can control the market for gold and exercise continued Money Power is via mercantilism and the continued control of government. A free market in gold and silver would deal death to their designs.
Money power fears terribly a free market in gold and silver. All their patiently hoarded metals would go for naught. They could spend every bit of it trying to manipulate fee markets and at the end would have nothing to show for it but an empty checkbook and frustrated connivances. For this reason, the "war between the states" was prosecuted. Money Power needed to regain control of money in the colonies.
Some will maintain that the war was about freeing the slaves, but anyone who looks closely at the historical record will likely come to the conclusion that the New York/European banking establishment was behind the Civil War and that its real goal was to minimize US exceptionalism and reduce the power of the republican experiment as regarded both free money and a free society.
The elites have been fighting FOR monopoly fiat money ever since. It is no coincidence that some 150 central banks now occupy most of the world's countries, when there were but a tiny handful 100 years ago. The elites have sought forcefully to emplace private/public central banks throughout the world and have succeeded in doing so.
It makes no sense, then, that the elites would now wish to revert to a free-market gold standard, much less to a gold and silver standard. Such gold and silver standards have been popular throughout history.
Common people can ascertain manipulation by checking the ratio between gold and silver. It's a good way to figure out the manipulations of a given power elite. It is not in the self-interest of central bankers to impose a credible, private market gold standard (or gold and silver) standard, and it is not surprising that Bernanke would come out against such an idea. Here's some more from the article excerpted above:
"Since the gold standard determines the money supply, there is not much scope for the central bank to use monetary policy to stabilize the economy," Bernanke said. "Under a gold standard, typically the money supply goes up and interest rates go down in a period of strong economic activity - so that's the reverse of what a central bank would normally do today."
Embodied by Texas congressman and Republican presidential hopeful Ron Paul, a loud minority advocates the closure of the central bank and a return to a gold standard where every dollar issued must be backed with equivalent reserves of precious metal.
Most economists credit the Fed for acting forcefully by lowering interest rates aggressively once it realized the magnitude of the 2007-2009 crisis. But policymakers, including Bernanke, have been chided for downplaying the housing downturn in its early stages and for turning a blind eye to flaws in the regulatory system that laid the groundwork for the boom and bust.
Some Fed critics argue that the central bank's ultra-easy monetary stance - it has held overnight interest rates near zero since late-2008 and has bought $2.3 trillion in bonds - is paving the way for future inflation.
In the above excerpt we can see the tremendous power that a central bank exercises through its monopoly manipulation of fiat money. Bernanke has "held" short rates near zero since 2007 while injecting trillions into the larger banking economy.
Of course this is nothing but a kind of price fixing. Bernanke is "fixing" the volume and price of money. In doing so, he is presiding over a tremendous wealth transfer from people who earn money to those who haven't earned it and likely won't handle it as well.
Central banking is nothing but price fixing, and price fixing never works. The dollar has depreciated some 95-99 percent since the inception of the Federal Reserve in 1913, and today, given that the Fed has injected literally tens of trillions more into the banking economy, it is very likely that the dollar reserve system is on its way out.
The power elite knows this, of course. The current growing, worldwide depression is of its own design and making as it is a direct result of central banking – the facility, worldwide, that prints too much causing first euphorias and booms and then busts.
The elites evidently and obviously want to supplant national currencies with one international one, perhaps the infamous SDRs supervised by the International Monetary Fund. But in doing so you can be sure the elites don't intend to let the markets themselves control money.
Bernanke would seem to be sending a clear message about that. However, we note that he seems to think he has to do so, and this is probably due to the success that educators like Congressman Ron Paul have had when it comes to money.
Fiat money, Greenbackerism and other inflation-oriented manipulations have been thoroughly vetted in the alternative media and no doubt these discussions have been examined at length by the powers-that-be.
Bernanke's caution about a private-market gold standard is a kind of warning squeak from the power elite that never deigned to address these issues before. That Bernanke, who works directly or indirectly for the top central banking families, has had to issue a statement on the subject is evidence that a great change in taking place in the historical monetary discussion.
Of course, as proponents of what we call the Internet Reformation, we are not surprised. We have long held that the Internet would focus attention on these previously abstruse issues and begin to undermine most if not all of the dominant social themes that the elites use to control people and move the world toward global governance.
Within this context, Bernanke's statements can be seen as further evidence that even the basic memes of the elite are under attack. They must be most uncomfortable now for Bernanke to make this statement.
They must, metaphorically, be making such statements between gritted teeth. It is NOT something they wish to do. They wish to treat monopoly fiat central banking as a GIVEN, something that is never to be commented because it is natural as breathing.
Only it is not. And the billions of words now expended on the subject of this illegitimate and destructive monetary system are likely, finally, having an effect on the powers-that-be. Not even the top powers of the world can keep an entirely illegitimate system in place.
There is, in fact, no place in the world for a system that allows a handful of people to print up to US$50 trillion on a whim to support their cronies while the rest of the world is struggling to get by on a dollar or two a day.
Since entering office in 2006, Bernanke has taken several steps to make the central bank more transparent, including holding quarterly news conferences and publishing policymakers' own projections for the path of interest rates.
This statement toward the end of the article profoundly misses the point, of course. The elites' staggering monetary manipulation has played out over the Internet in the past decade, and its profound IMMORALITY is public knowledge. More transparency is the LAST thing the system needs.
We have been arguing for a long time that many of elite memes are dying or dead thanks to the Internet and central banking may be chief among them. This squeak of agony from Bernanke is further proof that the top powers feel a need to protect central banking and to challenge its detractors.
The trouble is that central banking came in with assurances that it would modify monetary manias and ensure the system stayed solvent and steady for the benefit of the average person. As it has done none of that and has been exposed as horribly unjust and even genocidal system anyway, it is difficult to see how the elites intend to defend it going forward.
The alternative, in fact, is some sort of PUBLIC gold standard or global monetary standard controlled by the elites who have set up the current system. Bernanke's comments can also be seen as paving the way for a further evolution within the context of these parameters. But the LAST thing the elites want is a private gold standard or private money generally.
Ironically, unless they can gain significant control over the Internet, private monetary standards may indeed be in their future, which would jeopardize the entire program of global governance as their funding sources would dry up.
Conclusion: This will likely be the final battle of the Internet Reformation in our view – the struggle by the elites to move away from the failing and exposed central banking system toward another system ALSO controlled by them. Whether they can pull it off remains to be seen. The world's economy would seem to hang in the balance.
Posted by Danny B on 03/26/12 10:18 PM
This is another analysis and rebuttal of Bernanke's gold speech. It is quite detailed.
One interesting line that shows the whole modus operandi.
"maintaining government control over economies by giving banking systems priority over commerce has begun to be quite regressive"
Click to view link
"Priority", Huh. Manufacturing has dwindled to just 13 %
Click to view link
FED printing accounts for 19 % of GDP.
Click to view link
Finance and insurance accounts for about 8.4 %.
Click to view link
FED GOV debt-spending accounts for about 24 %.
HALF the economy is smoke-and-mirrors.
Posted by Bischoff on 03/25/12 05:01 PM
Hoss... Hoss... Hoss...
"But you can't go around making up your own definitions and then basing your proposed policy on others based upon it."
Are you disagreeing with me that countless number of people across the world, living in the past reaching back 3,000 years, as well as those living in the present, recognized that Gold is the best commodity on earth to store value (work performed)... ???
If you can assure me that people by overwhelming numbers DO NOT consider Gold to be the best store of value, I will agree with you that I can't go around making up my own definitions about what is "objective" value and which is "subjective" value regarding commodities. Until then, I consider my definition reasonable.
"Value is an estimation of worth relative to something else."
That something else is GOLD. Can't you see that... ??? Gold has "objective" value. Therefore it has no price. All other values are "subjective" derived or based on the "objective" value of gold.
Mises, and particularly Rothbard can't see that. That's why that part of Austrian Economics can't go anywhere. The marginal utility analysis theory to discover to prices put forth by Carl Menger, the founder of the Austrian School of Economics, is extremely useful. Too bad that today's Austrians can't seem to be able to apply it to Gold.
Posted by Bischoff on 03/25/12 04:39 PM
Hoss... Hoss... Hoss...
Salt, and beads, and silver, besides gold all have been used as a means of exchange, but that didn't make all these commodities "Money", as the DB wants you to believe.
Money is a commodity with constant marginal utility. Gold is that commodity by virtue of the recognition by countless numbers of people the world over that it is the one best commodity to store value (work performed). That is the reason Gold = Money. Because, Gold's utility declines so slowly that its saturation point is pushed off into the future as to be infinite.
As to your point that Gold is only useful unless it is also a means of exchange, I disagree. Gold faded as a means of exchange starting 500 years ago. Currency with fixed relationship to Gold took its place. When redeemable paper currencies were substituted for commodity currencies under the RBD, the fixed relationship to Gold was represented by Real Bills.
As long as currencies, whether commodity or paper, were freely redeemable in Gold, Gold itself didn't have to be a mediaum of exchange. It only had to be a standard of measure and redeemable.
"You can't take one aspect of what makes something money and disregard the rest."
You are falling for the convoluted statement regarding money often put forth by the DB to rebut me.
As you rightly point out, an aspect of Gold is that it CAN be a means of exchange, but it MUST not be a means of exchange to be "Money". IOW, Gold can be a means of exchange, but to the exclusion of any other means of exchange, only Gold is Money. It is that, because of its infinite marginal utility which no other commodity has.
Posted by Hoss on 03/25/12 03:28 PM
"There is no doubt that the "objective" value of Gold has its roots in subjectivity ... Interesting... .ain't it... ??? Circular... ??? Maybe, but reasonable... "
But you can't go around making up your own definitions and then basing your proposed policy on others based upon it.
Value is an estimation of worth relative to something else. An estimation by a person, for some purpose, the purpose defined by that person, for their own goals. The fallacy of equating a long history of subjective value judgements that happen to agree comes in real handy for smuggling illegitimate concepts into an argument. By your standard, paper money has objective value too (until it doesn't anymore).
Posted by Hoss on 03/25/12 03:22 PM
Gold would not be useful as a store of value if it couldn't be used as a means of exchange also. In fact it wouldn't be any more useful than helium, and in bringing that up you demonstrate the absurdity of the claim that gold has no importance as a means of exchange. You can't take one aspect of what makes something money and disregard the rest.
Posted by obsvr_1 on 03/25/12 01:35 PM
thanks for the clarification and detail.
Posted by Bischoff on 03/24/12 09:01 PM
"This is newsworthy, because it begins to show what the power elite REALLY thinks about a gold standard."
I think what is newsworthy, is the fact that the central banking crowd, whom you call the "monetary elite in the in the City of London", wants to eradicate the institutional knowledge about the gold standard, and that they are running into a problem.
While the central banking crowd has been sucessful in buying off the education establishment and academia from ever mentioning Adam Smith, Real Bills or the Gold Standard for generations, the internet comes along and mentions it again.
On the brink of success in dumbing down Western civilization, and in the attempt intelling the rest of the world that gold is just a barbaric metal, the internet comes along and argues otherwise.
THAT'S WHAT IS NEWSWORTHY... !!!
The headline should read: "Internet Prevents Power Elite from Wiping Out Institutional Knowledge of the Gold Standard"
Posted by Bischoff on 03/23/12 09:18 PM
"Seems to meet the criteria for a RBD instrument."
There are similarities between factoring and drawing a Real Bill.
Real Bills evolved over hundreds of years. There is in English-American Commercial Law a section which specifically deals with Notes and Real Bills.
Real Bills are not credit contracts as are 90-day invoices. That fact is very important in negotiability.
While you can discount a 90-day invoice, there is a defense that can be raised against the payment due, because of failure to "perform".
This is not a defense to avoid payment on a Real Bill. The validity of a Real Bill can only be attacked for insufficiency of the signature.
Therefore, the Real Bill differs from the 90-Day invoice in that it is freely negotiable. Anyone discounting a Real Bill has no concern that its validity will be attacked. To receive payment upon maturity on a Real Bill can confidently be expected.
As to default, the fact that the Real Bill is fully negotiable, there are likely many discounters who will affix their signature. Each of the endorsers accepts responsibility to pay in common and severally.
All endorsers would have to go bankrupt at the same time to default on payment of a Real Bill, a likelihood which is very small. Should any signateur or endorser on a Real Bill purposely default on a Real Bill, the Real Bills market and the business community in general will ostracize him. As a matter of fact, such individual will be out of business.
Posted by obsvr_1 on 03/23/12 06:50 PM
The invoice define the terms (interest) that is payable which is then effectively an IOU. Many companies then factor their acct's payable to receive a discounted cash amount from the finance company. The invoice is short term and will self liquidate when paid. There is a wage fund implied in this transaction as it is for goods within the value chain.
Seems to meet the criteria for a RBD instrument.
Also, RBD does not solve problems within the money supply associated with default in payment. So how are they different than unsecured credit money ?
Posted by Bischoff on 03/23/12 12:58 PM
There is no doubt that the "objective" value of Gold has its roots in subjectivity.
However, when the number of people who recognize Gold to be the BEST store of value is so large as to dwarf the number of those who don't recognize such, then by virtue of that widespread recognition the value of gold become "objective" versus the "subjective" value assigned to any other commodity.
Interesting... .ain't it... ??? Circular... ??? Maybe, but reasonable...
Posted by Bischoff on 03/23/12 12:52 PM
Gold is important as a store of value and as a measure of value. It has little to no importance as a means of exchange.
As to Helium, the problem there is how to you store it for for a thousand years. How do you hand it off?
Posted by Bischoff on 03/23/12 12:48 PM
That's right. So, you better know your neighbor... ... .
Posted by memehunter on 03/23/12 09:54 AM
Dave: What you have been proposing amounts to a sactioned depreciating currency.
I differentiated between the "means of exchange" and "store of value" functions of currency (and I'm far from being the first one to make that distinction, by the way). I'm not sure how that amounts to a proposition. So you have to clarify, if you want me to keep talking as you said.
As for your question, paper currency (even a paper currency that is not enforced by governmental decree) is generally not a good long-term store of value because the quantity of paper money in circulation can generally be increased easily and unpredictably, and because it is generally dependent on a local implicit agreement to use this currency. In contrast, gold is durable, it has a high stock-to-flow ratio, and it has been used as a store of value for millennia, over practically the entire world.
Also, a reminder for you: the fact that I am not sold on the idea of a gold standard does not mean that I am "anti-gold" (I see physical gold - not "paper gold" - as an ideal store of value) or that I am a "centralist". Similarly, the fact that I see Money Power as a bigger problem, generally speaking, than government does not mean that I am a "centralist". If you really insist on a label, I guess you could do worse than define me as being "anti-plutarchy".
The world is not always black or white, Dave.
Posted by Hoss on 03/23/12 09:47 AM
"The politicians could never confiscate our gold this time around."
But we cannot discount the possibility that they might be stupid enough to try. Failure hasn't stopped them from criminalizing pot, has it?
Two things are different this time, though.
People don't store their gold or any gold-related paper in banks any more. (And some of us don't store FRN's there either, because you can be erased at the push of a button.)
And this time, the guns might come out if they admitted defeat by taking the gloves off and going towards outright confiscation. Having your employer pay your taxes and having the value of your wages debauched from afar is one thing, but direct molestation brings a huge risk for retaliation.
Posted by Hoss on 03/23/12 09:40 AM
"You don't "purchase" the right to exclusive use, you register it with the county recorder."
Said the gang with the gun, thereby asserting the gang's possession and exclusive use.
Posted by Hoss on 03/23/12 09:31 AM
It's objective because people subjectively agree? Interesting. But circular.
Posted by Hoss on 03/23/12 09:24 AM
In Ingo's defense, quantity DOES play into it. One of the key concepts behind what makes something money is rarity. The rarity goes to density, so that a pocketful of coins could be traded for a warehouse full of grain. In fact there are a number of qualities that make something useful as money, and gold happens to top the list on all of them.
Helium neither spoils nor deteriorates.
Posted by Hoss on 03/23/12 09:14 AM
MH wrote, "However, it should be kept in mind that even the "store of value" function rests on an implicit expectation that this store of value will be accepted in the future in exchange for productive output. Therefore, it can be said to rely on an unspoken agreement to keep using this particular form of money as a "means of exchange" (whether that is its primary or secondary function)."
According to the terms you describe, yes. As long as it's an implicit expectation, not a demand at the point of a gun. If I don't trust that others would recognize and trade for whatever money is afoot, then in the extreme case I would save unconsumed goods directly. (And I do, just in case.) In such a case you lose the advantages of division-of-labor to some extent, but by bypassing the man with the gun, you might survive a little longer.
Posted by amanfromMars on 03/23/12 06:52 AM
"Nothing but the old tribal approach to securing survival. You're not a Taliban, Bill... .are you... ???" ... . Posted by Bischoff on 03/22/12 04:03 PM
Here is discussion and comment on a Taliban Bill? ... ... .. Click to view link
Posted by Bischoff on 03/23/12 12:58 AM
The politicians could never confiscate our gold this time around. How would they get at it? Today, people are much smarter than to turn in their gold volutarily to the government. That may have worked during an earlier time. Even then, very few people delivered up their physical gold to the government in 1933.
The way the government got at the gold in 1933 was by nationalizing it. It was done by decreeing that all interest and principal due saver on gold bonds be paid in irredeemable Federal Reserve Notes. That meant even so savers had invested gold in a gold bond, what they got back on maturity was a mere piece of paper which represented monetized debt. Since you can't save debt, all the paper was good for was to buy "stuff". Yet, people still felt a need to save for medical emergencies and old age.
Do you now understand why the government had to come up with Social Security legislation in 1935... ??? That's right, people could no longer save for their old age, because you can't save debt.
Social Security was a firm promise by the government to take from present workers to pay to present retirees. Now, by Obama giving payroll tax relief to worker, he undermines the promise. Instead, he wants the Fed to simply print money to give out as social security payment. When social security was collected from the present workers, it meant that it was backed by the workers' productivity (i.e. no inflation). The social security payment now is QE money created out of thin air (i.e. inflationary).
Watch out for the next government BOHICA job. It is Obama Care.
In any case, no matter what happend to them, people still know that only Gold is real savings, and this time its not invested in bonds, but is placed in deep, deep storage where no government agent will ever be able to find it.
I can not imagine that Bernancke will ever be stupid enough to call for the confiscation of gold. Why would he? It's not messing up his game now.
Gold will only come out of hiding after the irredeemable currency has collapsed, when Bernancke, and the politicians who backed him and the central bank are gone with an iron clad assurance that they will never return.