Gold Is Money, Not Tradition

When the highest monetary chairman in the US, Ben Bernanke, skates over gold with a superfluous off hand attitude by saying that gold is not money, we live in a very interesting governmental mumbo-jumbo. 

While every representative was calm during yesterday morning’s testimony, talking with purpose, not shaking, and showing no nervousness, Mr. Bernanke dodged questions. His voice trembled, mumbling and stumbling over very simple questions not complicated policy issues. 

This, coming from a Fed chairman, as he answered questions about what should be done to restore consumer confidence in the marketplace, was mind boggling. When Ron Paul asked “Do you think Gold is money”, there was a world-wide gasp, before Bernanke said “no”. When Ron Paul asked him then why is it in the Central Bank’s interest to keep so much of it there, Mr. Bernanke replied that it’s there as a tradition. The comment was mind blowing even to a nincompoop. What do central banks hold that doesn’t produce income? Currency and gold . Nothing else. 

Gold is money. Always has been, always will be. Currency is also money, but hasn’t been for long–and right now with the global debts mounting–it’s sliding on the ice faster than Mr. Bernanke’s skates. Most importantly, Central banks hold both, because they value gold over fleeting currency. 

To validate that, there is a report last week in the Financial Times that CB pulled 635 tones of gold from its bank for international settlements. So how can gold not be money and be in a bank for simply tradition? Not to mention when the international settlements were paid off with the 635 tones of gold, it was the largest withdrawal in 10 years. And when the question of printing money came up, if he is in fact was printing, Bernanke said, “No. We are creating reserves in the banking system.” Well, it is understood, that printing requires ink and paper, and he was not talking about consuming ink and paper. Digital money creation is not the same as printing new dollars. It’s actually smart for the Fed to not print it. Digital money creation is essentially free. We already know inflation is even showing its ugly head at the Fed’s printing presses.

Finally, when he said gold is kept as tradition, if gold is on bank balance sheet, you bet it is money and not tradition. As a reminder, considering that JP Morgan was the main force behind creating the Fed maybe Mr. Bernanki should know what he said about gold: “Gold is money and nothing else.” – JP Morgan 1912 (before the Fed was created). 

Gold has been used as a store of wealth for centuries! It has the value no currency has or can reach under any geopolitical crisis. And today, the demand for investors that are struggling with both EU and the US dollar, it’s a welcoming sign to own such safe haven the world over.