Ben Bernanke, Dr. Fiat Money, attacked the gold standard in a speech. He was speaking at George Washington University, which 35 years ago granted Mark Skousen his Ph.D. in economics. Skousen wrote his dissertation defending the gold standard. It was published in 1988, Economics of a Pure Gold Standard. It is clear that Dr. Bernanke has never read it. He would not like it if he did read it.
Bernanke’s objection to the gold standard is Skousen’s reason for supporting it. Bernanke said that such a system handicaps the government’s ability to address economic conditions. Exactly!
“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.” That’s it!
“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.” That’s not it. In fact, that’s what central banks do. Under a gold standard, the money supply is stable, interest rates go down, and so do prices.
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.
Bernanke defended the need for a central bank. Surprise, surprise!
Never before has any FED chairman had to do this. The FED is under attack, for the first time since it opened its doors in 1914
“You need to be attentive to where the economy is and not move too quickly to reverse the policies that are helping the recovery,” he said.
He is a bureaucrat defending the wisdom of bureaucrats. It is nice to see him on the defensive.