Yesterday Fed chairman, Ben Bernanke, countered the growing scrutiny of his economic NGO (non-governmental organization) with an admonition of the gold standard. In the first of four speeches he is delivering to George Washington University, the architect of the U.S. government’s bailout, criticized the oft-touted solution of the gold standard while essentially making the case for how things will work in a world without a central bank pulling the strings.
“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.”1
The speech is part of a larger publicity campaign by the Federal Reserve to push back against the growing public dissatisfaction with the corporation’s failure to satisfy their stated objectives “…to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” 2,3
This first lecture can be viewed in its entirety here:
Ludwig von Mises Institute president, Douglas French, provided an effective rebuttal of Bernanke’s comments in the following article today: