Blogs: Christopher K. Potter
After his testimony to the Senate Banking Committee on March 1st Ben Bernanke was asked a question about the gold standard. His answer:
"It did deliver price stability over very long periods of time but over shorter periods of time it caused wide swings in prices related to changes in demand or supply of gold. So, I don't think it's a panacea, and there also are other practical problems like the fact that we don't have enough gold to support our money supply.... I don't think that a full-fledged gold standard would be practical at this point." [emphasis added]
The idea that there is not enough gold to support a modern day gold standard is a widely held belief among financial elites and novices alike. Ask almost anyone if they are in favor of reintroducing gold into our monetary system and you are likely to hear some version of what Mr. Bernanke said. The problem with his argument, as with so many perceptions about gold, is that it is factually incorrect. Today we not only have enough gold, we have just the right amount of gold to support our money supply.
BY CHRISTOPHER K. POTTER: