Nearly a decade after he left academia for the Federal Reserve and put his easy-money stamp on the nation’s central bank, Ben Bernanke went back to school Tuesday to take on the gold standard. In his first of four planned lectures to George Washington University undergraduate students, the Fed chairman delved into the history of the institution he runs and in the process delivered a rebuttal to the monetary reform that has gained traction in the conservative movement and the Republican presidential nomination race. Business Insider’s Joe Weisenthal wrote that Bernanke “just murdered” the gold standard.
Only for an impressionable mind, of which there may have been a few in his audience of college students and reporters. Bernanke framed his critique from a somewhat odd premise: in the history of the Fed, the gold standard was “an alternative to the central bank.” While that is Ron Paul’s model today, the Fed was actually designed and opened under the fully-functioning classical gold standard. As a recent report on U.S. monetary history from the Republican staff of the Joint Economic Committee notes, the Federal Reserve System was created in 1913 with “A monetary policy mandate to provide an ‘elastic currency’ within the context of a gold standard to combat the form-seasonal elasticity problem” (italics added).