Federal Reserve Chairman Ben Bernanke and Rep. Ron Paul (R-TX) squared off, probably for the last time, at a congressional hearing on Wednesday on whether gold can be considered money.
Paul, who belongs to the libertarian wing of the Republican party and is currently running for the the Republican presidential nomination, expressed his sentiments about gold and the Federal Reserve in the books End The Fed and the Case for Gold.
Paul announced on Tuesday that he would not seek another term in Congress.
The gold talk begins at the 4:40 mark in the video below. Here is the transcript:
MR. PAUL: But very quickly, if you could answer another question, because I'm curious about this – you know, the price of gold today is $1,580 [U.S.]. The dollar during these last three years was devalued almost 50 per cent. When you wake up in the morning, do you care about the price of gold?
MR. BERNANKE: Well, I pay attention to the price of gold, but I think it reflects a lot of things. It reflects global uncertainties. I think people are – the reason people hold gold is as a protection against what we call tail risk, really, really bad outcomes. And to the extent that the last few years have made people more worried about potential of a major crisis, then they have gold as a protection.
MR. PAUL: Do you think gold is money?
MR. BERNANKE: No. It's not money, it's a precious metal…
MR. PAUL: Even if it has been money for 6,000 years, somebody reversed that and eliminated that economic law?
MR. BERNANKE: Well, it's – you know, it's an asset. I mean, it's the same – would you say Treasury bills are money? I don't think they're money either, but they're a financial asset.
MR. PAUL: Well, why do – why do – why do central banks hold it if it's not –
MR. BERNANKE: Well, it's a form of reserves. It's a form –
MR. PAUL: Why don't they hold diamonds?
MR. BERNANKE: Well, it's tradition, long-term tradition.
MR. PAUL: (Chuckles.) Well, some people still think it's money. I yield back. My time is up.