Although this interchange between Federal Reserve Chairman Ben Bernanke and Rep. Ron Paul (R-TX) took place yesterday, we thought it was amusing enough to still merit sharing. In a hearing Wednesday of the House subcommittee on monetary policy, Bernanke and Paul got into a heated discussion about... what money is. Paul asked Bernanke what he thinks about the price of gold and whether gold was money, and here's how the conversation played out:
Paul: Do you think gold is money?
Paul: It's not money?
Bernanke: It's a precious metal.
Paul: Even if it has been money for 6,000 years, somebody reversed that and eliminated that economic law?
Bernanke: Well, it's an asset. Would you say Treasury bills are money? I don't think they're money either, but they're a financial asset.
Paul: Why do central banks hold it?
Bernanke: Well, it's a form of reserves.
Paul: Why don't they hold diamonds?
Bernanke: Well it's tradition -- long-term tradition.
Paul: Well, some people still think it's money.
(It's worth noting that Big Ben is right: If money is understood as a "circulated medium of exchange" then gold is not money because in the U.S. it is not a generally accepted currency for exchange. It would be if we still had a gold standard, as Paul thinks we should, as this would make cash equivalent to a specific amount of gold. But the gold standard has been dead in this country since 1971.)
Watch the Bernanke/Paul showdown below: