Greenspan vs. Bernanke

Uh oh.

Alan Greenspan said this week that “gold is a currency.” Bernanke, just the opposite, when questioned by the only member of Congress who understands economics and finances, said that “gold is not money.”

So, we have one Chairman of the Federal Reserve disagreeing with another Chairman of the Federal Reserve. And they are disagreeing on a major issue: not on the importance of some obscure commodity, but on the importance and the very economic nature and function of gold! One says “gold is money.” Another says “gold is not money.” It is an important issue; the answer to what the economic nature of gold is determines one’s actions on the markets. This is not arguing about the market significance of peppermint sticks, after all; we are talking gold here.

The FED is supposedly “protecting” our money. But if there is no clear philosophy as to what “money” is, how do they know what to protect and how to protect it? And apparently, if two FED Chairmen don’t agree on this important issue, there is no clear philosophy, and therefore no clear strategy. The very reason for the existence of the FED is nil then, because they won’t know what is going on, what needs to be done, and if what is done is really the right thing to do.

If Bernanke is right that gold is not currency, then why do the banks and the investors keep buying it?

If Greenspan is right, then the best way to protect the US Dollar would be to tie it to gold – the Gold Standard that Greenspan himself argued for many years ago, before his first paycheck as a Chairman of the Federal Reserve.

So, who is right?

Anyway, there is a good news in all this. Alan Greenspan finally came to his senses and agreed with Ron Paul that gold is money. If Ron Paul is wacko, then we have two wackos. Add to this Robert Zoellick of the World Bank. Plus all the millions of wackos who keep buying gold and driving its price upward. Plus all these wacko banks who hold fast to their gold reserves.

That’s quite a lot of wackos.