By Eric McWhinnie
In the Federal Reserve’s semiannual Monetary Policy Report to Congress on Wednesday, Chairman Ben Bernanke offered a prepared statement about current economic conditions and the outlook. Bernanke’s statement was then followed by a Q&A session. As usual, the exchange between Bernanke and presidential candidate Dr. Ron Paul was exciting and insightful.
The first question asked by Paul was whether or not Bernanke did his own grocery shopping. The puzzled looking Fed Chairman responded with a “yes.” Paul proceeded to explain to Bernanke that no one believes the argument that the current inflation rate is only two percent. It is easy to see where Paul is coming from. According to Shadow Stats, if inflation was measured using the same methodology as it was in 1980, it would be closer to nine percent. The research firm explains, “In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.”
To make his point about inflation and a devaluing dollar crystal clear, Paul then pulled out a one ounce fine silver American Eagle coin from his pocket. “You took over the Fed in 2006. I have a silver ounce here, and this ounce of silver back in 2006 would buy over four gallons of gasoline. Today, it will buy almost 11 gallons of gasoline. That’s preservation of value,” said Paul. His example of how real money holds value is more true than ever. Despite decreasing demand, the average price of gasoline per gallon is at its highest price ever for this time of the year. As the Federal Reserve and other central banks around the world provide easy money to financial markets, commodities such as oil rise in cost since they are priced in devaluing currencies.
Perhaps the biggest progress Paul made with Bernanke during the exchange came when the Fed Chairman classified gold and silver as alternative currencies. In the past, Bernanke has claimed that central banks only hold gold because of tradition. However, Bernanke’s stance on precious metals appeared more favorable in Wednesday’s exchange. When asked about competing and parallel currencies, Bernanke responded, “On alternative currencies, no one prevents you from holding silver or gold. If you want to its perfectly legal to do that. It’s also perfectly fine to hold euros, yen or whatever else.” Unfortunately, the dollar, euro and yen do not have thousands of years worth of history backing them.