An old saw in Washington has it that if you come out for the gold standard, you lose your reputation. In supply-side circles, it’s the opposite. If you don’t favor gold as the anchor of the monetary regime, your reputation’s shot.
Here’s a logic game. Premise A: Ben Bernanke’s reputation is shot. Premise B: Bernanke was totally against the gold standard. What can the conclusion possibly be—all men are supply-siders?
Bernanke is perhaps the most anti-gold person in history. Received opinion says that this honor belongs to John Maynard Keynes, care of his 1923 remark, which has gone down through the ages as wisdom, that the gold standard was a “barbarous relic.” But Keynes, ever hating to be pinned down, was being evasive. He did not mean the gold standard in general. He meant only the gold “standard” as reconstituted weirdly after World War I, aping as it did the pre-1914 status quo. Goodbye to all that, Keynes insisted.
Keynes was revolted at one thing in 1923. This was the view that the British pound sterling/ounce-of-gold parity had to be exactly the same as in 1914, at 4 pounds sterling per ounce, because John Bull won the war—which ended in an armistice. In 1923, Keynes felt that the gold “standard” was a barbarous relic in one place at one historical juncture and in one way—the King’s realm in 1923 at £4/oz. Otherwise, including long after, Keynes was often a gold man.
Bernanke beats Keynes on this record. All he did as Fed chair was become querulously mystified when questioned in Congressional hearings and everywhere else about gold. “Nobody really understands gold prices and I don’t pretend to understand them either,” a bon mot of 2012 representative of a large sample.
Nobody understands gold prices. Search “price theory” on a Web engine, and up come hundreds of economists who claim—who assert with footnotes and JSTOR articles—mastery. Stephen Levitt of Freakonomics stardom even helps hold a price theory summer camp. It’s going on right now in Chicago, and walk-ins are not welcome. You have to register, that’s how nailed-down the wisdom is.
Gold would be the most assessed single thing in the economy over all of history. Therefore, continuing in the syllogistic vein, given that there is price theory, and given (per Bernanke) that gold cannot be assessed, either there is no price theory or there are people who understand gold prices. Call off the summer camp?
Bernanke got his gold views from Barry Eichengreen, whose 1992 book Golden Fetters: The Gold Standard and the Great Depression, a collection of essays he had recently been writing, introduced the argument that gold was at fault in the colossal global economic disaster that set in after 1929. Bernanke’s review of the book in the Journal of Monetary Economics was as fawning as can be found in such an outlet.
