Tuesday, March 20, 2012

Indoctrination 101: Bernanke Focuses GWU Lecture on Problems with Gold

For those who missed today's live lecture The Bernank gave to George Washington University's School of Business, we have the highlights, as well as the full recorded lecture. 
The Bernank devoted 6 slides of his lecture to gold...or should we say...PROBLEMS WITH GOLD AND THE GOLD STANDARD.

Bernanke informed the GWU boys and girls that 'the gold standard caused inflation', and that the problem with gold is that 'under a Gold standard the Fed would not have the flexibility to adjust money supply, so as to adjust for changing economic conditions', and finally, lists the gold standard as one of the primary causes of the the Great Depression!
So gold is bad as money because we cannot print it, understand boys and girls? 

We hope you're taking notes:

•Problems with the gold standard
–The strength of a gold standard is its greatest weakness too: Because the money supply is determined by the supply of gold, it cannot be adjusted in response to changing economic conditions.
•Problems with the gold standard
–All countries on the gold standard are forced to maintain fixed exchange rates.
–As a result, the effects of bad policies in one country can be transmitted to other countries if both are on the gold standard.
–If not perfectly credible, a gold standard is subject to speculative attack and ultimate collapse as people try to exchange paper money for gold.
–The gold standard did not prevent frequent financial panics.
–Although the gold standard promoted price stability over the very long run, over the medium run it sometimes caused periods of inflation and deflation.

What Caused the Great Depression?
•There were many causes, including
–economic and financial repercussions of World War I, including the effects of reparations payments
the structure of the international gold standard

For those who prefer Power Point slides, The Bernank's full lecture can be found in PDF form here: