The harshest congressional critic of the Federal Reserve faced the toughest internal questioner of central bank policy across a witness table on Capitol Hill on Tuesday. Surely there would be a meeting of the minds. Alas, it was not to be.
As Congress remained stalemated over avoiding a catastrophic U.S. debt default with a crucial deadline days away, Representative Ron Paul grilled a top Fed official over an issue that has been troubling him: Why is the dollar money and gold not? As Kansas City Fed President Thomas Hoenig testified before the House Financial Services domestic monetary affairs committee, which Paul chairs, the congressman told him:
Last week I learned that gold is not money. I’ve been able to put that out of my mind … so I’m still trying to find out what money is.
That, to Paul begged the question: What is a dollar? Some background: Paul, who has long advocated abolishing the Fed and returning to a currency backed by gold or silver, couldn’t get Fed Chairman Ben Bernanke to confirm, at a hearing two weeks ago, that the yellow stuff is the equivalent of cash.
“No, it’s a precious metal,” Bernanke said. Banks hold it because it is an asset that can be sold, he said. Investors hold it as a hedge against uncertain times, which is why its value has hit record levels of late.