Bernanke’s Problem with the Gold Standard

In his new lecture series, Federal Reserve (Fed) Chairman Ben Bernanke is going out of his way to discuss the "problems with the gold standard." To a central banker, the gold standard may be considered "competition," as their power would likely be greatly diminished if the U.S. were on a gold standard. The Fed, Bernanke argues, is the answer to the problems of the gold standard. We respectfully disagree. We disagree because the Fed ought to look at a different problem. Bernanke lists price stability and financial stability as key objectives of the Fed. Focusing on the latter one first, the Fed was established to reduce the risk of financial panics. Bernanke points out: "A financial panic is possible . . . → Read More: Bernanke’s Problem with the Gold Standard