Defining Moments

Via Daniel Indiviglio.

It seem that Fed Chairman Ben Bernanke was before some Congressional committee, when Ron Paul asks him how he would define the dollar. Now one good reason I would never suceed in politics is that I think a stupid question deserves a stupid answer. So here's dictionary.com's top three.

1. a paper money, silver or cupronickel coin, and monetary unit of the United States, equal to 100 cents. Symbol: $
2. a silver or nickel coin and monetary unit of canada, equal to 100 cents. Symbol: $
3. any of the monetary units of various other nations, as australia, the Bahamas, Barbados, Belize, Bermuda, Fiji, Guyana, Hong Kong, jamaica, Liberia, New Zealand, Singapore, the Solomon Islands, Trinidad and Tobago, and Zimbabwe, equal to 100 cents.

Bernanke, of course, knows that a gold-plated wack job like Paul would take offense at this kind of blunt honesty, so he offers:

My definition of the dollar is what it can buy. Consumers don't want to buy gold; they want to buy food, and gasoline, and clothes and all the other things that are in the consumer basket. It is the buying power of the dollar in terms of those goods and services that is what is important, and that's what I call price stability.

Not a definition of course, and certainly not what Paul wants. His reptilian mind can only grasp money if it's convertible into some stack of heavy metal.

Indiviglio isn't impressed either, but I had a similar impression of his thoughts.

What Paul (and Indiviglio) seem to be worried about is the question of how we can have faith in the stable value of money when it's based on arcane calculations of the Federal Reserve, rather than in something very concrete. Ultimately, the value of the dollar is based on a very complex set of actions of a whole horde of people: the ability and willingness of American people and American businesses to produce products the world wants, willingness of Congress to collect enough of the wealth produced to finance government costs, and the ability and willingness of the Fed to maintain price stability.

Scary stuff, since the parties of the first two parts are not doing so hot on holding up their ends. The alternatives, though, or at least Ron Paul's gold standard, has been tried, and found greviously wanting. It's a complicated world. Live with it or get off.

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