Bernanke Grilled: 'Is Gold Money?'

Is gold money? In between the rants of congressmen, Ben Bernanke was asked a somewhat improbable question: is gold money?

Mr. Bernanke said, "No." Why?

Aside from the desire to avoid ideological debates (going back to the gold standard, clearly impossible), he is most likely expressing a view that gold fails the primary test of what money is: something that is accepted in exchange for goods and services, or to repay debts.

Does gold satisfy this criteria?

In saying "no" Mr. Bernanke is likely thinking, where do you find gold accepted as a means of payment? What store anywhere on earth will accept gold in exchange for, say, food, or a new stereo system? None.

  • Gold Hits Record, Silver Soars, on Bernanke Remarks

But Mr. Bernanke is referring to the modern world, which has been overtaken by paper assets. Gold, of course, has been accepted as payment for goods and services, or to repay debts, in other cultures at other times. So have shells and beads, but that's besides the point. Gold clearly has been money in the past.

Furthermore, gold does meet another definition of what money should be: as a "store of value," that is, that whatever is being held will have value in the future.

The bottom line: gold was money in the past. Some have argued it should be money in the future.

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