It took some by surprise yesterday when Chairman Bernanke denied outright that there is any link between the debasement of the US dollar and the inflation in dollar denominated commodities like Food - which has been destabilizing world markets, and destroying governments throughout the Middle East and Africa. According to the Chairman no such linkage exists. If food prices are in fact going up (perhaps they only seem to be going up by people who only think they are starving), it is because of Bad Weather and Speculation. The rampant printing of dollars - according to the Chairman - isn't actually happening, but only seems to be happening to those who don't understand what Quantitative Easing is really all about.
Today the Chairman continued his role as Denier in Chief. Ron Paul, the chairman of the House Banking Committee pointed out that the surging price of gold suggests that a dollar debasement is in fact occurring, and he asked Chairman Bernanke if he would give a definition of the dollar. What exactly is a dollar that is not convertible into precious metal?
Bernanke blinked a couple of times and then launched into rambling "explanation" that touched on the dual mandate of the Fed.... unemployment, yada yada, price stability yada yada, the economic collapse yada yada, oversite and private sector failures yada yada...
Finally Bernanke managed to use up all of Ron Paul's time. When Ron Paul tried to follow up, he was cut off, and Maxine Waters proceeded to ask Bernanke if he didn't think too many government jobs were being lost - as though she hadn't heard the previous exchange and perhaps had no idea who Bernanke is and why he was there.
The question is this: is Bernanke a fool? Clearly not. Then the only other explanation for his nonsensical answers is that he must think that most people involved in and watching the hearings are fools. And judging by most of the day's exchanges, he's not terribly far off the mark.
But the markets are not so foolish. All this is just great for gold. If nothing else.