July 13, 2011 - Congressman Ron Paul questions Federal Reserve Chairman Ben Bernanke in a U.S. House Financial Services Committee Meeting shortly after reports surfaced that the Federal Reserve was preparing for a third round of quantitative easing.
Congressman Paul directly asks Chairman Bernanke whether he believes gold is money, to which Bernanke responds that it is not. Paul then asks why central banks bother to hold gold if it is not to be considered money, and Bernanke responds that it is merely tradition.
In light of this exchange, it is worth noting the following from International Business Times:
QNB Capital state in their latest report that central bank gold reserves rose by more than 2% between 2008 and the end of 2010, with central banks in Brazil, Russia, India and China – as well as those in the Middle East – particularly strong buyers of the yellow metal. Developing nations' preference for gold was highlighted by the Mexican central bank’s purchase of 100 tonnes of gold in the first quarter.
As a result, central banks in developing countries have been diversifying out of paper money and into gold bullion.
Quite an expensive tradition, wouldn't you say? Who knew that international central banks were so concerned with maintaining their "golden" heritage?