There's an old saying that goes: "he who has the gold, makes the rules." Since President Richard Nixon took the dollar, and by proxy the world, off the gold standard in 1971, and after four decades of fiat currency experimentation, we think the financial version of the golden rule can be amended to: "he who creates the money, makes the rules." In the US, the Federal Reserve creates the money and it has chosen a path of underwriting government spending and reflating credit and stock markets, which has resulted in economic growth. In Europe, the European Central Bank has become less accommodative, there is no centralized fiscal expansion and economic growth is near zero.

David Fuller's view Hmmm. Whichever way this economic situation plays out over the next decade or more, I think the old 'Golden Rule' has considerably more staying power. One hopes that Bernanke's efforts have jumpstarted a stalled US economy and that this leads to a self-sustaining economic recovery. We will see.

Meanwhile, I regard gold as hard money. Bernanke has increased the supply of faith-based paper money, way beyond what can be justified by GDP growth. This has steadied the US economy although we do not know for how long. It will certainly lower the purchasing power of the US dollar over time, not least against the price of gold. If the fiat currency printing press created wealth, the Weimar Republic would be remembered as a golden era of prosperity and Zimbabwe would be an economic powerhouse today.