What is bravery? Is it fighting a lion? Rescuing a princess? Saving the world from flesh-eating cockroaches bent on the destruction of Earth?
Hollywood would have us think so about all those things, but the truth is, none of those acts is very brave if the main character is invincible. After all, even a coward would save Earth from flesh-eating cockroaches if he or she were made out of Raid.
Bravery comes from doing the right thing even when it is very frightening to us. The more afraid we are of something, the braver we are when we actually do it. Bravery cannot exist without first being afraid, and we can never be heroic if not brave.
And by that measure, Federal Reserve Chairman Ben Bernanke is a very brave man. And, I reckon, a hero.
Consider the recent showdown between Bernanke and his arch-nemesis, Rep. Ron Paul (R-Texas). Paul challenged Ben Bernanke over whether gold is money.
Voice noticeably quivering, Bernanke went ahead and told the truth. It isn't.
Why gold isn't money
For something to be money, it has to be commonly exchanged for goods and services. Last time I checked, I couldn't take a gold coin into McDonald's and receive their oh-so-golden French fries in exchange.
Similarly, stocks -- as much I love them -- are not money or currency, either. If I want money for them, I'd have to sell shares. Furthermore, I couldn't get a direct price quote on, say, my Dell shares in terms of ounces of gold. I’d have to exchange my shares for dollars first and then, if I'm so inclined, exchange those dollars for gold.
But no matter how right he is, Bernanke had reason to be fearful in answering Paul. Bernanke was reappointed in 2008 by the thinnest margin ever, and the man challenging him was a politician who is a stone's throw away, as chairman of the Domestic Monetary Policy and Technology Subcommittee, from being his de facto boss. (The nearest would be President Obama.)
When was the last time you told your boss -- on national television, no less -- to stick it where the sun don't shine? That's brave.
Keep in mind that Bernanke didn't have to answer that way. He could have weaseled out of the question by saying, for example, "Well, it depends on how you define money." Or he could have explained it in Greenspan-speak that would be unrecognizable to the human ear. He even could have agreed with Paul but offered some caveats. Instead, Bernanke mustered his courage and explained his (correct) position in no uncertain terms.
Please stop it, Ron Paul
I don't doubt that Bernanke's opponent is sincere in his gold evangelism. Congressman Paul's personal portfolio is practically a gold-mining ETF unto itself, with a beefy $500,001 to $1,000,000 stake in Goldcorp
Although I give him credit for putting his money where his mouth is, there are two problems with Paul's gold-stock ownership:
- It's clearly a conflict of interest with his chairman position. The man who wants to bring back the gold standard owns the stocks that would most benefit from doing so. I do think Paul is a true believer in gold, but it still gives the appearance of impropriety.
Speaking of which, there's also the congressman's position, albeit a small one, in the Prudent Bear Mutual Fund, a dedicated short-bias mutual fund. It's a bit distressing to see that the Domestic Monetary Policy subcommittee's chairman, and a presidential candidate, is betting against American business. Since it's such an insignificant position, I recommend that he do away with it simply to avoid such an appearance. - His advocacy of gold, no matter how sincere, could cause real harm to real people. It may be OK for a multimillionaire congressman to bet most of his life's savings on gold, but it's probably not suitable for his supporters living paycheck to paycheck. What if he's wrong? Can Paul live with seeing his supporters lose their paychecks, invested almost entirely in gold-mining stocks as he his? I would imagine such a scenario would make Paul, or any man, feel enormous guilt.
Maybe Congressman Paul -- who is retiring from Congress at the end of his term -- can be brave and admit that although he loves gold, it's probably not appropriate for his supporters to confuse political ideology with sound investment strategy. Now that would be heroism on a Bernanke scale.
