Yesterday, Federal Reserve Chairman Ben Bernanke got all confused when asked whether gold is money and why central banks hold gold instead of diamonds. Watch the last 32 seconds of this youtube clip:
I know I am not the Chairman of the Federal Reserve, but at least I’ve heard about fungibility. Heck, even wikipedia mentions:
Diamonds are not fungible because diamonds’ varying cuts, colors, grades, and sizes make it difficult to find many diamonds with the same cut, color, grade, and size.
In contrast to diamonds, gold coins of the same grade and weight are fungible, as well as liquid.
If the Fed Chairman needs more information about why gold is money, he should google “why gold is money.” Now, I just need a good answer as to why pieces of paper with pictures of Presidents on them are considered money.