U.S. Rep. Ron Paul, R-Texas, got the better of Federal Reserve Chairman Ben Bernanke in an exchange yesterday during a hearing of the House Financial Services Committee.Paul observed that inflation is an increase in the money supply, and he quoted estimates that the U.S. money supply has been exploding lately — estimates Bernanke did not attempt to contradict. This explosion in the money supply, Paul said, is currency debasement that expropriates savers. He asked Bernanke how it could be justified.

Bernanke replied that the Fed’s statutory mandate is price stability rather than money supply. Whereupon Paul cited the sharply rising Producer Price Index.

Bernanke answered that he prefers to go by the Consumer Price Index. (Maybe because it is more aggressively manipulated by the government?)

Paul countered that even the CPI has turned up sharply lately.

The best Bernanke could do was to acknowledge that the Fed is concerned about that — concern that seems likely to manifest itself shortly in a strange way, with more reductions by the Fed in official interest rates, pushing them even farther below official inflation and expropriating savers even more to rescue the banks and financial houses that lately defrauded the world with the Fed’s connivance.