Federal Reserve Chairman Ben Bernanke reacted to conservatives across the country who have pushed for a return to the gold standard today, saying such a move “would not be feasible for practical and policy reasons.” Bernanke’s answer was in response to a question during his lecture about the history of the Federal Reserve today at George Washington University.

Returning to the gold standard wouldn’t be practical because there isn’t enough gold, Bernanke said. And even if it was practical, he added, it would be disastrous from a policy standpoint, preventing the Fed from responding to drastic rises in unemployment or rapid inflation or deflation during economic downturns. Committing to the gold standard, Bernanke said, “would mean we are swearing that no matter how bad unemployment gets, we aren’t going to do anything about it”:

STUDENT: Why is there an argument — some argument — for returning to the gold standard, and is it even possible?

BERNANKE: [...] I think, though, that the gold standard would not be feasible for both practical reasons and policy reasons. On the practical side there’s just not enough gold to meet the needs of a worldwide gold standard. But more fundamentally than that, the world has changed. [...] In a modern world, the commitment to the gold standard would mean that we are swearing that under no circumstances, no matter how bad unemployment gets, are we going to do anything about it using monetary policy.

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Conservatives around the country have pushed for a return to the gold standard, particularly since Bernanke’s Fed took sweeping monetary policy actions to combat the Great Recession. In state houses across the country, Republicans have pushed bills that would declare the dollar unconstitutional or force taxpayers to pay the government in only gold or silver. Goldbug fever also swept the Republican presidential primary, as candidates (besides long-time gold standard advocate Ron Paul) spoke at pro-gold standard events and stumped for it on the trail.

But as Bernanke noted, returning to the gold standard would have perilous consequences for the American economy. The American economy, he noted, was more prone to recessions before the gold standard was dropped, and, as with the Great Depression, the gold standard tends to make such downturns even more painful. “If you look at actual history, you’ll see that the gold standard didn’t work that well,” Bernanke said. “Indeed…there’s a good bit of evidence that the gold standard was one of the main reasons that the Depression was so deep and long.”

The Federal Reserve yesterday released transcripts from 2006 (full official transcripts of Fed meetings are released five years after the meetings occur), which shed some light on how badly the Fed misinterpreted the housing bubble. “I really believe that the drop in housing is actually on net going to make liquidity available for other sectors rather than being a drain going forward, and that will also get the growth rate more positive,” said then Fed member Susan Bies. “Housing is a relatively small sector of the economy, and its decline should be self-correcting,” added Janet Yellen, now the Fed’s vice chairman.

Dallas Fed Chairman Richard Fisher said that, “as one CEO told me, the only subject that has been more analyzed than the housing situation is the birth of Brad Pitt’s baby.” Chairman Ben Bernanke, meanwhile, predicted “at worst, an orderly decline in the housing market,” while now Treasury Secretary Tim Geithner (then president of the New York Federal Reserve) said, “we think the fundamentals of the expansion going forward still look good.”

The Fed’s perspective is perhaps best summed up by Gary Stern, then president of the Minneapolis Federal Reserve, in a March 2006 meeting:

I thought I would comment a bit more on two issues in particular—one is housing—where I wonder if the significance of potential developments might not be being exaggerated a bit. I certainly agree that changes in housing prices, up or down, feed into household wealth and through that into consumer spending. I think that’s a perfectly acceptable story. So if housing prices go down or level off, they will have that effect on wealth and potentially on spending.

But there seems to be a view that, in some sense, an exogenous pronounced decline in housing prices is possible, maybe even likely, and that this could be more devastating for the economy. It’s not that I would quibble with that story, but I would wonder about its likelihood because it seems to me more likely that housing is the tail rather than the dog in this. That is, as long as employment continues to go up, incomes continue to go up, and mortgage rates remain relatively moderate, then I would expect that we would avoid severe difficulties in housing except for a few markets that are particularly inflated at this point.

From the transcripts, it becomes clear that Fed officials thought the economy supported the housing market. But it was actually the other way around: the housing sector was supporting the economy. Meanwhile, the nation’s biggest banks had entwined themselves (via the housing market, which they were helping prop up with predatory subprime loans) to such an extent that when housing finally declined, the whole system fell apart.

ThinkProgress caught Gov. Rick Perry (R-TX) this week saying that Federal Reserve Chairman Ben Bernanke’s actions to stimulate the economy are “treasonous” and issuing a veiled threat of violence against the Fed chief. “If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas,” Perry said.

Several Republicans have called Perry out for using this sort of language. 2012 presidential hopeful Rick Santorum said that Perry’s remarks were “completely out of bounds.” “You can’t be calling Bernanke a traitor,” said Rep. Peter King (R-NY). “Intimating the Federal Reserve Chairman is guilty of treason is not going to create more confidence in voters about you,” added Rep. Charlie Bass (R-NH).

Former Reagan and George H.W. Bush economic adviser Bruce Bartlett labeled Perry “an idiot” for his remarks. However, one GOP’er doesn’t think that Perry went too far. During an interview with Lou Dobbs on Fox Business, former half-term governor Sarah Palin said that she might “have used similar terms” to describe Bernanke’s actions:

PALIN: [Perry] called it like he saw it and I always respect people for doing so. What Governor Perry is voicing concern about is something I wrote about on Facebook pages about ten months ago, this quantitative easing or monetizing our debt, essentially printing money out of thin air, which will eventually devalue our dollar and, I think, lead to inflation, in order to make it look like our debt isn’t as bad as it really is, and Governor Perry was voicing great concerns that many of us share. He just used some more candid terms, I think, than some of us would have used.

DOBBS: Even you?

PALIN: Well, yeah, that’s a good point. Perhaps I would have used similar terms. But I do share his concern though.

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Palin, of course, is no stranger to violent rhetoric of her own. Perry, for his part, is standing by his remarks, telling CNN, “I am just passionate about the issue and we stand by what we said.” “The governor is going to continue talking about getting America back to work in a tone that everyone understands,” added a campaign spokesperson. Not only were Perry’s remarks atrocious, but he also seemed to be admitting that the Federal Reserve’s quantitative easing would be good for the economy.