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The Third Economic Disorder

3.  The world dollar standard destabilizes the value of the dollar, fomenting euphorias and panics.

An economy based on money without intrinsic worth is like a jet aircraft without a gyroscope being kept stable exclusively by the pilot. The lack of stability injects a huge amount of uncertainty into the economy and the financial markets.

Federal Reserve Chairman Greenspan, in a 1996 speech before the American Enterprise Institute, famously called the market euphoria "irrational exuberance."    Fast, hard market drops are called "panics," as in we saw the crashes of 1973-74, Black Monday of 1987, and the Crash of 2008.

John Maynard Keynes, perhaps the most celebrated exponent of government management of markets — and a spectacularly unsuccessful commodities speculator — reportedly said "Markets can remain irrational a lot longer than you and I can remain solvent."  With all due respect to Keynes, the markets are not irrational.  Under the world dollar standard market participants, as well as the monetary authorities, are attempting to fly a jet without a gyroscopic stabilizer.  While it may be gallant, it is suicidal.

 

Kathleen M. Packard, Publisher
Ralph J. Benko, Editor

In Memoriam
Professor Jacques Rueff
(1896-1978)

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