"I got along with him fine. But Ben Bernanke thinks he's the smartest guy in the room, and wanted everyone to know it," remarked an acquaintance who used to sit in policy meetings with him. I was reminded of the remark when I read that Bernanke would become the first Federal Reserve Chairman to hold press conferences after meetings of the Federal Open Market Committee (FOMC). Bernanke specialized at Princeton in the Great Depression. Yet he ignored Jacques Rueff's contemporaneous explanation. As the chart shows, U.S. stock market speculation rose and fell step for step with foreign dollar reserves invested in New York. Bernanke and the Fed were thus surprised when the crude oil price rocketed to $150 a barrel in 2008 after earlier massive expansion of foreign official dollar reserves, triggering another stock crash-and by the latest round of commodity-led inflation, due this time mostly to the Fed's doubling of its balance sheet after that crash. How will lectures to the press wear, as evidence mounts of policy failures caused by the Federal Reserve ignoring the results of its own and other central banks' actions?
Today’s economic conditions reflect a fiat monetary system held together by many tricks and luck over the past 40 years. The world has been awash in paper money since removal of the last vestige of the gold standard by Richard Nixon when he buried the Bretton Woods agreement — the gold exchange standard — on August 15, 1971.
Since then we’ve been on a worldwide paper dollar standard. Quite possibly we are seeing the beginning of the end of that system. If so, tough times are ahead for the United States and the world economy.
The new Federal Reserve chairman, Janet Yellen, gave a policy speech today at Chicago, where, in a startling gesture, she mentioned three working individuals by name — Jermaine Brownlee, Vicki Lira, and Doreen Poole. They lost their jobs the Great Recession and have been struggling ever since. It was a refreshing, even affecting demarche by Mrs. Yellen, who has made a return to full employment a public priority. She underscored her sincerity by telephoning Mr. Brownlee and Ms. Lira and Ms. Poole before delivering her speech.
Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.
By John D. Mueller
Who Was Jacques Rueff?
... Trained in science and mathematics at the Ecole Polytechnique, Rueff devoted his first theoretical work to showing that the same scientific method applies to “moral” or “social” sciences like economics as to the physical sciences (Des Sciences Physiques aux Sciences Morales, 1922). In both cases, he pointed out, individual acts can be “indeterminate,” but the pattern of large numbers of individual acts can be predicted as a matter of probability. And so in economics no less than physics, as he later wrote, “A scientific theory is considered correct only if it makes forecasting possible.”
"Forerunners of man lived upon the planet several million years ago. But the unique, modern, social order of man – civilization – emerged only four to five thousand years ago. Historical and archaeological evidence suggests that the institution of money evolved coterminously with civilization. From the standpoint of the 100,000-year history of Homo sapiens, civilization and money are but young and fragile reeds. Today their very existence is threatened by financial disorder."
There is a lot of bad behavior in the global political and monetary world. Much of it comes in countries that should know better. Recep Tayyip Erdogan’s Justice and Development Party (AKP) easily won municipal electons in Turkey but the party’s candidates won far short of the nation’s votes.
Hostility toward gold has a long pedigree.
19th century depiction of Pliny the Elder courtesy of the Library of Congress
Gaius Plinius Secundus, commonly known as Pliny the Elder, in his The Natural History, Book 33, section 3, writes:
Would that gold could have been banished for ever from the earth, accursed by...