The True Gold Standard (Second Edition)
Who is Jacques Rueff?
With Bastille Day just past, let us pause, briefly, to salute the greatest economist of the 20th century: French monetary statesman Jacques Rueff. The little-publicized Rueffian school (to which this writer belongs) quietly is working to gain influence in the corridors of power to revitalize Rueff’s great legacy, the classical gold standard.
The rascal offers wealth untold, But gives the glitter, not the gold. -- Goethe's Faust, Part II
In his Speech in the Committee for Action and Economic Expansion, March 27, 1952, Jacques Rueff, the great monetary statesman, anticipated the recent speech by Bundesbank president Jens Weidmann by 60 years. Rueff:
A German economist called Wageman, who was somewhat prominent under Hitler, said, in a book published during the war, that “the most important scientific work of the French in the monetary field was Zola’s great novel Money.”
Here and behold this leaflet rich in fate That turns our woes to prosperous estate: “To whom It may concern, this note of hand Is worth a thousand ducats on demand, The pledge whereof and guarantee is found In treasure buried in the Emperor’s ground.” He then fully sets forth the theories of exchange media and fully employment:
None has the power to stay the flying chits,
they run as quick as lightning on their way,
And money-booths kept open night and day,
When every single note is honored duly
With gold and silver—though with discount truly. [an early example of monetary deprecation]
From there it flows to wine-shops, butchers, bakers,
with half the world as glutton merry-makers,
The other bent on flaunting fashion-showing,
The clothiers cutting-out, the tailors sewing . [full employment]
“His Majesty!”—toasts flow and cellar clatters . . .
But in his commentary on the festivities, the Herald foresees an unhappy outcome:
Now see the charming mob all grabbing rush,
They almost maul the donor in the crush.
The gems he flicks around as in a dream,
And snatchers fill the hall in greedy stream.
But lo, a trick quite new to me:
The thing each seizes eagerly
Rewards him with a scurvy pay,
The gift dissolves and floats away.
The pearls are loosened from their band,
And beetles scurry round his hand.
And round his head they buzz about.
With solid goods before their eyes,
Some grab, and catch frail butterflies.
The rascal offers wealth untold,
But gives the glitter, not the gold.1
Nothing is missing: the technical formula, the political advantages, the social consequences. The poet was indubitably more clear-sighted than are most economists; he understood and clearly demonstrated that inflation was the work of the devil because it respected appearances but destroyed reality.
Collected in The Age of Inflation, by Jacques Rueff, Henry Regnery Company, Chicago, 1954, pp. 62 - 64
August 23 marks the 116th anniversary of the birth of Jacques Rueff. In a speech to the French Parliament in 1996, Lewis E. Lehrman called Rueff “an extraordinary teacher, a selfless servant of the French people, and a peerless citizen of the world – the words of General de Gaulle – ‘une poète de finance.’
There is tragedy in the world because men contrive, out of nothings, tragedies that are totally unnecessary—which means that men are frivolous.
(Epigram to The Monetary Sin of the West)
There remains a widespread myth that the gold standard had some role in triggering the Great Depression.
And also there remains a myth among some on the right that FDR does not deserve credit for having brought about the lifting of the Great Depression in the United States.
Let us lay both myths to rest.
It is of exceptional interest to read what the great Jacques Rueff had to say about this very matter in 1971.
From The Monetary Sins of the West, available to be freely downloaded in PDF form, courtesy of the Mises Institute:
The gold standard is not a symbol, a romantic notion, or an anachronism. As one of the gold standard's greatest proponents of the 20th century, Jacques Rueff understood by direct participation in the world monetary system it was "this collapse of the gold-exchange standard that, without any possible doubt, transformed the depression of 1929 into the Great Depression of 1931."
And as for the lifting of the Depression?:
The destiny of mankind hinges upon gold
So observes Hugo Salinas-Price, the "Sage of Mexico."
I must have read fifty accounts, in the FT and others of that ilk, about what went wrong with the Euro. I have yet to read one that comes out with the plain, unvarnished truth. The whole bloody Establishment of bankers, politicians, economists and journalist whores sings the same song: “The euro came to grief because there was no fiscal union”. Therefore, the solution to be inferred is that fiscal union would remedy the case of the European Union’s imminent collapse.
Let’s face it: the euro is a fiat currency and fiat always ends up in disaster.
Our civilization is in evident decline. If it weren’t, we would find several eminent economists of the stature of Jacques Rueff in the halls of power; he was the French economist who wisely counseled General Charles de Gaulle to remove France’s gold from the cellars of the NY Fed and transfer it to France.
Jacques Rueff was a man capable of understanding the fundamentals of how the world works. His vision was clear, and his intellectual scope was capable of taking in the details of local commerce as well its international workings. Men and women of his capacity are still around today, but they are not welcome in the higher reaches of politics.
Rueff wrote a little book in 1963, “L’Age de L’Inflation” (“The Age of Inflation”) made up of some articles he had written. He wrote an “Introduction” to his book, and the very first words are these:
“LE SORT DE L’HOMME SE JOUE SUR LA MONNAIE”
A loose translation, taking into account the content of his book, would be:
“THE DESTINY OF MANKIND HINGES UPON GOLD”
Europe is a great mess today because those in power made the wrong choice when deciding what currency the European Union should use. They chose a fiat currency instead of the Gold Standard and currency redeemable in gold at sight. That is the Original Sin of the euro.
Rueff was also active when the European Union was being forged. His book’s fifth essay ends with these prophetic words:
“L’ EUROPE SE FERA SUR LA MONNAIE, OU NE SE FERA PAS”
Translated loosely and considering Rueff’s views, this would be:
“EUROPE WILL BE BUILT UPON GOLD,
Indeed, United Europe is falling apart. By the time you read this, it may already have collapsed. But it is falling apart not because of a lack of “Fiscal Union”. It is collapsing because of the absence of the fundamental means for free international collaboration, based on the realities of each nation of Europe: there is no gold standard at work.
Somewhere in his books, Ludwig von Mises states that the beginning of the end of the Austrian Empire came when the gold coin stopped circulating in the Empire. It was this stable and trustworthy money that had held together an Empire made up of several nations with very different cultures. When the gold coin disappeared, the unifying factor was gone as well.
Gold is the money for societies made up of men and women who wish to live in the real world.
This is part of the trouble in our declining civilization: men and women in these times wish to live in illusions, and the politicians, the bankers and their economist lapdogs have been providing those illusions for many decades now. Those illusions were enabled by the “Welfare State”: Comfort and security from cradle to grave, with no requirement of hard work to merit them. On the other hand, it would also be reasonable to say that men and women today live in illusions, because they were forced to do so by the fiat money they had to use. Once fiat money is in place, all becomes illusion and gambling and people give up trying to make sense of life. Pretty soon they take illusions to be realities.
Wolfgang Münchau in the FT of September 26 writes in the editorial page: “I have never seen Europe’s politicians as scared as I saw them in Washington last week”.
Read the rest, here.