The PhD standard

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http://www.atimes.com/atimes/Global_Economy/MH23Dj01.html

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." John Maynard Keynes

This week, Federal Reserve "money printing" became a focal point of American political discourse. Across the Atlantic, a worsening banking crisis failed to diminish German resolve against backing the issuance of "eurobonds".

Many of us have read and pondered Keynes's famous quote on debauching the currency so often we're rather numb to it. But in


light of recent developments, it's worth reminding readers that history is unequivocal: the soundness of money - monetary stability - is fundamental to the well-being of both the economy and society. The myriad consequences of prolonged monetary instability are these days increasingly difficult to disregard.

I have argued that the global financial "system" for decades now has operated in a unique environment. I know of no comparable period in history where there were no restraints on either the quantity or quality of global credit creation. I have further posited that "unconstrained credit is the bane of capitalism". Unfettered finance ensures severe pricing distortions, speculative excess, the misallocation of resources, bubble dynamics, acute financial and economic fragility - and the "debauching" of currencies across the globe. Again, increasingly difficult to disregard.

I have referred to this anchorless global credit system as "global wildcat finance." As a proponent for the return to the gold standard, Jim Grant has coined the term "The PhD standard" to describe the current state of monetary affairs. I hope Mr Grant doesn't mind too much if I borrow his brilliant terminology. It's just too perfect. And as a product of public schools and universities (and a couple decades of diligent independent study of finance and economic history), it's too tempting to label the unfolding tumult the "Ivy League crisis."