Guest Post by Simon Black
In early 1940s as World War II raged in Europe and the Pacific, the most powerful person in the world was NOT Adolf Hitler. Nor Franklin Roosevelt. Nor Winston Churchill. Nor Josef Stalin.
Not even close.
The most powerful person in the world was a Nobel Prize winning physicist named Arthur Compton.
Compton had been tasked by the US government to lead a group of scientists in developing a plutonium-based nuclear weapon– the same one that would be used to bomb Japan in 1945.
No one had even detonated a nuclear device or even controlled a nuclear reaction. It was all theoretical.
In fact, Plutonium had only been discovered in 1940. The entire field was brand new.
At a certain point in the project’s development, the scientists realized there was a chance that nuclear detonation could ignite the Earth’s atmosphere and annihilate all life on the planet.
Compton was head of the project, so it was up to him to decide whether or not to proceed.
Every living creature in the world– every plant, every animal, every German, every American– had a pretty serious interest in Compton’s decision.
Yet almost nobody knew his name. Or that such a decision was even being made.
Arthur Compton was not an elected official. Nobody voted whether he should have the authority to put the entire planet at risk in order to advance US interests.
Compton gave the green light, so the project went ahead as planned. And they thankfully didn’t ignite the atmosphere.
But the safe outcome was far from certain.
Even right up until the morning of July 16, 1945– the day of the first nuclear detonation in New Mexico– scientists jovially took bets with each other whether the atmosphere would ignite.
I thought about this story yesterday as the chairman of the Federal Reserve testified in front of Congress yesterday about US monetary policy.
Very few people know his name or realize that he is one of the most powerful people in the world.
That’s because, as chairman of the Fed, he heads a committee that wields dictatorial control over US interest rates and the supply of US dollars.
The US dollar is still the world’s dominant reserve currency, so the committee’s decisions directly affect the prices and values of assets, goods, and services everywhere on the planet.
EVERYTHING– from your monthly salary, investment portfolio, value of your home and interest rate on your car loan, to the price of oil in Saudi Arabia, to the inflation rate in Bangladesh– is influenced by their decisions.
That’s an enormous amount of power.
Yet just like Arthur Compton and his fellow scientists, none of these people has been elected.
The decisions they make are based solely on what’s best for the United States… even though the consequences affect nearly everyone on the planet.
And they also acknowledge they’re in uncharted waters.
The Fed Chairman told Congress yesterday that economic conditions are totally unprecedented, and that his committee has “significant humility” because so many of their basic assumptions have been wrong.
He also acknowledges that what they’re doing right now has never been tried before.
By many historic measures, the US economy has never been better.
The US unemployment rate is below 4%. GDP is growing. The stock market is at an all-time high.
These are all great signs.
Yet the Fed has cut interest rates three times this year (including a 0.25% cut just two weeks ago), and they’re printing up to $80 billion per month in new money to inject into the economy.
Those are things that a central bank does when an economy is weak.
It’s like administering a strong dose of a powerful, experimental medicine to a healthy individual; there’s not much reason to do it, and you have no idea what the reaction is going to be.
Arthur Compton and his colleagues relied on theoretical physics to make a final determination that the nuclear detonation would be safe.
The Federal Reserve’s Open Market Committee relies on theoretical economics– untested and unproven ideas– in deciding that printing trillions of dollars and slashing interest rates to historically low levels will be consequence free.
But to be frank, the Fed doesn’t have the best track record in predicting the financial crises and economic downturn that they help create.
For example, they totally missed the 2008/2009 Great Recession.
Even when the warning signs were obvious in late 2007, just months before the crash, the Fed Chairman at the time insisted that there would be no recession.
They helped engineer that crisis with their unprecedented, experimental interest rate policy during the early 2000s. And they failed to see the warning signs.
Compton turned out to be right about nuclear detonation. And we can certainly hope that the Fed gets it right this time too.
But you might want to think about owning a bit of gold and silver… just in case these guys ignite the atmosphere.
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3 points:
NOBODY SHOULD EVER be able to wield that much power – EVER
The problem would go away overnight by simply abolishing the Federal Reserve and restoring the Constitutional requirement that ONLY gold and silver be used as money. For those who need a step-by-step implementation plan, one great suggestion came from Ron Paul, who suggested simply abolishing all legal tender laws, abolishing all taxes on gold/silver, allowing anyone to coin money (with penalties for fraud, etc.), and allowing ALL currencies to circulate without restriction. Gresham’s law (good money will drive out bad) will take care of the rest and the Fed and their government-enforced “monopoly money” will be driven from the marketplace (along with most if not all global fiat currencies).
Just because something CAN be done, does not mean that it SHOULD be done. Scientists (and I am one), too often simply don’t give enough of a shit because they care more about the discovery than the consequences, as they will likely be dead before what they are doing blows up in everyone’s face. That seems to be the mentality of the Fed as well.
“…because they care more about the discovery than the consequences, as they will likely be dead before what they are doing blows up in everyone’s face.”
My take is that the ((controllers)) know exactly what they’re doing, discovered long ago how to do it, and believe, not irrationally IMO, that its consequences will redound, not only to their own benefit, but as well to that of their bloodlines downstream in time.
What a bullshit article. Nuclear physics, although in its infancy, was still subject to empirical testing. There were known laws of nature that could be relied upon to form the basis for analysis.
Economics is 100% bullshit past common sense. There is no empirical testing. All the testing is done in real time on real people. The members of the Fed should be tried, found guilty of mass murder via their policies and hung from the neck till dead. The entire field of Economics needs to be dismissed as an absolute fraud.
And yet there actually was REAL CONCERN that the first nuclear test would burn off the atmosphere. And a better study of the Austrian School of Economics (mises.org for all the free information you could possibly want) would show you that there is at least one school of economics that is reality based, based on human action and human valuation, and does not attempt to address issues with BS formulation as if it were a “hard” science.
Economics is a lot like love, everyone involved has got to believe in it or it just goes away. It’s a manifest reality rather than a Natural one. As long as people accept it, it’s real, the moment they stop believing, it’s gone.
That doesn’t sound like objectivism.
Agree. As applied to money, there really is no such thing as intrinsic value. Even for time-honored hard assets like gold and silver, value is imputed. It is whatever two or more men at a particular time at a particular place under particular circumtances, agree that it is, based upon a myriad of factors related to human behavior – which is why economics is unamenable to mathematic algorithms and is a “social science” rather than an actual science IMO.
I call bullshit. Decisions of the Fed’s Open Market Committee serve the interests of the committee’s members, i.e. bankers.
“It’s like administering a strong dose of a powerful, experimental medicine to a healthy individual; there’s not much reason to do it, and you have no idea what the reaction is going to be.”
Except the economy isn’t anywhere near healthy and the unemployment rate (don’t even start on the under employment rate) isn’t anywhere near 4%. The economy is rotted out with bad debt that never was purged from the last recession and grows bigger daily.
Why is Simon Black re-writing history? I never heard of Compton.
The Manhattan Project was a research and development undertaking during World War II that produced the first nuclear weapons. It was led by the United States with the support of the United Kingdom and Canada. From 1942 to 1946, the project was under the direction of Major General Leslie Groves of the U.S. Army Corps of Engineers. Nuclear physicist Robert Oppenheimer was the director of the Los Alamos Laboratory that designed the actual bombs.
During World War II, Compton was a key figure in the Manhattan Project that developed the first nuclear weapons. His reports were important in launching the project.
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“Jesus I know, and Paul I know about, but who are you?”
Simon still cannot write in paragraphs more than one sentence long. That he isn’t working to become a better writer after all these years while trying to peddle his newsletter says plenty to me. He throws out some nuggets of information but never fleshes any of his thoughts out for the non-premium reader.
I had the opportunity to hear a lecture by Hans Bethe while in college. It was a very small audience, less than 40 or 50. It was more like a discussion than a speech.
He was very clear that no one who really understood the new science they were dealing with thought the atmosphere would burn up. Also, the Nazi’s didn’t realize the weapon capability of fission reactions. They were pursuing electricity generation. That was from secret recordings he listened to as part of his government work.
Several stupid things scientists have done and plan sprang to mind. Building a super collider, many were afraid the earth might split in two. Taking ice cores from places where everyone died from something. And possibly bring it all back to life and exposing people to this. Harvard planning on dumping heavy metals into our atmosphere to cool the earth even though we are entering a cooling cycle. The push for electric cars when we have a delicate power grid that can’t support this. I am sure readers could keep going with this.