Back in the days, Alan Greenspan took the oracular role of the world's foremost central banker to an Olympian extreme. He reigned, incomprehensively enigmatic in bafflegab, supremely confident in macroeconomic management. For a while, he appeared indispensable. Senator John McCain once suggested that, were Mr. Greenspan to die, the White House should prop him in his chair, put a pair of sunglasses on him and extend his appointment for another term. Rarely has a mere mortal walked so close to God and worked so intimately with Him.
But then, when it comes to money, the state has always asserted theistic pretensions. U.S. currency explicitly perpetuates the ancient belief in the inherently sacred nature of money: In God We Trust. Derived from the Latin moneta, a title ("one who warns") used to describe the goddess Juno (in whose temple the Romans minted their coins), the word "money" and its associated vocabulary have always reverberated with moral instruction: sound as a dollar. And properly so. The most important economic function of the state - any state - must surely be its guarantee of honest money.
Now, though, there is trouble in paradise. The world appears to have lost part of its trust in the U.S. dollar and much of its trust in Federal Reserve Board chairman Ben Bernanke, alchemist-in-chief at the Washington temple where economists transform computer keystrokes into imaginary money.
The greenback will assuredly survive in the long run, as it always does, though worth less than ever. Mr. Bernanke will probably survive, too: deicide is risky, and bad for business. But the monetary insurrectionists now openly ridicule his performance as oracle and talk openly of rebellion.
Consider the warning the other day from Toronto investment manager Alex Jurshevski, founder of Recovery Partners, a firm that advises governments, corporations and investors on sovereign risk. Mr. Jurshevski agrees 100 per cent with German Finance Minister Wolfgang Schauble: "With all due respect, U.S. [monetary]policy is clueless." Mr. Jurshevski, however, places less importance on due respect. In a November bulletin, he said he thinks - "the odds suggest" - that Mr. Bernanke will be compelled to step down by spring. Or earlier. Whether sooner or later, he said, Mr. Bernanke's "return to full-time teaching" can't come a millisecond too soon.
Mr. Jurshevski said Mr. Bernanke's policies - among them, the creation of an artificial stock market boom - are "short-sighted and arrogant." He argues that Mr. Bernanke has misled American lawmakers and the markets, that he has ignored the country's "vast solvency problem," that he has conducted no risk assessments, that he has thus not given adequate thought for the morrow. People are right, Mr. Jurshevski said, to question Mr. Bernanke's competence to head the Fed.
President Barack Obama cannot fire Mr. Bernanke - at least, not directly. He can fire Mr. Bernanke only for cause. Yet Mr. Obama's best hope for a second term makes him highly dependent on Mr. Bernanke for strategic stimulation of economic growth, real or imagined.
The problem, though, isn't merely Mr. Bernanke, who is more or less as omniscient as other Fed chairmen. The Fed's raison d'être is the protection of the integrity of the U.S. dollar. How has it done as an institution? In 1944, when representatives of 43 countries assembled at Bretton Woods in New Hampshire to prepare for the postwar economy, the U.S. dollar was worth one-35th of an ounce of gold. In 1971, when then-president Richard Nixon abandoned gold, the dollar was worth one-38th of an ounce. Forty years later, it is worth roughly as much (as The New York Sun memorably expresses it) as one-1,400th of an ounce.
When Sir Isaac Newton, serving as master of the mint in Great Britain, set the price of gold in 1717 at three pounds and change, the price held for 200 years (except only for the Napoleonic Wars). In the United States, the gold price changed only four times between 1792 and 1973 (rising from $19.75 U.S. per ounce to $42.22) - when the markets assumed the task of evaluating a dollar against a fixed quantity of gold.
In retrospect, the Fed's fundamental job appears to have been simply the manufacture and distribution of inflation. So much for the almighty dollar.