I only met Paul Volcker once, sitting next to him at dinner after a conference at which he had spoken. His topic was emerging currency trends—this was sometime in the first decade of the 2000s—and I don’t recall whether anything that he suggested might develop came to pass. At the dinner's start, I mentioned to Volcker that while listening to him belittle the dollar I kept expecting to hear a call for a return to a gold standard. He replied politely, “When I was at the Fed, we hated gold.”
I already knew this. What I didn’t ask, because he was an honored guest, was, “What do you idiots think you’re doing rigging the price of money?” No matter, he could have responded that he hadn’t run the Federal Reserve for almost twenty years.
This note it isn’t about monetary policy, or about Paul Volcker, or about the quaint idea that there is a “right” price for money that may be arrived at by a cartel of central bankers. It’s about nutty people, and rational people, and the art of connecting dots. The question is whether the dots ever connect. But first, a digression on madness. The best known dot-connectors are cultists. Some of the pictures they discover are invisible to the normal eye.
You might not believe, for example, that almost thirty years ago, I was part of a global financial conspiracy that included Paul Volcker. Or that my wife Mira is the granddaughter of mob financier Meyer Lansky. Or that she tried to murder an East European immigrant (and war criminal) named John Demjanjuk. Or that her then-employer, the Anti-Defamation League, colluded with the CIA and the Justice Department to send an innocent cult leader to prison for mail fraud. Or that Henry Kissinger was a KGB agent. Or the Queen of England a drug trafficker. You might not believe this stuff because you most likely live in a world shaped by normal experience and you know that highly improbable things are seldom true. The more improbable things that get strung together, the less likely it is that the emergent narrative reflects reality. (An unknown person named Linda may be a librarian. But it’s statistically less and less likely as you add complexity that this random person is a librarian, and a feminist, and an animal rights activist, and a Republican, vegan, blues singer and poker player. The improbability goes up exponentially, not arithmetically. And that’s a chain in which none of the descriptions, taken by itself, is the least unlikely.)
A fair number of people believe things that are improbable at each step, and cumulatively are bonkers. They hold secret knowledge: esoteric stuff that provides an insight into how the world works that isn’t available to the rest of us. You can find it everywhere. Gold bugs can weave theories about global deception that make the Linda-chain look probable. Scientologists, Rosicrucians, Moonies all have their arcana. Alex Jones and Paul Craig Roberts will set your head spinning with exotic explanations of recent history. It’s the Dan Brown-novel version of reality. There are machinations behind the scenes, and we who know, really know what they are.
The search for coherence underlying this folly is reasonable. We want to understand the world, and it’s complicated. Questions of what we know and how we know it are difficult. Seeking answers, some intelligent people are drawn into the looniest belief systems.
In the eighties and nineties, the Lyndon LaRouche cult was ticked at my wife and her employer, the ADL, for a variety of reasons. Partly it was that her boss had described LaRouche on an NBC program as a “small-time Hitler,” and LaRouche not only lost his libel suit but also lost NBC’s counter-suit. Partly it was that Lyndon was in federal prison for mail fraud. (Some of his spear-carriers, tried in Virginia for bilking people through false loans, got up to 77 years.) At various times the cult took ads in The New York Times denouncing Mira, leafleted our neighborhood, Northern Virginia, D.C., and Maryland suburbs with “wanted” posters of her (in defense, it happens, of a Sobibór camp guard), and wrote bits of entertaining lunacy. In an article in Executive IntelligenceReview, LaRouche acolyte Herbert Quinde disclosed, “By marriage and political affiliation [Mira] Boland is linked to the Wall Street financial arm of the Anglo-American ‘secret government’ apparat, which played a central role in the Iran-Contra scandal.” Quinde collected stray facts, then sat down and knitted his data points all together: me (a financial writer at the time), Paul Volcker, Walter Schloss, John Train, even Warren Buffett got roped in. There’s a reason mad people are called “dotty.” It’s all the time they spend working with a ruler, a protractor, a fine-point pen, and a field of dots. After a while, they can’t help but see patterns.
If you Google my wife’s name, to this day you’ll get hits from various sites linked one way or another to the LaRouche cult. She was far from their only target. LaRouchies confronted KGB mole Kissinger on his way to heart surgery. They ran around Manhattan distributing mock editions of The New Yorker and The New York Times Book Review dedicated to outing lawyer Roy Cohn as a homosexual. You couldn’t fault them as lacking energy.
As an aside: The people I’ve known emerging from cults are horrified at the time they’ve spent there. Time is a fast-wasting asset, and they’ve blown some of it trying to become Rosicrucians. It makes me wonder if Herb Quinde, who has gone on to other things, remains dotty or just went through a phase.
I don’t mean to focus on the LaRouchies; it’s just that we had the most direct experience with that cult. Others are certainly worse. The LaRouchies never gathered in Guyana for a mass murder/mass suicide as did the People’s Temple believers. For decades Sung Myung Moon collected thousands of obedient followers in mass ceremonies of arranged marriages. Some descriptions of Scientology’s vengeance campaigns make the LaRouche nits seem benign, which they weren’t and perhaps aren’t.
It’s the belief structure that’s interesting: the connect-o reasoning that creates patterns that can explain a great deal, if only you accept the lines between the dots. People seem to want to believe in something, or just about anything. I know people who believe in the transmigration of souls (certainly a secret from the rest of us) and claim to have found corroboration. Transubstantiation is a fairly widespread doctrine, though no less dependent on acceptance of an improbable narrative. People believe in the lost sciences of Atlantis and Lemuria. Science fictionists in the 1930s had hollow-earth adherents, some of whom may have meant it. I met a woman who had lost her husband and child and had become a Mormon. Tablets under a hill in Palmyra? Why not. It was the start of a pattern that gave her damaged life coherence.
Belief can be an anchor that keeps us pointed in a steady direction. The problem is that belief requires adherence to some version of connect-o. Even acceptance of things that seem highly probable can turn out to be grossly mistaken. The world is much less coherent than we would like it to be. The narratives mislead us.
Which brings me back, however improbably, to Paul Volcker. It’s received wisdom that Volcker broke inflation during the early eighties by jacking up interest rates. This may or may not be a good reading of correlation as cause. What he almost certainly accomplished was the creation of a Cult of the Fed, which flourished under “Maestro” Greenspan, grew mossy late in Bernanke’s run, and encounters skepticism under Mrs. Yellen. We’ve reached a moment in that belief system as uncomfortable as the day a LaRouchie discovers the Queen of England isn’t running drugs. The Fed cult was based on an inductionist’s faith that mounds of macroeconomic arcana could enable central bankers to know where interest rates should be set, following on an occultist’s belief that they should be set at all.
Here is why the problem is serious. It isn’t just nutty people who knit together theories from strings of data that may or may not represent reality. It’s rational, educated people, too. Think of policy wonks. They know the minutiae of energy, health care, trade, interest rates, investment, art, culture and morality. They discover regularities on whiteboards, with the confidence of statisticians who know everything except the size of the group from which their data sets are drawn. Protractors in hand, they can prove it all, just as Herb Quinde could prove my wife’s ties to the Anglo-American secret treehouse society.
The problem of induction afflicts the dotty and the sane alike. It’s more amusing when the connections are wacky. It’s trouble for the rest of us when they seem to make sense.