MONETABRIEF – Street protests in France which included students, have turned into riots with torched buildings and looting, recalling the Aragalaya in Sri Lanka after the worst currency collapse engineered by the central bank in its history.

Mercantilism Corrupts Economics

The French protests are coming amid high inflation generated for years by macro-economists who have operated abundant reserve regimes (a single policy rate, created with excess liquidity).

The abundant reserve regime was an invention of the Fed, after it fired the housing bubble, as was the original policy rate/open market operations in 1920s that led to the Great Depression and currency collapses of the 1930s.

Though strikes against employers is the usual result of high positive inflation targeting, which is cumulative, the triggers for greater social unrest and civil strife can outwardly manifest through young people through different triggers.

The protest are among the worst since 1968.

The 1960s saw severe corruption of economics with Anglophone economists (MITs Samuelson in particular) promoting stimulus on the doctrine that there was a trade-off between inflation and employment.

The original paper that led to the trouble was written by Alan William Phillips.

The spurious doctrine has been revived as potential output and high inflation target in Sri Lanka with the central bank recently openly admitting that it wanted high inflation to boost growth.

Ironically the central bank was given 'independance'to maintain stability not create external trouble by printing money.

The 7 percent inflation target was renewed for another three years shortly after it amplified a shock from the Middle East war by bustign the rupee to 330 from 300.

1968 French Protests after Gold Price Went Up

Though monetary knowledge in the French speaking nation was greater in the 1960s, compared to the US and UK, it also got hit as the Federal lit a fuse under the Bretton Woods system.

In May 1968 France erupted in protests triggered by students at Nanterre University which evolved into a general strike involving leftists.

President De Gaulle left for a military base in Germany and wage hikes were negotiated. Inflation in France was 4.54 in 1968 and topped 6 percent the next year.

France re-imposed exchange controls in May 31.

As the US continued to print money misled by macro-economists, from the early 1960s, disregarding the gold peg at 35 dollars, prices came under pressure worldwide.

The London Gold Pool finally collapsed and in March 1968 gold hit 45 dollars before easing, while macro-economists kept the 'official' gold price at 35 dollar in a futile action, until the Bretton Woods collapsed two years later and gold soared higher.

Sri Lanka by then had started to go to the IMF and the administration of Dudley Senanayake, which wanted to free traded had to go for back-to-back IMF programs and pass the import control law.

Under the abundant reserve regimes in the Fed and ECB (now headed by Christine Largarde who was at one time in IMF), gold is now 4000 dollars an ounce.

Macro-economists in Sri Lanka after cutting rates to close an output gap (the IMF gave technical assistance to the central bank to calculate potential output, giving incentives from 2015 for the note-issue bank print money to 'close' the gap).

In Sri Lanka in 2026, there has been a resurgence of nationalism with some monks coming to the streets accompanied by protestors holding a lion flag sans the coloured lines signifying minorities.

Europe has also seen a resurgence of nationalism under the high inflation of the ECB coming from the abundant reserve regime.

In Sweden however – where inflation is low and has been for some time – the nationalists lost ground in an election in September. (Colombo/Oct18/2026)