Quote from scriabinop23:
From what I understand, the modern Austrians don't like government intervention, banking multipliers (leverage). They like pure and free markets. If there is a built in deflationary bias due to productivity and population growth, the Austrian school (or at least the Ron Paul obsessed) don't believe money supply should be ever -not- backed by some precious metal commodity. I am not sure their attitude on adjusting money supply if the commodity is available to account for deflationary bias (ie if the fed needs to increase dollar supply, it stockpiles more gold). Someone correct me or answer this question please.
Finally, from what I understand, they like completely free and unfettered markets, and ultimately buy the 'invisible hand' concept. The market will take care of itself when prices end up where they should be. Social consequences don't matter to the Austrians (correct me if I'm wrong).
In the end, the currency is viable, but there is no trampoline or safety net. Money for investment (due to lack of fractional reserve and credit) is harder to come by, and I imagine only what society determines the best investment gets money.
So the flaw I see besides an inherent incompatibility with socialist society: A paradox. Austrian economics want pure capitalism (self interest), yet they want to purposefully exclude self interest motivated capitalistic behavior in the government and beholden sectors (banking) from acting capitalistic. In truth, what is happening today is a perfect example of the banking cartel having their way, continuing a transfer of wealth from the populous to themselves through their connections. But by definition, this is free market behavior, just as monopolies and oligopolies occur in free market.
In fact, one could call the banking system an oligopoly that ultimately controls all of our wealth using the Fed as its proxy (indirectly (arguable) forcing them to dilute the money supply right now). Political will does not accept economic catastrophe. Austrians do.
So if I am seeing it correctly, the Austrians want their cake (a government and banking cartel not involved in the capitalistic pursuit) and at the same time unfettered capitalism.
But by definition, the behavior of those in power to continue the perpetuate their power is the hallmark of unfettered and unregulated capitalism.
Those are my two cents. Please no "sound money" mantras ... But please educate me without blasting me on how I'm an idiot because I don't buy into the Austrian hype. Correct me if I'm wrong on any fundamental points and point me to specific areas I have flaws and I'll be glad to learn more details. Just getting into this.
You're one of the few posters that actually "gets" the confluence between politics, corporate cronyism, and whats passed off as "secular" monetarism. For that, I applaud and congratulate you.
Knowing the system is built on a fraud and a scam, designed to enrich a tiny oligarchical class at the expense of the masses, the question becomes: what do we do about it?
The study of economic theory is similar to any other liberal discipline - psychology, history, sociology etc.
Each field draws upon several paradigms to make their explanations of human behavior complete.
I view economics in the same regard.
Neo-classical, mercantilism, monetary, Keynesian, Austrian (hard money) - each School contributes elements of factual truth. Some more, some less.
Austrian school is by no means perfect. In fact, its relative shortcomings stem from its political bias. Speaking of that, you've likely realized how each Economic School is incestuously intertwined with its own, unique political ideology.
Big Government Oligarchs = Keynesian Monetarism!
Small Government Libertarians = Austrian School.
Aspiring Super-Powers = Mercantilism.
My 2 cents regarding your questions:
1) Commodity-backed money is great - so long as production of that commodity cannot (unreasonably) outpace population/productivity growth.
Acquiring extra gold reserves to print more is fine. Less gold on the market = currency appreciation + less money printing from foreign, gold-backed countries = net wash in global money growth (in theory).
2) Social Consequences matter. But under all circumstances, they should never be under the purview of Government. This is where politics trumps economics. Austrian promotes freest markets possible - no tax, no central bank (to rob), no Government (to waste).
Taxation under the guise of social welfare grows exponentially higher until people are the subjects of Government, not the other way around. Present day Canada, America, Europe are living proof of Governments run amok from decades of incremental taxation and inflation all originally sold under the banner of "Helping". Wolf in sheeps clothing.
So no, Libertarians would keep their own money, no income tax, very little sales tax. But from that offsetting amount in personal wealth, private charitable donations would be expected to pick up the shortfall.
3) To your major point - Libertarians don't harbor "anti-capitalistic" sentiment toward any industry, including banking. The key distinction here - they are anti-
monopolistic
Commercial Banks hold a monopoly over credit issuance by their ownership and control over the FED Reserve System This means everyone else gets fucked, as history and contemporary events have demonstrated in recent years.
Banks are free to profit and speculate as much as they like under an Austrian System - so long as its their own, unleveraged capital thats risked, or capital from their depositors.
Where's the fun in that??!!?
The problem isn't banks making a profit. Its the Banks counterfeiting dollars on everyone elses tab, running the markets into the stratosphere, then putting everyone else out of work. Or taking over the Country.
Thats where we're headed next, btw. Notice how the ultimate free market conclusion to every capitalist experiment is monopoly?
Yea, well they're not gonna stop at just the banking and credit system. They're gonna try and commandeer the overt political machinations of the Country = Dictatorship. Some notable Scholars say they already have (Carol Qiugley, Bill Clintons academic mentor). This is the same group of people commonly referred to as the "New World Order".
Back to your point - free markets aren't free when capitalism devolves into monopolies. Then it becomes a quasi-centrally planned economy for private profit. Sound familiar!?!
I think any reasonable Libertarian would promote aggressive Anti-Monopoly Legislation/Boards to break up unruly companies that hold excessive market share.
The crux of the issue is money supply. And how best to create a monetary system that can accommodate economic growth and capital creation without being subject to rampant exploitation and take-over by a small, moneyed elite. The later has already happened.
Most Austrians who know their stuff, will tell you that a hard money deflationary system is
not best. But its A LOT better than what we have.
Best to settle for moderate growth in a deflationary system until we come up with something better. The alternative is to let the vultures takeover and rape the Country into the ground!!
Last point - there are sects within sects within sects.
Most Constitutionalists would fall under the category of Social Libertarian. Minimal Government welfare/healthcare net.
Of course, you get the hardliners in every school of thought who yearn for the ultimate Utopic vision, no matter how "unworkable". For instance, hardcore Neocons wanting to "glass parking lot" the Middle East. Try not to throw the baby out with the bath water, and all that good stuff.
