Austrian Economics and its weird obsession with gold as the only "sound money" dominates the discussion of monetary reform in the alt-economics community, and is given major impetus by the platform and candidacy of Ron Paul. The attraction of Austrian Economics to alt-righters appears to be in its promise of limited government. Theoretically, a gold-standard monetary system would allow us to shove government out of the market and back in its "Constitutionally-limited" box.
That is, of course, the first absurdity. Government which is determined to be authoritarian will do whatever it takes (such as seizing all gold and declaring a new economic order, which has been done before), so obviously a gold-standard has no ability to limit government power. Anyone who publicly suggest that a gold-standard can limit government power should be slapped across the face for their ignorant display of ignorance.
But even worse, Austrians posit the gold-standard as some kind of economic good of its own, in a crypto-religious fashion defining gold as the only "real money", as opposed to all the paper "fiat money" which is thereby ontologically illegitimate. But... If government declares via legal fiat that gold is now money, doesn't that make gold "fiat money"? if you don't think so, you need to review the definition of the word "fiat".
Or maybe the problem is with the Fractional Reserve system? Welll......Ooops, it turns out a fractional reserve system could rest quite comfortably on a gold-standard money base. No ontological collision there, sorry. If your mind has trouble grasping this, you need to familiarize yourself with monetary history.
Some seem to imply the ultimate goal should be a full reserve system based on nothing but the possession of bags stuffed with gold coins. The very system that was phased out, what, a millennia ago? Even under the historic "full reserve, gold standard" systems, various non-gold means are invented to conduct commerse, such as bills of credit, cheques, silver and copper, etc. The pure "gold-based system" is a complete fantasy.
The real problem is, what then, central banking? But a central bank, in the sense of a bank that does business with the central government, is inevitable, literally impossible to avoid. The government has to put its money somewhere, doesn't it? The banking institution in which the central government places its deposits and makes its withdrawals is by definition a central bank.
Is the problem then that government shouldn't be able to "create money from nothing"! Well, then, I am left wondering, who? Who gets to create the money? Someone creates the money, it must be admitted.
Ah yes, this is where the rubber hits the road, where the naked truth steps out into full light. Austrian economic theory is nothing less that pro-banking-class propaganda.
It is no accident that Austrian theory places such a high rhetorical value on the "sanctity of private property". Their whole argument boils down to the idea that rich people should have the exclusive right to create and profit from money, and they shouldn't have to share it with anyone!
Fortunately, the fact is, there is no reason at all that people should put up with this absurd assertion. It is an offense to common sense to assert that the government should have to pay any private parties to conduct its monetary business.
Government is an expression of the people, for the general benefit of the people, and government is perfectly capable of operating its monetary transactions for the benefit of the people, rather than for the profit of a banking elite. The profits that come from the creation of money, the holding of money, and the lending of money, when done in the name of general government, should accrue to the general populous. In practice, we should have MORE public banking, not less.
Didn't you ever wonder why Austrian economic theory is so well funded? Why it has so many essay-writing and magazine-publishing mouthpieces and gets so much publicity? Austrians would return all the profits of money to the wealthy banking class. The wealthy banking class are more than happy to fund this propaganda which so clearly advances their interests.
General confusion surrounds the internet discussion of "Austrian" alternatives. Another red herring is bandied about concerning "legal tender laws". In fact, there is no law mandating the use of the USD/FRN. You are free to use any money you want. You are required to pay TAXES in USD/FRN, but that is all. People have "free banking" right now if they want it.
End the Fed?
As for the current Fed Reserve, the problem with "ending" it, according to Austrian recommendations, is that it would return all the profit and power of money control to private banking interests.
In reality, the main problem with the Fed today is that it is not under enough public control. My critique is that by basing the system on Presidential appointees (and that, only in part), it serves to amplify the influence that the money powers have over government. In short, by buying off one man (the Pres) and a few key other men (committee heads and key confirmation votes), the Moneyed Elite can retain an absolute choke hold over policy and potential reform.
Thus we see the incredible incestuousness of the current climate, in which Goldman Sachs insiders, for example, are simple recycled throughout the system, which, not coincidentally, is used to advance their interests. With policies like "too big to fail" and "zero interest loans for member banks", it essentially results in "Socialism for the rich, harsh capitalism for the rest".
If monetary policy makers were subject to popular approval, it stands to reason they would be more likely to enact policies which benefitted the general populous. I fail to see how that would be worse than now, a situation in which the general population is fleeced for the enrichment of the banking elite
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