The Issue With The Austrian School
They sell an idea, a good one, but still: an idea. They don’t sell fact or reality, and that’s what I am going to hand you on a silver platter because it really is quite easy of a concept...
Libertarian Eschaton is the same as the State’s
Time and time again the main rebuke I am forced to endure in any encounter with many understandably fuming-mad opponents on the debate of inflation is, “Well what does it matter!? Prices are going up now! Now is all that matters!” While I really do feel flattered by the perpetual onslaught of sophistry and short-sightedness, I must just prod, if for only the sake of my own ego, the thorn in the eye of the Austrian and the ultimate issue with the axiom of every argument he makes: Thing bad, gov’t said it did thing that caused bad thing, therefore gov’t is the source of bad thing.
In this case, among the plethora of other wrongs they have jammed into their optimistic worldview, is how they see central banks as the source of monetary ails, and if we just returned to free banking, or some modern spin on free banking, all of our economic woes would be solved. You don’t have to be a PhD to understand the framing of this eschaton. They operate in myth and ideology like many other economic absolutists, and if the world does not conform to their narrow observations, then it’s the world that is wrong, not them!
The impact of government on the proclivity of wealthy societies becoming decadent, to different extents, is really quite ineffectual. Government, and monetary policy, have little impact on institutional (commercial banking) sentiment on the economy. The minute the economy reaches diminishing returns, and a shortage of dollars for a bunch of debt being produced, the fingers always start being pointed, because no one likes problems, and even more importantly, no one likes being blamed for problems.
For the Austrians and other free-market absolutists, the idea that market freedom and free trade could lead to an undesirable end is quite nerve-wracking. Who wants to see their great utopia undermined? Well, they can revise history to meet their requirements, so that they can envision a possible future where 1870s-1910s America can be fully realized once again, or something of the sort. Once again, and we’ve all gone through this stage of our political-philosophical journey already: reality gets in the way of your utopia, and competing power gets in the way of what you ultimately want.
What’s done is done. The market can’t keep producing sharper knives and rounder SUVs, and to think it will somehow just keep on chugging away at innovation is simple worship of the same mythos of the modern state capitalist government, but in a less liberal framing.
The modern Austrian can’t get what they want, so they foist every issue onto some ominous “state” that is just hopelessly coercive. This brings me to an even more relevant issue, however:
A Warped View of Origin: Inflation
Due to an already warped understanding of reality itself, the Austrian goes blaming the wrong people for non-issues that he hopes to use as ammo against an enemy, but ends up just being firepower for his enemy by lending them credibility and power that they really don’t have.
I have probably talked on inflation more than anyone else is in the DR, but it’s just due to the elaborate misunderstandings of many people on our side. Most of y’all are either former-libertarians or libertarian-adjacent, and you all get your framing for how money works and macroeconomics from a pundit or maybe someone like Thomas Sowell or Murray Rothbard. No issue there, however - those are great and intelligent men to start with. They just won’t give you the answer you’re looking for, and provide more of a philosophical frame and argument for decentralized governments and against bloated bureaucracies.
Their forte ends there, however. They are no better at explaining the ins and outs of the banking system than Joe Biden or Jim Cramer. They sell an idea, a good one, but still: an idea. They don’t sell fact or reality, and that’s what I am going to hand you on a silver platter because it really is quite easy of a concept:
The Fed, nor any central bank (that matters) creates inflation, nor can they, because they refuse to actually print money. They give banks central bank reserves (CBRs) and those CBRs are supposed to spur lending growth, but lending growth before the proliferation of CBRs via Quantitative Easing was steady at it, and after 2008, has not. Lending growth and economic perception are not ascertained by the alchemical whims of a Federal Reserve Chairman, but by the relationship between revenue into companies, relative to their debt. When debt is accumulated too much, to the point the ability to produce more revenue becomes too expensive, the proclivity towards a depression and deleveraging are near-certain, because market sentiment is not a central banking phenomenon, but a commercial bank one. Why? Because CBRs are supposed to be the basis for which banks create bank deposits (money in checking accounts) via lending. Commercial banks are the real money printers and they are not printing money.
It is very, very, very simple to understand this concept, but many people resent it because the basis of their entire worldview is built upon one axiom: gov’t bad, and all gov’t does ends up doing bad things. That’s just not the case. Gov’t bad? Yeah, sure, I agree. Gov’t induce inflation? No. Sorry, money isn’t just printed from a printer and sent to banks. This is not, and never has been, how money works, except maybe under certain communist systems? I’d have to check with my secretary on that one.
The dollar shortage around the world is plain to see, and so is the diminishing returns. This is a deflationary phenomenon, and like any other long decline in history, it will edge towards monetary deflation. Maybe prices will fluctuate like crazy. I don’t know because I’m not an all-knowing magical alchemist like many of you think J. Powell is. I can say for certain, however, that it is not a monetary phenomenon.
Wtvr bro it doesn’t matter
No yeah, if that’s what you want to say, then sure, by all means, I’m happy to take the long-run over the short and be right, but that’s not why I talk about this. The reason I talk about this is because the ends are utterly opposite. The free market absolutists, the Austrians, the bleeding heart libertarians, all believe that every issue originates from careless, idiotic, and usually malicious governments, and that if we just return to some system of wild west that this will all improve, but they’re just wrong. They don’t take into account any aspect of diminishing returns, and that Highs don’t and aren’t supposed to last forever. They reject every spiritual argument about their ultimate end and want to live in this bubble where nothing ever goes wrong under “small government” lol.
They will crash and burn if they ever have the opportunity to make decisions for other people, partly because one of the main tenets behind their mythos is every person being a free agent that can rule themselves and has no motivation to coerce or destroy.
My ultimate end is to recognize that economic lows are a sign of overleveraging and that system should break itself, or should be hastened to be broken. Maybe Russia will help with that? We shouldn’t live in this world where we make enemies with people who are really just there to be the shamanic priest class of the state. They do nothing, they are nothing, and we bestow them a generous amount of legitimacy when we recognize them as anything other than useless PhDs who are trying to make us buy stocks. Expectations-policy generators.
“Corruption, embezzlement, fraud, these are all characteristics which exist everywhere. It is regrettably the way human nature functions, whether we like it or not. What successful economies do is keep it to a minimum. No one has ever eliminated any of that stuff.”
Alan Greenspan