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Analyzing Austrian economics memes: Who benefits from the anarcho-capitalist utopia?

September 24, 2012

Most alternative media outlets promoting Austrian economics are fond of laying all the blame for our economic woes at the feet of politicians and the government. To be sure, Austrian sympathizers are correct in pointing out that governments have become, in most countries, bloated and mismanaged institutions, with labyrinthine rules and an addiction to red tape. However, what is suspicious is that Austrian solutions always end up somehow benefiting private banks and “hard money” proponents instead of the general population.

Let us identify some of the typical memes disseminated by Austrian outlets, through an analysis of Daily Bell’s founder Anthony Wile’s sales pitch for The Foundation for the Advancement of Free Market Thinking (FAFMT). Keeping in mind that Wile and several of his collaborators have worked and still work as consultants for large international banks and other financial concerns, we will apply the well-known cui bono principle to our analysis: who would really benefit from all the reforms and proposals advocated by Wile’s Foundation?

–          Politicians all over the world spend with abandon, burdening their citizens with confiscatory taxes, insurmountable debts and economic ruin’

True, excessive governmental spending and heavy taxation are unjustified.  However, when Wile talks about “insurmountable debts”, he fails to mention that governments would not need to pay interest if they did not borrow interest-bearing fiat currencies created from nothing. And interest charges are a major part of the burden mentioned by Wile: in the United States alone, interest charges correspond to nearly half of the $11 trillion increase in public debt projected over the next decade.

It stands to reason that, in the absence of interest charges, State deficits would be significantly reduced. Moreover, a larger share of the governmental spending could be directed towards useful programs, instead of paying banksters for the privilege of conjuring money out of thin air. In spite of the Daily Bell’s constant clamoring, there is nothing remotely statist or coercive about noticing this fact: pointing out the ludicrousness of the current monetary system does not mean that one endorses oppressive governments. On the other hand, a failure to notice the longstanding usurious usurpation is almost certainly indicative of a hidden agenda.

–          Central bankers shamelessly manipulate and inflate their currencies creating financial bubbles that ultimately burst, leaving shattered lives and businesses in their wake…’

The Daily Bell is only one of numerous alternative media outlets that constantly repeat this assertion. Although the concept of central banking is justifiably open to criticism, this Austrian meme is, once more, a half-truth at best. Indeed, according to recent estimates, 97% of the money supply is created by commercial banks. More strikingly, we learn in Congressman Wright Patman’s Primer on Money that since the 19th century, while the United States were still under the Austrians’ beloved gold standard, checkbook money (credit) created by commercial banks in the form of loans has replaced notes as the most important form of money.

Without minimizing the role of central banks, the reader would be justified in asking why is Anthony Wile heaping so much scorn on central bankers, all the while completely ignoring commercial banks? As a rule, Austrian sympathizers are very voluble on central banks, but are generally remarkably silent on the excesses of commercial banking, and seem unable to understand that the banking system is one.

–           ‘The U.S. Federal Reserve and other central banks must be abolished and replaced with currencies 100% backed by gold and/or other commodities…’

Why do we need currencies to be backed by gold and/or commodities? The Daily Bell has never really explained the rationale behind this, except to claim that gold-backed currencies are more “honest”. Whereas physical gold may arguably be more honest in the sense that it cannot be inflated so easily, the same cannot be said for “gold-backed” currencies for which “paper gold” can be printed far in excess of the amount of physical gold backing the currencies. After all, this is exactly why this practice became very popular with goldsmiths.

From Modern Money Mechanics, published by the Federal Reserve Bank of Chicago:

It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their “deposit receipts” whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.

 Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment.

 There you have it: the original reason why bankers (and modern Austrians) always favored “gold-backed” currencies over physical gold was because it enabled them to develop fractional banking.

More importantly, we should keep in mind that following Wile’s suggestion of abolishing central banks and replacing fiat currencies with gold-backed currencies amounts to transferring the control of the money supply from central banks to those who own gold mines and large hoards of gold. This is why “hard money” entrepreneurs and their Libertarian friends tirelessly promote the concept. But is this really advantageous for the general population, even in the absence of a currency monopoly? Beware of the Austrian ‘Free Market for Currencies’ Hoax!

–          Welfare and other redistribution schemes need to be abolished and government spending rolled back at all levels by 60% to 90%…’

Now the true colors of the anarcho-capitalists shine in all their brazen conceit. In their utopian world, private banks should hold most, if not all, of the power to create money: governments would be denied any control over the currency supply and their spending would be severely restricted. It is not difficult to imagine the control over the economy that private bankers would acquire in a few years in such a world. Austrians and assorted anarcho-capitalists may rail against governmental excesses, but it is naïve to think that private bankers will have the best interests of the population at heart.

Speaking of interest, it is worth noticing once again how Anthony Wile and his Austrian friends utterly condemn any form of “welfare and other redistribution schemes” when it comes from the government, but completely endorse another, much more insidious “redistribution scheme”, namely the collection of interest charges by banks. A wealth transfer of trillions for the mere service of creating money at the stroke of a pen. This is another reason why the “commodity backing” is a popular option among the Austrian crowd: by promoting the use a commodity to represent symbolic wealth, Austrians hope to be able to justify interest through their worn-out, and already debunked, time-preference theory. But this is merely a make-believe attempt to give some credibility to this monstrous wealth transfer that is enslaving most of the population.

Not only is interest on credit fraudulently justified through the time-preference theory, but anti-interest activists are also regularly denounced as evil UN stooges conducting “backdoor government psyops”

–          Government regulations – including sacred cows such as anti-trust laws, minimum wage laws and food and drug laws – must be repealed.

As pointed out above, we do agree that excessive government regulations are a burden. Even worse, many of these regulations actually serve international cartels, such as the pharmaceutical industry, instead of protecting the citizen. Clearly, the current regulatory system does not serve its intended function.

Having said that, do we really want a world without laws? Libertarians dream of a return to the law of the jungle, with a Far West-type “private justice”. Apparently, the only things that the government should protect and enforce are property rights and, one would assume, the payment of interest charges to private banks. The priorities of the anarcho-capitalists are clear: nothing should stand in the way of private cartels (abolition of anti-trust laws), any type of regulations and laws that would slow down or impede business must be abolished forthwith, and finally any type of protection or entitlement for the average citizen shall be eliminated. Does this sound like an ideal society for human beings, or more like a utopia designed with transnational corporations in mind?


What kind of “freedom” is it that these “free-market” thinkers are advocating? We must be careful not to confuse true liberty with the lack of rules of the Libertarian utopia, for this is more akin to financial servitude, if not outright slavery, than to any kind of emancipation. The truth is that it takes only a little bit of scratching off the veneer of respectability and listening past the “freedom” buzzwords to see the ever-present Satanic core that underlies and informs this ideology.


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