Daily Bell review: on banking, the nature of money, and dubious affiliations
Today, we introduce what may become a semi-regular feature here at the Daily Knell: the Daily Bell review, where we comment on the Austro-libertarian propaganda peddled by this well-known “alternative” website.
For our first “Daily Bell review”, we focus on a couple of articles posted in the last week on the Daily Bell, and especially on Detlev Schlichter’s interview and the ensuing comments and discussion that this interview generated.
‘In fact, what the modern system does is create huge flows of fiat money that end up building an entirely artificial system beholden to central bank facilities.’
Actually, 97% of our money supply is created as credit by commercial banks, but that won’t stop the Daily Bell and others from focusing exclusively on “central bank facilities”. In fact, the Daily Bell is rehashing the typical Austro-libertarian cliché: central banks are evil statist institutions creating untold amounts of money, while private banks are simply wonderful financial institutions that would function perfectly in a utopian “free market”, but whose operations are distorted by central banks. Basically, the Daily Bell and their friends forget, or rather do not want to admit, that the banking system is one.
‘A funny thing happened on a way to a “movement.” It was exposed. The alternative media, including The Daily Bell, pointed out the various contradictions, suspicious funding and general nonsensical nature of this manufactured effort. And that has helped sink it, or at least diminish it.’
Similarly, we at the Daily Knell have pointed out the “suspicious funding” and elite connections of most of the Austro-libertarian alternative media, including the Daily Bell. We have also demonstrated that the so-called “Ron Paul revolution” was a manufactured effort for the most part, even though it was branded as a “grassroots movement”.
Schlichter: “The Cobden Centre is an educational charity that promotes honest money, free trade and peace. […]There is no political agenda or political affiliation, which I like.”
No “political agenda”? Are you sure, Mr. Schlichter? Maybe you forgot to mention that the Cobden Centre is part of the Atlas Network, a family of inter-related neoliberal think-tanks that are all ultimately controlled by the Mont Pèlerin Society (see our analysis of the Mont Pèlerin Society). In fact, the Cobden Centre would fit perfectly in the left-hand lower corner of our Libertarian network chart.
Schlichter: “The supply of gold is relatively inelastic, largely outside political control (or anybody else’s control), and gold has a long global tradition as money.”
According to Schlichter, the supply of gold is “largely outside political control or anybody else’s control”.
However, here is what the Daily Bell elves themselves replied to a feedbacker elsewhere:
‘But this is a statement otherwise of absolute lunacy: “Commodity (or quasi-commodity) money has a predetermined supply, that cannot be altered arbitrarily by anyone.” As Rothbard as pointed out, the circulating supply of gold (and silver) – the only supply that counts within the context of monetary utility – can be affected by hoarding and dis-hoarding deponent to value. Others have made the same argument regarding the price sensitivity of mining.’
So who is right, Schlichter or the Bell elves? This is a crucial issue, as one of the purported advantages of commodity money, according to some Austrians, is that its supply cannot be controlled arbitrarily. Austrians can’t have it both ways and suggest that gold is outside political control when it suits them, and then elsewhere claim that this is a statement “of absolute lunacy”.
It is also important to ask ourselves if it is better to have the money supply controlled by gold miners and entities hoarding large quantities of gold (including elite familial dynasties and, in spite of the Bell’s claims, central bank vaults) rather than, wait for it… central banks controlled by the same elite familial dynasties? Granted, it may not be a pure monopoly in the first case, but it would not take long for the Money Power to have a complete corner on gold. Does this sound like a true alternative or more like another phony elite dialectic?
Although the Bell recognizes that Rothschild, Rockefeller, and their allies control the central banks, it disputes the claim that the Rothschild dynasty controls the world’s gold. But the Bell elves, who collaborated with Rothschild associate Lord Rees-Mogg, should know that Rothschild fixed the gold price until 2004 and is likely still in charge behind the scenes.
Schlichter: ‘Injections of new money are always disruptive.’
Schlichter (in response to another question): ‘A growing economy that uses an unchanging quantity of a monetary asset (let’s say a fixed supply of gold) as money will probably experience moderate secular deflation, that’s all, and it is no problem.’
This is the typical Austrian position: a fixed money supply is preferable, even with an expanding population and growing economy. What this means is that Austrians are in favor of a currency whose purchasing power is increasing or at best stable, but never decreasing. This is very favorable to rentiers, moneylenders, and those sitting on large amounts of gold, but not for debtors or for the majority of the workers.
In fact, Austrianism is the perfect economic school for lenders: 1) they want a hard, commodity-based currency (which is why they would prefer the “means of exchange” to be an “asset”), 2) they accept and justify usury and reject as “cranks” all theorists and schools that denounce interest, and 3) they don’t mind deflation at all (Schlichter is quite explicit about this) but they hate inflation as if it’s the worst possible thing that could happen to mankind.
Schlichter: ‘This whole excitement about the anthropologist David Graeber and the idea that he dethroned Adam Smith and, one assumes, by extension all of modern monetary theory is not only nonsense, it provides a classic example of how, without proper theory you misinterpret historical facts. I may not be an anthropologist but David Graeber is certainly no economist. […]So even if the state invented money, the benefits of money accrue directly to everybody who uses it – to this day.’
Clearly, Schlichter is quite uncomfortable with the research of David Graeber and other advocates of the “Credit theory of money”. Some readers may find this puzzling: after all, why should a contemporary Austrian economist worry about some historical findings?
There is an interesting subtext here: Austrians rely heavily on their claims that money evolved out of barter, and that commodity-based forms of money were chosen by the “free market”. Now that Graeber and others have debunked this theory and shown that money likely appeared as a statist (gasp!) institution, Austrians are deeply troubled as the historical credibility of their narrative is thrown into question.
As an aside, given that Ludwig von Mises got his degree in law, Schlichter’s dismissal of Graeber’s economic theories on the basis of his training as an anthropologist implies a dubious double standard. More importantly, since Austrian economists reject the empirical reductionist methodology, as well as any attempts to use mathematical models to quantify economic phenomena, an anthropological approach does not seem so difficult to reconcile with praxeology, catallactics, and other concepts developed by the author of Human Action.
The Schlichter interview also generated a vigorous discussion. We will address some interesting comments by the Daily Bell elves:
Daily Bell (in reply to a feedbacker): ‘We are simply applying an Austrian analysis to Ms. Kennedy’s critique. As she and her husband are long-term UN affiliates and deeply green we tend to distrust her anyway. And Austrian economics tells us it is very difficult if not impossible to quantify an economy with exactitude.’
Margrit Kennedy’s conclusions regarding interest as a primary wealth transfer mechanism are based on the work of German economist Helmut Creutz, whose book The Money Syndrome is now available in English. Now, Mr. Creutz is also “green”, so that is probably enough for the Bell to “distrust” him. However, we believe that, “green” or not, Creutz’s work should be judged on its own merits. In any case, if affiliations are a sufficient criterion to “distrust” someone, one would be well-advised to “distrust” most of the Austro-libertarian propaganda, as our regular readers surely know (see below).
Daily Bell (in reply to a feedbacker): ‘If you can find ANY active, FORMAL modern endorsement of the power elite of a legitimate Austrian anarcho-capitalist, provide it on these pages and we’ll treat it with the seriousness it deserves.’
Oooh, that’s a difficult one… How about the Rockefeller Foundation being Mises’s main sponsor for nineteen years (1926 to 1945)? How about elite member Lord William Rees-Mogg founding the libertarian propaganda behemoth Agora? How about Council on Foreign Relations co-founder Walter Lippmann establishing the neoliberal agenda in 1937 together with Mises, Friedrich von Hayek, and the director of the Bank of International Settlements? Or how about well-connected Jesuit James Sadowsky, the teacher of future “Black Pope” Peter-Hans Kolvenbach and a member of the Mont Pèlerin Society, the grey eminence behind Murray Rothbard and Thomas Woods?
Finally, the discussion included a somewhat surprising analysis of the Gesell-inspired “Wörgl experiment” by blogger (and Austrian sympathizer) bionic mosquito. But given that bionic mosquito has now written two articles on the Wörgl experiment, we will comment on his efforts in a separate article.
Schlichter is basically regurgitating the archetypal nonsense of Austrianism. He can be forgiven: he does not believe in “conspiratorial history”, meaning he’s completely in the dark and using economics as a nice mindgame, instead of a tool to understand reality. Hence his blindness to the obvious benefits of deflation to the monied classes. Like many Austro-libertarians, Schlichter and the Daily Bell focus almost exclusively on the public/private dichotomy, with the State being the source of all evil. They essentially ignore class differences and the fact that the aims and goals of the monied classes, comprising the rentiers, moneylenders, and “old money” families, are often in direct opposition to those of the working population.
Let us be clear: Austrianism, with its insistence on commodity money, its justification of usury, its praise of deflation, and its connection to globalist and transnational interests, is the economic theory of choice of the wealthy. No wonder that David Rockefeller considers himself “a follower of Austrian economics”. But by ignoring “conspirational history” or by reducing everything to the public/private dichotomy, Austro-libertarian propagandists try to pull the wool over our eyes and convince us that their ideology is one of “freedom” and “liberty”. It is no coincidence that the Daily Bell is becoming quicker than ever in dismissing competing viewpoints solely on the basis of their affiliations, while trying to sweep under the carpet the obvious elite connections of many, if not most, Austro-libertarian writers.