We Austrians Are Shills for the Bankers, Says Critic by Thomas E. Woods, Jr.

by Thomas E. Woods, Jr.

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So I’m minding my own business on Twitter – where you can follow me @ThomasEWoods, by the way – and some guy starts suggesting that the Austrian School economists are just shills and apologists for the bankers.


I restrained myself from asking which Austrian books and authors he had read, since I’m not inclined to pose questions to which I already know the answers. I noted to him that no one was more opposed to the bailouts than the Austrian economists, and that this failure to support rescues of financial institutions seems like odd behavior for shills and apologists for those same financial institutions.


I asked him if he thought the present banking system, one of the most regulated and controlled industries in the country, was a free-market one. He replied, “How is existing banking system diff than a gold backed currency issued by private banks? Isn’t that Austrian monetary utopia?” (He then said he favored the nationalization of the Fed – the Fed’s problem evidently being that it isn’t socialistic enough – and the issuance of money by the federal government directly.)


Well, for one thing, the Austrians simply describe the phenomena of money and banking, and leave it to individuals to draw out the implications of the analysis.


Money emerges on the market as the most highly marketable commodity. This is how society moves from barter to a money economy. People value the most saleable good not just for its use value but increasingly for its exchange value. In other words, gold – or whatever – is valued not just for its ornamental and industrial uses, but also because it can fetch you the goods you want. People want it, so if you can get it, you can acquire the things you want from them.


Irredeemable paper money could not possibly have emerged this way. It is not a saleable good. No one values pieces of paper with politicians’ faces on them, so they would not be the most marketable commodity in society.

Moreover, no one can engage in economic calculation using a paper money introduced ex nihilo by the state. With gold (or whatever the spontaneously chosen money commodity happens to be), people can recall the exchange ratios that existed under the latest stage of barter – one gold unit for ten hats, three dozen oranges, or 100 pencils. But with pieces of paper printed by the state and simply imposed on people, how can anyone know how many of them ought to fetch a hat, an orange, or a tomato? Another reason no one would spontaneously adopt this system.


The system my critic wishes to impose must be imposed via the police. It could never emerge voluntarily. He doesn’t see this as an indication that something might be wrong with it.... Finish reading:
We Austrians Are Shills for the Bankers, Says Critic by Thomas E. Woods, Jr.