Change won’t happen unless we the people demand it. It’s time to speak up and be heard. Contact your representatives, demonstrate and take to the street. Support HR 1207 and 833. Also let our VP Biden know he is after all on the Task Force for the Middle Class.

It won’t ever happen. There is simply too much money to be made with unsound money. Plus, Austrian econ is still a minority opinion, a very small minority. Keynesian econ still rules, and Keynesians say unsound money is best for the economy.

The best monetary policy we had since the creation of the Fed, I believe, was during Greespan’s early years. As Fed chair, he targeted the price of gold, attempting to keep it between $350 and $250. That policy led to some of the best real growth in the economy in many decades. Then he went senile.

OK. Nearly four decades since the federal government completed the transition (Nixon, 1971 if I’m not mistaken) from the gold standard for our money system. Let us assume, just for discussion, that the Austrian School guys are correct and that the backing of money by gold or some other reasonably suitable commodity is the lynchpin to sound monetary policy. What exactly is it that the Austrians suggest for making the transition back to better monetary policy? What exactly does the transition look like and where is the political impetus to make it happen?

I think I understand the “monetary system” as a layman participant and have some grounding in macro economics and monetary policy. There seems to be no effective leverage point in the system to realistically begin the transition, never mind the lack of political will amongst the people. I’d love to hear or read about any realistic plans to make the transition back to sound money.

To date, all I hear or read about are superficial assertions of the “correctness” of the sound money method; show me the way to implement it in the current political environment. I am happy to help make a go of it!

The Fed has no desire to see an end to the middle class, as it stands to reason that an end to the middle-class would mean the disappearance of the Feds great equalizer. In contrast, it would be to the Fed’s advantage if the middle class were to grow by the poor moving up and stepping into it. At which point there would be two economic populations the rich and the sponges, oops! I mean surviving. The Fed would then have the world’s strongest population of sponges; there I go again, to cushion the blow from its monetary policies that consistently favor the individually and corporate rich.

“If your enemy is making you stronger, then strengthen your enemy” – Florida Economist

I like the little anecdote:

‘I recently snuck up on the manager of the grocery store where I shop (he was marking up the prices of goods already on the shelves). Behind his back I remarked, “Hey, stop causing inflation.” ‘

…..the tragedy is in the shopkeeper’s reply, which began with a resigned ‘I know…..’. It demonstrates that even he has been bamboozled into believing that his price increases are the drivers of inflation.

sad sad sad.

@Mike – you don’t speak for all Austrian economists, so please don’t make sweeping generalizations like this.

Let’s take credit cards: Any payment the credit card company makes should be real money: ie 100% backed by gold or another commodity.

First, realize that a credit limit is not the same as a demand deposit – one is already part of the money supply, the other is not until it is used. This is clearly seen by people who suddenly have their credit limits reduced dramatically – could this happen if it was money in the first place (without said customer’s bank going bankrupt)?

Credit card companies under a 100% reserve backed system would have to make payments with real money. If they ran out of money, their clients could not use their balances.

This could be handled by always having enough real money on hand to meet the projected spending needs of their customers – when spending exceeded this projection, real borrowing (borrowing backed up by real savings, not demand deposits) from banks or individuals could supplement the extra demand for credit. In this way, credit card companies could exist in a system of 100% reserves.

Store credit is something else entirely. No new money is being created when a store decides to give an item first and accept payments down the road. They are taking on a promise of payment, not a form of money.

Another quote from above:

“Every dollar owed to employees is backed not by gold, but by employer IOU’s worth a dollar of gold. Austrians fail to see that there will always be various kinds of money that are not 100% backed by gold, but they continue to insist that banks hold 100% gold reserves for the money they issue. Then they try to wriggle out of their own inconsistency by claiming that credit card dollars, dollars owed by employers, etc., are not really money.”

Um… how are wages owed the exact same thing as money? They don’t become money until the employer pays their employees. Before that, it’s just a promise to pay.

As one credit card dollar is paid off, another is issued, so there is a permanent flaot of credit card dollars that are never actually paid off. These have as much claim to being called money as checking account dollars. Checking account dollars are often created by loan, and eventually paid off. But there is a permanent float of checking account dollars that are never paid off. Back in 1710, when paper money was a new thing, people claimed that they weren’t really money, until someone pointed out that there is also a permanent float of banknotes that are never really paid off.

You’ve hit on one of the many inconsistencies of the Austrian view of money.
Each credit card dollar is backed not with a dollar’s worth of gold, but with IOU’s worth one dollar of gold. Every dollar owed to employees is backed not by gold, but by employer IOU’s worth a dollar of gold. Austrians fail to see that there will always be various kinds of money that are not 100% backed by gold, but they continue to insist that banks hold 100% gold reserves for the money they issue. Then they try to wriggle out of their own inconsistency by claiming that credit card dollars, dollars owed by employers, etc., are not really money.

Would there also be a dollar of gold for every dollar on deposit in every bank? CD, money market funds, savings accounts? What would be the price of gold?

And a dollar of gold for every credit card balance carried forward? or is this included in the money in circulation?

If every employer paid every employee on the first of every month instead of every 2 weeks would this increase the total required cash in circulation and thus raise the price of gold? I can’t quite think this one through.

And yes, a Gold-standard central bank is better than a fiat central bank… but no central bank is better. Trusting Kings and politicians with that power is just asking to be robbed.

England went off the gold standard during WWI and the Napoleonic wars, BTW.

I’m not qualified to speak for Dr. Thornton, but the way I understand his article is that he has no qualms with someone making over $1 million/year.

His point is that the policies of the Federal Reserve are responsible for the transfer of wealth from the poor and middle class to the upper class of society. Wealth transfer is the inevitable consequence whenever an institution is granted a monopoly over currency issue.

Although the quote you cited could be expanded upon using misguided socialist themes in one of Obama’s speeches, I think Dr. Thornton’s Fellowship at the Mises Institute and PhD in economics will convince he’s no friend of socialism.