The Core Tenets of The Austrian School of Economics

By: Gordon Long | Sat, Nov 7, 2015
Print Email
Robert Blumen

FRA Co-Founder, Gordon T. Long interviewed Robert Blumen, noted follower of the Austrian School of Economics, on the Core Tenets of the Austrian School and the Key Elements for investing in an Era of Financial Repression.


Core Tenets

1. All economic understanding must be based on individual action
2. Subjective valuation drives prices
3. Marginal utility
4. Entrepreneurship
5. Time preference as the basis of interest and profit
6. The role of capital in production
7. Savings is required to create capital
8. Price Theory: - prices determine costs, not the other way around
9. Money as an evolutionary solution the problem of barter
10. Precious metals as an evolutionary solution to the choice of the best money
11. The purchasing power of money as a price that balances money supply and money demand
12. Non-neutrality of money (Cantillon effects)
13. The importance of money prices
14. Money is a good, and like any good, money does not have constant purchasing power. Stable money does not mean stable prices.
15. Mises' "critique of intervention": one thing leads to another
16. The "impossibility" of socialism (central planning)
17. Macro-Economics must be founded on micro economics
18. Macro-economics is based on Say's law.
19. The rejection of the Keynesian revolution in macro.
20. Money and money substitutes (bank deposits, bank notes).
21. Banking with 100% gold reserves
22. Fractional reserve banking. The Austrian critique of fractional reserve banking
23. Central banking. The Austrian critique of central banking.

24. Austrian business cycle theory - the theory of unsustainable booms drive by fractional reserve banking and central banking.

a. Inflation is not just rising prices, it distorts production as well.
b. Distortions are unsustainable
c. The "crack up bust" as one possible ending to the unsustainable boom

25. Deflation:

a. Deflation has been demonized by the Keynesians.
b. Natural slow deflation is the result of increasing production.
c. Deflation is the correction process from inflation.
d. Deflation is not a mouse trap that the economy gets stuck in and cannot escape.

26. An Austrian understanding of recessions and depressions through Say's Law, entrepreneurship, and market price theory


Key Elements in an Era of Financial Repression

1. Entrepreneurs create wealth by employing scarce resources in production within the context of the price system.

This requires real markets with real prices.

2. Central planning can not replace market prices.

3. Central bankers have it backwards. Counter-cyclical policies create the business cycle.

4. Interest is not a number you can set to anything you like for "policy" reasons. It is a price and it cannot be zero.

5. Attempting to keep interest rates at zero creates unsustainable distortions in the productive part of the economy.

6. Something that is unsustainable must stop - at some point.

7. In the end there are two choices - market prices or destruction of the monetary system

8. Investors think in terms of money, but money itself is unstable.

9. The path from fake prices to real prices will be difficult.

 


 

Gordon Long

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

Copyright © 2010-2017 Gordon T. Long

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com