• 6 hours The Crushing Reality Of Poverty In America
  • 9 hours Should You Buy Into The World’s Largest IPO?
  • 12 hours The Infinite Possibilities Of Cosmic Energy
  • 1 day Analysts Link Walking To Economic Growth
  • 2 days Will Japan Turn Its Back On The Aramco IPO?
  • 3 days Global Debt Soars To $188 Trillion
  • 3 days The World's Largest Gold Miners Are Getting Creative
  • 4 days Twitter: The Saudi Spy Tool To Bring Down Dissidents
  • 5 days Broad Commodity Funds Don’t Give Enough Exposure To Gold
  • 5 days Here We Go Again: Another Giant Telecoms Mega-Merger
  • 5 days World's Largest Gold Miner Sees Profits Triple
  • 6 days Microsoft Japan Trials 4 Day Work Weeks, Productivity Soars By 40%
  • 6 days Hedge Funds Lose $4 Billion In Four Days As California Wildfires Rage On
  • 7 days New Viral App May Be A National Security Threat In Disguise
  • 7 days China's $10 Trillion Space Play
  • 8 days Human Energy: Debunking The Matrix
  • 8 days Cannabis Has Become A Real Estate Selling Point
  • 9 days The Gold Stock Boom Is Just Getting Started
  • 10 days Fading Trade War Hope Leaves Oil Directionless
  • 11 days Millennials Deal Death Blow To America’s Biggest Breweries
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Gordon Long

Gordon Long

Mr. Long is a former senior group executive with IBM & Motorola, a principle in a high tech public start-up and founder of a private…

Contact Author

  1. Home
  2. Markets
  3. Other

The Core Tenets of The Austrian School of Economics

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.

 

Back to homepage

Leave a comment

Leave a comment