There are a lot of living Austrians, from Kirzner to Garrison and Horwitz. Why don’t you read them?
Actually I couldn’t care less whether somebody is an ‘austrian’ or not. I’m interested in freedom, not in the petty squabbles of ‘intellectuals’.
As far as frb goes, some people get it right and some people don’t. And some people obfuscate the issue on purpose.
Key people in the austrian school, like Mises and (I think) to a lesser degree Hayek were critical of frb/fiduciary media/etc.
But of course other people who call themselves ‘austrians’ can say different things. So what ?
See, liberalism was once the party of freedom. Now it is not. But it is still called ‘liberalism’…
Why would I start with the most recent stuff? That doesn’t make any sense at all; it’s like trying to learn how to use anti-derivatives before you learn addition. In fact, I’m planning on reading Bohm-Bawerk next, or maybe even Malthus or Tooke. Economics is not a hard science, you can’t just hop right in. There’s a reason why both Keynes and Hayek started with the Wicksellian framework but came to two entirely different conclusions.
Here is Salerno:
AEN: On another controversial area, did Mises favor 100 percent reserve banking or not?
SALERNO: The Review has published a paper by Larry White and George Selgin arguing he did not, and they make a credible case. But Ive argued the other view. Looking at the whole of his writings, we see that the very reason Mises favored free banking was mainly to suppress the issuance of fiduciary media, that is, bank notes and deposits not covered by 100 percent cash reserves.
In the monetary theory section of The Theory of Money and Credit, Mises lists the benefits of fiduciary media. Then in a later chapter on the business cycle, he demonstrates that fiduciary media are a necessary and sufficient cause of the cycle. When Mises finally addresses “basic questions” of future policy, he calls for the suppression of all further creation of fiduciary media, if not an outright ban on fractional-reserves. Even the early Mises clearly thought that the disadvantages of fiduciary media outweighed their advantages.
AEN: A more careful reading, then, should settle the issue?
SALERNO: A careful and wide reading. Mises toughened his stance even more between 1924 and 1940, with the publication of Nationalökonomie, the German language forerunner of Human Action. There he is conspicuously silent on the benefits he had once attributed to the creation of fiduciary media. Instead, he concludes that the only way to eliminate business cycles and inflation is to “suppress all further issue of fiduciary media.” Only this, he says, will create the necessary safeguards. Finally, in his 1952 epilogue to The Theory of Money and Credit, he offers a detailed plan for a 100 percent backing for future increases in bank notes and deposits.
Also, it is important to recognize that Mises didn’t think free banking would evolve toward a small reserve ratio of gold to liabilities. With real competition, Mises predicted, evolution would be in the opposite direction, toward 100 percent reserves, as bankers swiftly learned that any increase in fiduciary media would leave them open to bank runs and insolvency. In the balance, then, he was more of a Rothbardian than a Whiteian on the fractional-reserve question.
AEN: What are your strongest criticisms of the free banking/fractional-reserve position?
SALERNO: That any increase in the supply of fiduciary media brings about the business cycle. The free bankers have gone to great lengths to get around this point.
Also, the contagion effect–the tendency of bank runs to spread–has doomed fractional-reserve systems throughout history. As bank after bank falls, it creates the illusion that central banking is necessary to correct for a supposed “market failure.” But under a 100 percent reserve system, there is no instability and no contagion effect. Bank runs have no macroeconomic consequences.
AEN: But we have fractional reserves now and the system is not plagued by runs.
SALERNO: Today’s fractional reserves are a fiction of accounting, and don’t exist in fact. Because of deposit insurance and the Feds power to create new money, the public correctly perceives that all deposits are guaranteed at face value. Deposits are in fact risk-free claims to currency. That means we effectively live under 100 percent reserves. If we did away with deposit insurance, we’d be better off in the long run, but the present system would quickly collapse.
That’s true. But they really don’t have a solid deposit insurance system. The Cayman Islands has none whatsoever.
So if you don’t mind answering the question and not simply equivocating central bank with deposit insurance…
Well, 100% reserves of paper…
I think I’ve said this about 6 times already. I just finished the book!
I have no problem with admitting that there were two different versions of Mises and that I think the Mises that wrote The Theory of Money and Credit was better than the Mises of late. On this point, I’m simply going to remain favoring Mises for his earlier works and ignore his Human Action.
As far as Salerno’s criticisms of fractional reserves, they seem devoid of empiricism and it’s actually quite odd for him to argue that there really isn’t any fractional reserve system today if he wants to simultaneously argue that fractional reserves are the cause of business cycles.
I would ask him why there are no bank runs in the Cayman Islands or in Andorra.
they arent in competition with sound money?
fact : frb is a fraud and ‘inefficient’ regardless of Mises managing to grasp that or not.
fact : The views presented by Mises in HA are rather sensible regardless of your irrelevant opinions about them.
Banks extend ‘credit’ which is not backed by savings. It can’t get any more obvious than that…IF you know the basics.
My point was that it has been refuted in subsequent development by later Austrians.
false
True, definately that was my point.
are we going to need to introduce on the forum now…
But that’s the central premise of ABCT. Can you explain why Mises, Hayek, Lachmann were wrong?
There money is sound. It’s efficiently lended and received to give people back money in interest rates.
Anyways, there doesn’t need to be a gold dollar for there to be runs on the bank. Yet there aren’t… Strange.
But they must be… For then the banks would be fractional reserves. According to Salerno, they aren’t.
You can scream and kick about how fractional reserves are frauded all you like, it doesn’t make it so - and it certainly doesn’t sell your cause to actual economists.
And Hayek and early Mises did have very sensible ideas. Rothbard, not so much - at least on monetary economics.
Sorry, I don’t know what your pronouns are supposed to replace. “But they must be” - What are ‘they’ ?
That doesn’t even make sense does it ? “The banks would be fractional reserves” ? What ?