We explore several unaddressed issues in George Selgin’s (1988) claim that the best monetary syst... more We explore several unaddressed issues in George Selgin’s (1988) claim that the best monetary system to maintain monetary equilibrium is a fractional reserve free banking one. The claim that adverse clearing balances would limit credit expansion in a fractional reserve free banking system is more troublesome than previously reckoned. Both lengthened clearing periods and interbank agreements render credit expansion unrestrained. “The theory of free banking” confuses increases in money held with increases in real savings, resulting in exacerbated economic cycles when fiduciary media is issued equally under both scenarios. Most troubling, these economic cycles generated by the free banking system breed an incentive to create a coordinating agent serving as a lender of last resort. The central bank is demonstrated to be a natural, if not unavoidable outgrowth of the fractional reserve free banking system.
Much has been written about the quantity of money and its effects on money’s purchasing power. Ho... more Much has been written about the quantity of money and its effects on money’s purchasing power. However, changes in the quality of money have been widely neglected. This paper analyzes changes in the quality of money and its influence on the purchasing power of money.
Balance sheet analysis is standard practice for assessing private sector businesses. No such anal... more Balance sheet analysis is standard practice for assessing private sector businesses. No such analysis has been applied to central banks previously. We provide the theoretical foundation and rationale for such analysis. This foundation is rooted in the quality theory of money which places special emphasis on subjective factors as a complement to the more conventional quantitative factors that determine money’s purchasing power. The balance sheet of a central bank reveals the quality of the assets backing a currency and serves as an indicator of future monetary policy. Several accounting ratios proxy the quality of money in terms of assets held by the central bank, alluding to potential shifts in its purchasing power. These ratios can also be used to estimate the scope of future monetary policies that are feasible by the central bank.
The best that mankind ever knew: Freedom and life are earned by those alone Who conquer them each... more The best that mankind ever knew: Freedom and life are earned by those alone Who conquer them each day anew. Johann Wolfgang von Goethe 1 hhhhhh ACCORDING TO MANY ECONOMISTS we need the state to provide public goods. 2 The assertion seems to be so crystal-clear that it is not even worth discussion in the mainstream. One typical and popular example of public goods in Germany is the case of dikes or levees. In Vahlens Kompendium der Wirtschaftstheorie und Wirtschaftspolitik (2003), maybe the most widely used German economics textbook,
ABSTRACT: Much has been written about the quantity of money and its effects on money’s purchasing... more ABSTRACT: Much has been written about the quantity of money and its effects on money’s purchasing power. However, changes in the quality of money have been widely neglected. This paper analyzes changes in the quality of money and its influence on the purchasing power of money. I.
Journal of Social, Political, and Economic Studies, 2014
IntroductionInvestors typically view central banks as essential institutions for the stable funct... more IntroductionInvestors typically view central banks as essential institutions for the stable functioning of financial markets. Governments entrust them with the role of monetary policy and allow them discretion to fine-tune the economy to provide either price or economic stability.They traditionally use two tools to achieve these goals. The first are monetary policy tools at the central bank's disposal through its function as the primary supplier of money in an economy. In this regard, there are three operations that allow the central bank to enact monetary policy: 1) banking system reserve requirements, 2) direct lending through the discount window, and 3) asset purchases or sales that alter the money supply.The second area of policy tools involves measures the central bank can use to serve in its function as a lender of last resort. Institutions that are dangerously nearing insolvency and may cause contagion throughout the economy may be assisted directly by central bank fundin...
It is a great pleasure for me to present this book by my colleague Philipp Bagus, one of my most ... more It is a great pleasure for me to present this book by my colleague Philipp Bagus, one of my most brilliant and promising students. e book is extremely timely and shows how the interventionist setup of the European Monetary system has led to disaster. e current sovereign debt crisis is the direct result of credit expansion by the European banking system. In the early s, credit was expanded especially in the periphery of the European Monetary Union such as in Ireland, Greece, Portugal, and Spain. Interest rates were reduced substantially by credit expansion coupled with a fall both in inflationary expectations and risk premiums. e sharp fall in inflationary expectations was caused by the prestige of the newly created European Central Bank as a copy of the Bundesbank. Risk premiums were reduced artificially due to the expected support by stronger nations. e result was an artificial boom. Asset price bubbles such as a housing bubble in Spain developed. e newly created money was...
This paper analyses the COVID-19 crisis and its management from the perspective of Austrian Econo... more This paper analyses the COVID-19 crisis and its management from the perspective of Austrian Economics. The attention focuses on the State’s coercive intervention according to the principles of political economy, capital theory and Austrian business economic cycles. The paper examines the specific case of massive intervention by governments and, especially, central banks in monetary and financial markets to deal with the pandemic trying to mitigate its negative effects. The paper offers a critical analysis of government tax policies and the increase in public spending, considered as the panacea and universal remedy for the social troubles. This review concludes with a proposal to change the mainstream paradigm, thereby proposing a more sustainable and wellbeing economics.
The “European Green Deal” has ambitious aims, such as net-zero greenhouse gas emissions by 2050. ... more The “European Green Deal” has ambitious aims, such as net-zero greenhouse gas emissions by 2050. While the European Union aims to make its energies greener, Russia pursues power-goals based on its status as a geo-energy superpower. A successful “European Green Deal” would have the up-to-now underestimated geopolitical advantage of making the European Union less dependent on Russian hydrocarbons. In this article, we illustrate Russian power-politics and its geopolitical implications by analyzing the illustrative case of the North Caucasus, which has been traditionally a strategic region for Russia. The present article describes and analyses the impact of Russian intervention in the North Caucasian secessionist conflict since 1991 and its importance in terms of natural resources, especially hydrocarbons. The geopolitical power secured by Russia in the North Caucasian conflict has important implications for European Union’s energy supply security and could be regarded as a strong argum...
International Journal of Environmental Research and Public Health, 2021
In this article, we aim to develop a political economy of mass hysteria. Using the background of ... more In this article, we aim to develop a political economy of mass hysteria. Using the background of COVID-19, we study past mass hysteria. Negative information which is spread through mass media repetitively can affect public health negatively in the form of nocebo effects and mass hysteria. We argue that mass and digital media in connection with the state may have had adverse consequences during the COVID-19 crisis. The resulting collective hysteria may have contributed to policy errors by governments not in line with health recommendations. While mass hysteria can occur in societies with a minimal state, we show that there exist certain self-corrective mechanisms and limits to the harm inflicted, such as sacrosanct private property rights. However, mass hysteria can be exacerbated and self-reinforcing when the negative information comes from an authoritative source, when the media are politicized, and social networks make the negative information omnipresent. We conclude that the neg...
This critical and thought-provoking book explores the causes and consequences of Europe’s failed ... more This critical and thought-provoking book explores the causes and consequences of Europe’s failed political and economic institutions. Europe’s recession has created new challenges as market turmoil has shaken the foundations of the twin pillars of the new drive for European integration – political and monetary unions. This book critically assesses the patchwork solutions continually offered to hold the troubled unions together. Failed political policies, from the prodigious ‘Common Agricultural Policy’ to ever more common fiscal stimulus packages, are shown to have bred less than stellar results in the past, and to have devastating implications for future European growth. The contributors outline the manner through which European monetary union has subsidized and continues to exacerbate the burgeoning debt crisis. Most strikingly, the interplay between Europe’s political and economic realms is exposed as the boondoggle it is, with increasingly bureaucratic institutions plaguing the continent and endangering future potential.
Gregor Hochreiter, Mag. M. Sc. (Wien) David Howden (Madrid) Guido Hülsmann, Prof. Dr. (d'Ang... more Gregor Hochreiter, Mag. M. Sc. (Wien) David Howden (Madrid) Guido Hülsmann, Prof. Dr. (d'Angers) Holger Koch, Diplom-Volkswirt (Bayreuth) Michael Lorenz, Dr. habil (Chemnitz) Peter Oberender, Prof. Dr. Dr. hc (Bayreuth) Michael von Prollius, Dr. (Berlin) Eugen Maria ...
Authors in the Austrian tradition have made the credit expansion of a fractional reserve banking ... more Authors in the Austrian tradition have made the credit expansion of a fractional reserve banking system as the prime cause of business cycles. Authors such as Selgin (1988) and White (1999) have argued that a solution to this problem would be a free banking system. They maintain that the competition between banks would limit the credit expansion effectively. Other authors such as Rothbard (1991) and Huerta de Soto (2006) have gone further and advocated a 100 percent reserve banking system ruling out credit expansion altogether. In this article it is argued that a 100 percent reserve system can still bring about business cycles through excessive maturity mismatching between deposits and loans.
We explore several unaddressed issues in George Selgin’s (1988) claim that the best monetary syst... more We explore several unaddressed issues in George Selgin’s (1988) claim that the best monetary system to maintain monetary equilibrium is a fractional reserve free banking one. The claim that adverse clearing balances would limit credit expansion in a fractional reserve free banking system is more troublesome than previously reckoned. Both lengthened clearing periods and interbank agreements render credit expansion unrestrained. “The theory of free banking” confuses increases in money held with increases in real savings, resulting in exacerbated economic cycles when fiduciary media is issued equally under both scenarios. Most troubling, these economic cycles generated by the free banking system breed an incentive to create a coordinating agent serving as a lender of last resort. The central bank is demonstrated to be a natural, if not unavoidable outgrowth of the fractional reserve free banking system.
Much has been written about the quantity of money and its effects on money’s purchasing power. Ho... more Much has been written about the quantity of money and its effects on money’s purchasing power. However, changes in the quality of money have been widely neglected. This paper analyzes changes in the quality of money and its influence on the purchasing power of money.
Balance sheet analysis is standard practice for assessing private sector businesses. No such anal... more Balance sheet analysis is standard practice for assessing private sector businesses. No such analysis has been applied to central banks previously. We provide the theoretical foundation and rationale for such analysis. This foundation is rooted in the quality theory of money which places special emphasis on subjective factors as a complement to the more conventional quantitative factors that determine money’s purchasing power. The balance sheet of a central bank reveals the quality of the assets backing a currency and serves as an indicator of future monetary policy. Several accounting ratios proxy the quality of money in terms of assets held by the central bank, alluding to potential shifts in its purchasing power. These ratios can also be used to estimate the scope of future monetary policies that are feasible by the central bank.
The best that mankind ever knew: Freedom and life are earned by those alone Who conquer them each... more The best that mankind ever knew: Freedom and life are earned by those alone Who conquer them each day anew. Johann Wolfgang von Goethe 1 hhhhhh ACCORDING TO MANY ECONOMISTS we need the state to provide public goods. 2 The assertion seems to be so crystal-clear that it is not even worth discussion in the mainstream. One typical and popular example of public goods in Germany is the case of dikes or levees. In Vahlens Kompendium der Wirtschaftstheorie und Wirtschaftspolitik (2003), maybe the most widely used German economics textbook,
ABSTRACT: Much has been written about the quantity of money and its effects on money’s purchasing... more ABSTRACT: Much has been written about the quantity of money and its effects on money’s purchasing power. However, changes in the quality of money have been widely neglected. This paper analyzes changes in the quality of money and its influence on the purchasing power of money. I.
Journal of Social, Political, and Economic Studies, 2014
IntroductionInvestors typically view central banks as essential institutions for the stable funct... more IntroductionInvestors typically view central banks as essential institutions for the stable functioning of financial markets. Governments entrust them with the role of monetary policy and allow them discretion to fine-tune the economy to provide either price or economic stability.They traditionally use two tools to achieve these goals. The first are monetary policy tools at the central bank's disposal through its function as the primary supplier of money in an economy. In this regard, there are three operations that allow the central bank to enact monetary policy: 1) banking system reserve requirements, 2) direct lending through the discount window, and 3) asset purchases or sales that alter the money supply.The second area of policy tools involves measures the central bank can use to serve in its function as a lender of last resort. Institutions that are dangerously nearing insolvency and may cause contagion throughout the economy may be assisted directly by central bank fundin...
It is a great pleasure for me to present this book by my colleague Philipp Bagus, one of my most ... more It is a great pleasure for me to present this book by my colleague Philipp Bagus, one of my most brilliant and promising students. e book is extremely timely and shows how the interventionist setup of the European Monetary system has led to disaster. e current sovereign debt crisis is the direct result of credit expansion by the European banking system. In the early s, credit was expanded especially in the periphery of the European Monetary Union such as in Ireland, Greece, Portugal, and Spain. Interest rates were reduced substantially by credit expansion coupled with a fall both in inflationary expectations and risk premiums. e sharp fall in inflationary expectations was caused by the prestige of the newly created European Central Bank as a copy of the Bundesbank. Risk premiums were reduced artificially due to the expected support by stronger nations. e result was an artificial boom. Asset price bubbles such as a housing bubble in Spain developed. e newly created money was...
This paper analyses the COVID-19 crisis and its management from the perspective of Austrian Econo... more This paper analyses the COVID-19 crisis and its management from the perspective of Austrian Economics. The attention focuses on the State’s coercive intervention according to the principles of political economy, capital theory and Austrian business economic cycles. The paper examines the specific case of massive intervention by governments and, especially, central banks in monetary and financial markets to deal with the pandemic trying to mitigate its negative effects. The paper offers a critical analysis of government tax policies and the increase in public spending, considered as the panacea and universal remedy for the social troubles. This review concludes with a proposal to change the mainstream paradigm, thereby proposing a more sustainable and wellbeing economics.
The “European Green Deal” has ambitious aims, such as net-zero greenhouse gas emissions by 2050. ... more The “European Green Deal” has ambitious aims, such as net-zero greenhouse gas emissions by 2050. While the European Union aims to make its energies greener, Russia pursues power-goals based on its status as a geo-energy superpower. A successful “European Green Deal” would have the up-to-now underestimated geopolitical advantage of making the European Union less dependent on Russian hydrocarbons. In this article, we illustrate Russian power-politics and its geopolitical implications by analyzing the illustrative case of the North Caucasus, which has been traditionally a strategic region for Russia. The present article describes and analyses the impact of Russian intervention in the North Caucasian secessionist conflict since 1991 and its importance in terms of natural resources, especially hydrocarbons. The geopolitical power secured by Russia in the North Caucasian conflict has important implications for European Union’s energy supply security and could be regarded as a strong argum...
International Journal of Environmental Research and Public Health, 2021
In this article, we aim to develop a political economy of mass hysteria. Using the background of ... more In this article, we aim to develop a political economy of mass hysteria. Using the background of COVID-19, we study past mass hysteria. Negative information which is spread through mass media repetitively can affect public health negatively in the form of nocebo effects and mass hysteria. We argue that mass and digital media in connection with the state may have had adverse consequences during the COVID-19 crisis. The resulting collective hysteria may have contributed to policy errors by governments not in line with health recommendations. While mass hysteria can occur in societies with a minimal state, we show that there exist certain self-corrective mechanisms and limits to the harm inflicted, such as sacrosanct private property rights. However, mass hysteria can be exacerbated and self-reinforcing when the negative information comes from an authoritative source, when the media are politicized, and social networks make the negative information omnipresent. We conclude that the neg...
This critical and thought-provoking book explores the causes and consequences of Europe’s failed ... more This critical and thought-provoking book explores the causes and consequences of Europe’s failed political and economic institutions. Europe’s recession has created new challenges as market turmoil has shaken the foundations of the twin pillars of the new drive for European integration – political and monetary unions. This book critically assesses the patchwork solutions continually offered to hold the troubled unions together. Failed political policies, from the prodigious ‘Common Agricultural Policy’ to ever more common fiscal stimulus packages, are shown to have bred less than stellar results in the past, and to have devastating implications for future European growth. The contributors outline the manner through which European monetary union has subsidized and continues to exacerbate the burgeoning debt crisis. Most strikingly, the interplay between Europe’s political and economic realms is exposed as the boondoggle it is, with increasingly bureaucratic institutions plaguing the continent and endangering future potential.
Gregor Hochreiter, Mag. M. Sc. (Wien) David Howden (Madrid) Guido Hülsmann, Prof. Dr. (d'Ang... more Gregor Hochreiter, Mag. M. Sc. (Wien) David Howden (Madrid) Guido Hülsmann, Prof. Dr. (d'Angers) Holger Koch, Diplom-Volkswirt (Bayreuth) Michael Lorenz, Dr. habil (Chemnitz) Peter Oberender, Prof. Dr. Dr. hc (Bayreuth) Michael von Prollius, Dr. (Berlin) Eugen Maria ...
Authors in the Austrian tradition have made the credit expansion of a fractional reserve banking ... more Authors in the Austrian tradition have made the credit expansion of a fractional reserve banking system as the prime cause of business cycles. Authors such as Selgin (1988) and White (1999) have argued that a solution to this problem would be a free banking system. They maintain that the competition between banks would limit the credit expansion effectively. Other authors such as Rothbard (1991) and Huerta de Soto (2006) have gone further and advocated a 100 percent reserve banking system ruling out credit expansion altogether. In this article it is argued that a 100 percent reserve system can still bring about business cycles through excessive maturity mismatching between deposits and loans.
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