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The Counter-Currents 2014 Summer Fundraiser 
The Austrian Economic Apocalypse?

1,570 words

dollarImage2Since yesterday’s update on our Summer Fundraiser, we have received 5 donations totaling $540 in amounts ranging from $10 to $250, including the first of a recurring donation of $30/month. Our total is now $36,357. We are now  $3,643 from our goal of $40,000 with just 4 days to go. Again, I want to thank all of our donors for your generous support.

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Back at the beginning of 2012, I stuck my neck out a bit by writing an article on economics, “Money for Nothing” (audio version here), in which I offered my take on Social Credit theory. The subsequent discussion thread, as well as private communications with Social Credit experts, convinced me that I was on the right track. So every once and a while, I am emboldened again to offer some economic heresies for discussion. Today is one of those days.

One does not have to lurk very long at Lew Rockwell’s site, or read many articles by Paul Craig Roberts, without encountering the ideas that I will dub the Austrian theory of economic apocalypse. These ideas are not confined to Austrian school economists, but they are certainly concentrated among them. The theory has the following premises.

  1. “Sound” money is good. “Fiat” money is bad.
  2. Sound money is currency whose value is derived not from its usefulness as a medium of exchange for all manner of goods and services. Instead, what makes money sound is its exchangeability for a hoard of goods, most often precious metals, held by a bank. The amount of sound money is limited by the amount of the hoard of goods backing it up.
  3. The value of fiat money, by contrast, is not determined by its exchangeability with a fixed hoard of goods, but rather by its exchangeability with the whole world of goods and services. As long as fiat money is accepted as a means of exchange, it has value.
  4. The amount of fiat money is not limited by a fixed hoard of precious commodities, but by the entire economy of goods and services. And the amount of fiat currency can be increased proportionate to the growth of the entire economy without any negative consequences.
  5. Money is a commodity, which is subject to the laws of supply and demand, like any other commodity.
  6. Money also has a price, which is interest.
  7. When the supply of money increases while other things remain equal, the value of money will go down. This is called inflation. Inflation manifests itself in the rise of prices for goods and services, as more currency chases the same amount of goods. But not every price increase is due to inflation.
  8. When the supply of money decreases while other things remain equal, the value of money will rise. This is deflation. Deflation manifests itself in falling prices, as less currency chases the same amount of goods. But not every price decrease is due to deflation. The falling prices of computing power, for example, is not due to currency deflation but to technological progress. (Propositions 5-7 are orthodox monetary theory even outside Austrian hard money circles.)
  9. If a society dramatically increases the money supply while economic productivity remains the same, there will be inflation. However, while in the last decade, the supply of US dollars and Zimbabwe dollars has dramatically increased, there has been hyperinflation only in Zimbabwe, but not in the United States. This seems to be a clear empirical falsification of orthodox monetary theory.
  10. To explain this discrepancy, economists appeal to the status of the US dollar as the world reserve currency. After World War II, the US was in a position to dictate that international trade be priced in dollars, which creates a demand for dollars among foreign governments and individuals. Hard money economists claim that this demand is so immense and insatiable that the United States has been able to create immense amounts of fiat currency without hyperinflation.
  11. However, if the dollar is no longer the world reserve currency, then, the hard money advocates insist, the economic apocalypse will arrive, and America will be devastated by hyperinflation.
  12. Those given to conspiracy theories argue that the United States resorts to wars and assassinations to prevent political leaders from dumping the dollar in favor of other currencies. Saddam Hussein and Qaddafi, it is alleged, were destroyed because they entertained the idea of pricing oil in currencies other than the dollar. Iran, it is alleged, is a target for the same reason. (Such Judenrein explanations for US foreign policy in Israel’s neighborhood should be automatic cause for suspicion.)
  13. Hard money advocates are constantly looking for signs of imminent economic apocalypse. It is, for example, routinely predicted that China and Russia will abandon the dollar for the euro. It is even alleged that the Chinese are buying up vast amounts of gold to put the yuan on the gold standard. (Google it if you don’t believe me.)
  14. If any of these things happens, the dollar will crash and American political and economic hegemony will be destroyed, so we are urged to protect ourselves. Sound money advocates are happy to take your soon-to-be-worthless fiat currency off your hands in exchange for precious metals — even though their own theory would seem to predict the exact opposite behavior. Am I the only one who thinks this is a blatant swindle?

This all looks rather different, however, from a Social Credit point of view.

  1. Social Credit advocates the creation of a pure fiat currency that has absolutely no intrinsic value and is not backed by a fixed hoard of goods. Instead, currency’s sole value is as a medium of exchange. It is “backed” by the entire realm of economic goods and services for which it is exchangeable.
  2. Social Credit seeks the complete decommodification of money. Under a Social Credit system, money would have no price, i.e., there would be no interest. And decommodified currency would not be subject to the laws of supply and demand like other commodities. That is to say, there would be no inflation or deflation of currency.
  3. I wish to suggest that the reason that the US dollar has not gone the way of the Zimbabwe dollar is simply that it is functioning as if it were a decommodified pure fiat currency on the Social Credit model. Yes, the US dollar is still a commodity, because it is loaned out at interest. But the reason that it is not massively discounted like the Zimbabwe dollar is that international markets will not treat it like a commodified currency as long as it serves as a universal medium of exchange.
  4. It seems exceedingly unlikely that any country or group of countries can replace the dollar as world reserve currency, even if they wanted to.
  5. Logically, the dollar could only be replaced with a soft currency or a hard currency.
  6. If any country tried to replace the dollar as the world medium of exchange with a soft currency of its own devising, the likely result would go the way of the Zimbabwe dollar, i.e., it would be discounted/inflated to worthlessness. Because there would be no compelling reason for the whole world to trade a known soft currency for an unknown one.
  7. And if someone tried to replace the dollar with a hard currency — such as gold or euros — particularly for trading petroleum or agricultural commodities, the result would be the curse of deflation. And no sensible government would accept the reality of deflation to avoid the mere possibility of inflation. Of course some governments might still be irrational enough to follow hard money policies. But the consequences would eventually argue for their repeal.
  8. If the US system does collapse, it will probably not be due to the collapse of the dollar. The US economic system might well be able to continue indefinitely producing only currency. Americans might be able to consume the bounty of the globe simply because we get to spend dollars first. White Nationalists who pin their hopes on the collapse of the US dollar might be guilty of irrational optimism. Larger social forces are still on our side — particularly the social consequences of dysgenics and race replacement — but the dollar apocalypse is not among them.

The Right, particularly in the United States, desperately needs to break away from free market economic orthodoxy. Simply because it makes us stupid and evil. Along with writers like Kerry Bolton, Counter-Currents is doing its part to recover the rich tradition of Right-wing alternatives to capitalism, including Social Credit, Guild Socialism, Populism, and Distributism. Our influence will grow only with your support.

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Greg Johnson



  1. James O'Meara
    Posted October 28, 2014 at 11:40 am | Permalink

    ” Saddam Hussein and Qaddafi, it is alleged, were destroyed because they entertained the idea of pricing oil in currencies other than the dollar. Iran, it is alleged, is a target for the same reason. (Such Judenrein explanations for US foreign policy in Israel’s neighborhood should be automatic cause for suspicion.)”

    No conspiracy, just fact. As Steve Sailer says about ‘racism’, it’s just a question of noticing things. The US only attacks nations that do not have Keynesian “Central Banks” to involve them in the international money scheme. The first thing done, after takeover, is to set one up (what, we should waste time putting out fires and feeding the starving?).

    As for being Judenrein, well, that may be the public face — don’t want to be “anti-Semitic” now do we? — but you don’t have to read very far in the comment sections to find names like Rothschild popping up. Some the readers can connect the dots, if not the writers.

    Although useful for some non-MSM critiques, the “free market” Rockwell types are of course a controlled opposition. Fiat money, loaned at interest from private bankers, is of course bad, but so is gold (guess who owns it?) Hitler figured this out and successfully implemented his own kind of Social Credit/Distributivism, which was, of course, the reason he “had to be destroyed” too.

    “And no sensible government would accept the reality of deflation to avoid the mere possibility of inflation. Of course some governments might still be irrational enough to follow hard money policies. But the consequences would eventually argue for their repeal.”

    My understanding of the rationale for Russia/China to do so is geopolitical, not economic. War (defensive, by their lights) by other means, in short.

  2. Greg Johnson
    Posted October 28, 2014 at 2:56 pm | Permalink

    I am not familiar with any recent work by Jones.

  3. Mr Smith
    Posted October 28, 2014 at 5:19 pm | Permalink

    Both Social Credit and Austrians are antiquated schools of economics that once had something valuable to offer the policy debate – about 80 years ago or so. Not so anymore.

    The valuable insights of the Austrian School of ”Economics” have been retained within economics as the quantitative theory of money. The valuable insights of the Social Credit movement – the idea that the depression was fundamentally unnecessary since it was essentially caused not by a lack of capital or workers but by a lack of means of exchange (or rather: a shortfall in demand) – is an integral part of modern macroeconomics.

    Let me explain:
    1. A financially caused depression happens when lenders suddenly realizes that the borrowers will not be able to pay back.
    2. They then stop lending.
    3. The borrowers being unable to re-finance their loans start saving. This leads to a decline in aggregate demand: The borrowers are now spending less, but no one else is spending more.
    4. This leads to a decline for all sectors of the economy, which of course make borrowers previously capable of repaying their loans unable to as their businesses shrink or they lose their jobs.
    5. The borrowers then call in the loans to those people as well initiating the famous vicious circle as ever-increasing number of loans are called in and ever increasing number of people and businesses stops saving or consuming.
    6. The Fed responds by lowering the Fed interest rate to zero, to make investment (and lending) cheaper pumping up demand.
    7. Unfortunately in a really serious vicious circle this is not enough. The decline in demand caused by the vicious circle is larger than the increase in demand caused by the lower interest-rate.
    8. Hence, even at a zero-interest rate the slump persists.
    9. Until it doesn’t anymore. In the medium-run the market economy re-adapts and bounces back. The economy returns to full-capacity.
    10. The Fed now raises the interest-rate to prevent over-lending, which would lead to inflation (an increasing amount of money chasing a finite amount of goods).

    Now, the theory that the Fed can create infinite amount of money because the demand for dollars is insatiable makes no sense: In that case, pre-quantitative easing and zero interest-rate the rest of the world would have been in a serious slump due to there not having been enough dollars (means of exchange) to go around – just like America or Germany under the depression.

    The reasons that there is no hyperinflation today are two-fold: The first is an understanding of what money is. Money is not the monetary base. Money is credit. The fractional reserve banking theory is incorrect.

    Banks do not multiply up the monetary base in some kind of mechanistic function, rather banks create money by issuing credit. They issue credit when they make the calculation that considering the risk they’re taking and the costs they have it’s a good investment. They then issue credit out of thin air, which becomes money.

    The Fed and the government can influence that calculation by decreasing both the risk (through implicit promises of bailouts and explicit promises of guaranteeing deposits) and the cost. They influence the cost through the federal interest-rate, since commercial bank-reserves mainly consists of money lent from the central-bank at the going rate.

    And this is why there is no hyper-inflation: Increasing the monetary base only leads to monetary expansion if the commercial banks use that bank-reserve to increase credit proportionally. They’re not – at the moment – because there are very few profitable lending opportunities right now. Instead they’re just stocking up on reserves (and inflating the asset market – but that’s a lesson for another day). If that changes in the future the Feds will increase the prices (the Fed interest rate) of central-bank reserves resulting in commercial being less willing to hold large amounts of those. With less central-bank reserves backing up the credit (money) they’re issuing they will be less willing to create money since they’re now facing both higher risk (=smaller reserves) and also higher costs (=more expensive reserves). Hence, economy-wide interest-rates will go up ideally balancing the credit expansion to approximately 2 % per year after economic growth has been included.

    Of course the problem with this neat theory is the asset market, where profits can be made even without there being any fundamental value in the investments made. All it takes is that the insiders cash out before the bubble blows.

    (The reason Zimbabwe has inflation is that they’re not issuing money as credit but simply printing money. Hence money-creation is not restrained by the availability of attractive investment-opportunities for banks.)

    Greg’s theory of the world market treating dollars as an un-commodified product is just empty words and muddled thinking: Why do they do that? Where is the mechanism? What does it even mean? Why would a mean of exchange that is not sold for interest be immune to inflation? Surely you could still increase the interest-free money supply faster than you could increase production?

    More importantly: why would we want an interest-free economy? How would we reimburse investors without a monetary incentive? Where would investments even come from without interest? Savings? That would necessitate people saving half their income, and how would we achieve that without the incentive of massive interest rates? (Massive interest rates that mind you would make most investment today profitable very un-profitable.)

    The simple truth is that credit and interest are necessary parts of a modern economy. Hitler knew it: He didn’t institute social credit – that’s just a right-wing myth – he just expanded the money supply and implemented direct fiscal stimulus while bringing the banks under stricter-control (and purging them of non-Germans). Hitler was a Keynesian.

    The solution is not social-credit. The solution is regulating finance – like in the welfare states of old. That can’t be down within the context of a global economy, though. You need a smaller space then that: The nation-state or (preferably, since the nation-state is a little bit to small in a lot of cases) Eurosiberia.

    • Greg Johnson
      Posted October 30, 2014 at 12:57 am | Permalink

      Just to restate my argument, the ideal currency from a social credit point of view has no intrinsic value and no price (interest). It simply serves as a medium of exchange. It would not have another life as a commodity that is traded and loaned, subjected to the laws of supply and demand. My suggestion is that the US dollar is not being discounted like the Zimbabwe dollar because it is not necessarily the case that every currency (whether in cash or credit) is treated as a commodity. The US dollar may be defying the inflation predicted by the quantity theory of money because that theory is not necessarily true of money. It is not necessarily true of a pure fiat currency in a social credit economy, and the US dollar may be approaching that function. Of course, it is still possible to increase the supply of such currency faster than aggregate production, and that would cause discounting to kick in. But the real point is that there is no iron law of supply and demand that always governs the behavior of money. Money has value if people think it has value, and as long as they think it has value it does. Reckless increases in the money supply might change that perception. But that certainly has not happened with the US dollar since 2008.

      An economy can be capitalized without interest-bearing bank loans. Loans can be issued interest free, for flat processing fees. Companies can attract investors by selling stock and paying dividends.

  4. Frank Deschamps
    Posted October 28, 2014 at 5:46 pm | Permalink

    More generally, how likely is collapse from due to multiracialism in the United States given how Mexico and Brazil are getting by with, what, 70% NAMs? That said, American Whites’ threshold for crappy governance is probably a lot lower than those of Conquistador-Americans.

  5. Lorenz Kraus
    Posted October 29, 2014 at 11:04 pm | Permalink

    “Social Credit advocates the creation of a pure fiat currency that has absolutely no intrinsic value and is not backed by a fixed hoard of goods.”

    You could make that with any digital coin these days, but why would it buy anything? Dogecoin doesn’t go very far. It’s “thin-air money,” that speculators have fun with, but it hasn’t been widely adapted.

    The real issue is issue and redeem. The US can issue a lot of currency because it has a huge economy and lots of taxation, and taxes have to be paid. As long as people believe there are viable US taxpayers, who will need “stay-out-of-jail” dollars, dollars will have final demand.

    Zimbabwe fiats collapsed because, (I’m assuming), few real taxpayers existed to sop up all the fiats paid to state employees and their equipment/training/ and related costs. Hyper-inflation is the recognition that there is no realistic final demand.

    This is called the credit theory of money.

    I haven’t seen the Austrian School discuss or refute it, since I only came across it recently, but it has its merits, including historical and practical intuitiveness. Austrian money goes back to a Regression Theorem; which is a thought experiment.

    The Credit Theory of Money is subject to the law of supply and demand for money, but it makes sense that the real demand for fiats is to stay out of jail. As far as the present economy is concerned, fiats keep you out of jail, not gold, so fiats “are money and nothing else is.” Money is what keeps you out of jail.

    Another way of saying this is that fiat money only has value because it is based on force.

    By contrast, an apple grower could issue tickets for the coming harvest to buy his stuff and when the harvest comes, people redeem them for apples. This makes those tickets grower specific, season specific, and the tickets are more like a form of capital. (Capital is heterogeneous; money is homogeneous. Under the fiat system, money is the homogeneous form of capital; capital is the heterogeneous form of money).

    In a fiat-free economy, there would be no money. All tickets would be capital, including tickets to gold.

    A lasting nation-wide or global currency is not possible without a nation-state and a populous willing to be sent to jail to support it. Thank god for the American people who are willing to serve this purpose for the world.

    • Greg Johnson
      Posted October 30, 2014 at 12:43 am | Permalink

      I don’t agree that fiat money has value due simply to force. Zimbabwe dollars and US dollars have governments on their side, but the former is worthless and the latter is not. Bitcoins are a fiat currency that are not backed up by the state, but they have value. The reason fiat currencies have value is simply because they are accepted as media of exchange.

  6. Stronza
    Posted October 30, 2014 at 2:06 am | Permalink

    How can we talk about money/currencies etc. without referring to the quality of the societies they exist in? Social Credit presupposes a decent nation where everybody can trust everyone else. Where everyone has the same way of seeing the world. Gold backed currency could exist only in places damaged and corrupted in one way or another.

    • Triptolemus
      Posted October 30, 2014 at 2:40 pm | Permalink

      I think your question is right on the money, so to speak. When we talk about society, we are usually referring to the anti-social, multiracial “market society” which, I agree, can never be fitted to a social credit or similar system because it is inherently antithetical to it. [See: ]. So, then, we need to solve first order problems, such as the sovereignty of real (ethnic) nations. Thank you for pointing this out before we get lost in the wilderness (or, the human zoo).

      • Stronza
        Posted October 30, 2014 at 6:49 pm | Permalink

        Thank you very much, Tripto. It only makes sense that as we remake ourselves, the right currency will appear without a heck of a lot of discussion. Not that I’m opp0sed to any of these discussions here. I will have a look at the article of de Benoist, though at first glance it might be tough going for such as myself.

  7. Triptolemus
    Posted October 30, 2014 at 11:27 am | Permalink

    Thank you for the valuable, detailed insights. I, too, advocate the aforementioned ‘right-wing’ alternatives to capitalism, and I must say that I was converted to this view mainly by Proudhon, who I read in my anarchistic early twenties, and later Ezra Pound, who promoted social credit and lambasted “Usura”, and also by a glance at G. K. Chesterton and Hilaire Belloc, who conceived distributism. It is worth mentioning that, at least to my mind, there is some overlap between these and some ‘left-wing’ economic concepts. ‘Catholic worker’ Dorothy Day also advocated distributism, and both mutualism and Silvio Gesell’s Natural Economic Order (an Austrian school theory which Keynes would later mutilate, highly recommended) are based on Proudhon. Some of the ideas of ex-Catholic ‘anarchist’ Ivan Illich (conviviality) and non-conformist Jacques Ellul (on technique) come to mind, as well as the free communism evangelized by the Diggers during the Interregnum. Leave no stone unturned!

    However, I have come to the view that not only interest, but money itself (both ‘sound’ and ‘fiat’), as well as rent, tax, salary, wages, fees and fines, and so on (the entire market economy) are all forms of usury. In fact, all forms of capital, commodities, and real property (land enclosure) are forms of usury, by my extended definition: Anything removed from a life system (commodified) is assigned false value (starting with use value), because in markets the true (unmeasurable) value of a thing becomes detemporized (from eternity). Gesell (and later Keynes, following him) addressed this by suggesting various mechanisms to imitate the natural degradation of use value. Essentially, every thing, in time, will become other things (useful or not) and thus all valuation is temporary, subjective, and ultimately false. This revelation is admittedly unpractical at present, but it led me to two conclusions, 1) that use value is a ‘spook’ and it really ‘does’ boil down to force (see Max Stirner), and 2) that we ought to return to a traditional sustenance based economy (i.e., the ‘left-wing’ gift or potlatch economy, perhaps without the fetish for primitive tribes and colonialism baggage). In other words, back to the land!

    I mention this because I think some good ideas have suffered through bad associations (i.e., assimilated to post-marxism or deformed anarchism), and should be recovered. In any case, donating to Counter-Currents would be a good way to start planting seeds, thanks for this writing this piece!

  8. me
    Posted October 30, 2014 at 5:25 pm | Permalink

    The definition of “fiat’ is “by legal decree” (look it up in the dictionary). Gold and Silver were fiat money in USA until 1930’s in case of gold & 1965 in case of silver.

    A friend who is an expert on monetary reform did say this:

    All legal tender money is fiat money whether it is lumps of any metal or computer bytes. The problem is not fiat money and never has been. The problem is that the government made Federal Reserve Notes, privately issued money legal tender, i.e., fiat money which is issued as debt. No law makes checks or computer bytes legal tender, but they are generally accepted as such. It is the private debt money monopoly that is the problem, not word definitions.

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