WHY THE AUSTRIAN SCHOOL NEEDS TO PURGE ITS FLAWS
Copyright 2004 J. N. Tlaga
Let us imagine a three-way debate in presidential elections, in which Ron Paul defends his Austrian scenario of returning to honest money, as presented in THE CASE FOR GOLD (ISBN 0-932790-31-3).
And so, he maintains his Austrian position that "...fractional reserve system has created the business cycle, and if that is to be eliminated, its cause must be also", and he declares that the reform he proposes "...is simply that all promises to pay on demand whether made in the form of notes or deposits, be backed 100 percent by whatever is promised, be it silver, gold, or watermelons. If there is any failure to carry 100 percent reserves or to make delivery when demanded, such persons or institutions would be subject to severe penalties."
Of course, he adorns his orientation with the omnipresent story how the private goldsmiths, warehousing surplus gold for London merchants, "...fell prey to the temptation to print pseudo-warehouse receipts not covered by gold and lend them out...", and how "...in this way fractional-reserve banking came to England." Nobody knows who gave birth to this legend, but everybody seems to like it without a word of explanation why.
Then, let us imagine, the establishment's Demo-Republican candidates, acting in concert as they always do, patiently and meticulously dissecting Ron Paul's position and presenting a coherent view in opposition to his agenda along the lines of the arguments presented here in the prior articles of this series:
How To Defang All The Banks Once For All
Questions And Answers
Austrian Inflation & Deflation
Wrong Theory Can Kill Our Hope
Prevention Of Instability Is The Trick
What would be the outcome of this imaginary debate?
Not only would Ron Paul lose his presidential bid, but the whole cause of honest money -- having been so thoroughly embarrassed, as rooted in ignorance -- would be buried for good, because, anyone else trying to revive
it in the future could then be easily dismissed not on actual merits but on... "Here they go again!".
That's why it is so essential for the Austrian School to purge its flaws long before any attempt is made to persuade American electorate to endorse the cause of honest money.
If the Austrians will refuse to overhaul their doctrine, or will simply elect to remain silent, they should be relegated to the status of the "English opposition".
Controlling the opposition is the British imperial establishment's traditional method of staying in power.
Controlling both sides in the elections is only a small part of this system. Far more important part is the propaganda effort to keep the masses of people all over the world in the state of permanent distraction and ignorance. See
http://www.gold-eagle.com/editorials_02/tlaga070402.html
I do not propose that Austrian think tanks are the puppet theaters operated by the fiat establishment. Rather, they are honest libertarian institutions that may be, just may be, subtly and remotely manipulated by the establishment.
In the famous moving picture "Polyanna", a rich widow (or a rich old maid) makes regular contributions to a parish priest and always submits with her check a detailed critique of the last Sunday sermon with suggestions for the
next Sunday one. As a result, all the sermons reflect the rich widow's "theology" of eternal damnation, hell fires, etc. Then, one day, that message of fear and terror is confronted, by a message of love proposed by a little orphan girl, Polyanna, that was just placed in the custody of the rich widow. Polyanna has no money to contribute, but her message wins hands down.
In the past I have already proposed a thesis that Civil War in America may have been engineered by the English bankers making regular contributions to the clergy of the Northern states (via local "rich widows") whose objective
was to reward anti-slavery content. In those days, church pulpits were the equivalent of today's networks. The reason I proposed that thesis was that the rush of anti-slavery sermons in the North emerged right after President
Andrew Jackson succeeded in closing down the Second Bank of the United States (the Fed's predecessor).
I submit, there is plenty of room for the same modus operandi to be applied in controlling the content of libertarian opposition to English imperial globalization today.
It is not difficult to imagine some "rich widow" making a hefty contribution accompanied with "spontaneous" praise for fractional reserve theory of this or that author. The effect of such contribution-supported praise is twofold:
1. It discourages critical evaluation of such theories on their merits; and
2. It encourages republication (pun not intended), if not downright propagation of such theories.
With criticism shut off and active promotion turned on, with great scholarly prestige of the think tanks involved, and with the fact that numerous books of every shade and description consistently repeat the same theories over and over again, the task to dislodge such myths from the public mind is rather difficult indeed. But difficulty should never justify complacency. Any false theory allowed to linger in our midst simply because we are too tired to struggle with too big a mountain of ignorance may one day ruin our cause for good.
Nothing must be accepted into honest money agenda unless it has been exposed to the most thorough analysis and critique.
Nothing, nothing, nothing but nothing must be accepted on the basis of the authors apparent authority. No one's authority can possibly be greater than the authority of reason.
This is an example of what we are up against:
"Why are you trying to confuse things that are very clearly defined?
"Fractional Reserve Banking has a history to it. Check out the following book which clearly explains the history and function of fractional reserve banking..."
According to this logic, once Claudius Ptolemy wrote his thirteen volumes on the motion of the planets in 140 AD, no one should try to confuse things that were so very clearly defined.
And no one did until 1543 AD.
Once we develop complacency to tolerate "Ptolemaic" theories just because their proponents happened to be the friends of honest money, we will set ourselves up for very rude awakening one day.
Once we make a bid for return to honest money and we lose because of some silly item of ignorance in our agenda, that may be the end of our hope. For this very reason such items of ignorance must not be tolerated.
In God we trust, all others pay cash.
No one's credit is as good as one's money.
These elementary principles should be consistently applied to all apparent "authorities" lingering in or around the honest money agenda.
This is not a call for some witch-hunt. This is only a call for accountability and excellence.
This article should never be interpreted as hostile to the Austrian School of economics as such, nor as any change of our faith in Ron Paul's ability to represent the cause of hones money. The overall standing of the Austrian School can never be adversely affected by dropping its faulty theory of the fractional reserve banking, and Ron Paul continues to be the very best choice for leading the effort to restore honest money. The sole concern of this article is that Ron Paul must have the very best arguments on hand before he will make any bid for restoring honest money.
Nothing would be more tragic than to see our cause defeated because we failed to do our homework.
"The real virtue fears no critique."
(And claims no privilege either.)
24 January 2004
J. N. Tlaga
jtlaga@bellsouth.net
PS: The promised article on how the fractional reserve banking is employed by the central bank under fiat money
system is still in the making.
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