The Austrian Cure for a Broken Economy

Inflation, high prices, stagnant wages, and recurring financial crises are usually treated as separate problems, but Austrian economists argue they are connected consequences of interventions that distort the price signals a market economy relies on to coordinate itself. Sound money, free prices, secure property, open competition, capital accumulation, and profit-and-loss discipline are the key to prosperity, not command from Washington.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

Economic distress is on almost everyone’s mind lately. Inflation, high prices, stagnant wages, declining purchasing power, inequality, and recurring financial crises are often treated as separate problems requiring separate government solutions. The Austrian School begins elsewhere. From Carl Menger and Eugen von Böhm-Bawerk through Ludwig von Mises, Friedrich A. Hayek, and Murray Rothbard, Austrian economists argued that these problems are frequently connected consequences of interventions that distort the signals by which a market economy coordinates itself. The cure, therefore, is not another layer of economic management, it is the restoration of sound money, free prices, secure property, open competition, capital accumulation, and the discipline of profit and loss.

The first Austrian prescription is monetary. Inflation, in the Austrian sense, begins with an expansion of the money supply beyond the increase in the demand for money, not merely with the subsequent rise of consumer prices. Menger explained how money could emerge spontaneously from exchange as market participants converged on more saleable commodities. Mises developed the implications of money for the entire structure of economic calculation, while Rothbard carried the hard-money argument to its most radical conclusion. The common principle is that money should not be an instrument through which governments or central banks continually manipulate purchasing power.…