New Austrian School of Economics
The New Austrian School of Economics is attempting to influence and endorse a return to the gold standard as sound money policy to address the current international financial volatility affecting worldwide economics and trade.
Under the academic leadership of Dr. Antal Fekete, the school's premises support the idea that one of the primary problems with the world economy is that the current international financial crisis is the final product of the gradual elimination of gold as a financial security. The position is the antithesis to the Keynesian Quantity Theory of Money that controls the contemporary financial landscape.
The original Austrian School of Economics thought dates back centuries and may be more modernly understood through the traditional theories of Adam Smith, dating from 18th century Britain, and contemporarily through the theories of Ludwig von Mises from the early and middle 20th century.
The primary tenets of the theory are gold-backed money policy and the pricing mechanism of product value based on labor costs. The emphasis is on the individual's labor value, which is the one common asset that the common individual has for trade, and a decentralized free-market economy. Economic growth and soundness is best measured accurately by utilizing short-term debt and consistent value as monetary policy. Smithian theory suggested 60 days to settle bills even during the 1800s.
The New Austrian School maintains that the Keynesian model of centralized governmental economic planning is largely responsible for building the current international financial bubbles because the powers-that-be blocked the international bill-clearing market after World War I, further hindering Germany's ability to rebuild as a nation. It also almost guaranteed a second World War, as wars are primarily fought over treasure instead of the perceptive window-dressing of ideas and security.
The bill-clearing process is central to the Smithian Real Bills Doctrine. The policy adherence had worked well during the 19th century and the beginning of the Industrial Revolution. When the international bill market was not allowed to reopen after the War, the quantity of money began an inflationary trend without a clearing mechanism. Coupled to the soundness concept of the discount rate, the ultimate result was the stock market crash of 1929 and the following Great Depression.
In the United States, the Gold Confiscation Act of 1933 followed shortly thereafter along with the Glass-Steagall Act. Glass-Steagall was legislation that separated investment banks and commercial banks in the US and established the Federal Deposit Insurance Corporation to protect individual savings.
The New Austrian School position on the current fiscal crisis is that the general financial bubble has continued evolving gradually since the early 1970s when the final remnants of the gold standard were cut. International trade began a journey that has created trade imbalances because of the elimination of bill clearing and the acceptance of huge national debts. The forty-year bubble has allowed for the buildup of excessive amounts of money in some countries and excessive deficits in others, possibly leading to another stock market crash like none known in history.
Dr. Fekete has been retired for some time now but has decided that the international economic condition is in dire need of scholastic redirection. International trade relationships can lead to high volatility and international relationship insecurity. The New Austrian School of Economics supports revisiting gold-backed monetary policy, along with cessation of long-term maintenance of growing international deficits and trade imbalances worldwide.