Monetary theory is where Austrians diverge the most from mainstream. Mises built a new taxonomy of money. He said money included any checking account deposits. The marginal utility of gold on the last day of barter was determined by the uses of gold. People then demanded gold as money because there was preexisting value. A paper dollar must have such a connection to money. Government cannot create money. Money is not neutral. The natural trend of prices in a market economy is falling.

5. Modern Monetary Theory: The Austrian Contribution

Joseph T. Salerno presents a series of ten formal lectures on topics related to the history and theory of the Austrian School of Economics.
Download the complete audio of this event (ZIP) here.

Although often neglected by the English-speaking world, the French Liberal School of the nineteenth century has long provided a robust foundation for modern laissez-faire economics and the pro-freedom ideology we now sometimes call libertarianism.

Forerunners of the Austrian School: The French Liberal School

The mythology of gold really grew up with Keynes and the quantity theory. Here are six of those myths: the gold standard is unable to accommodate the needs of an growing economy; the quantity of money is arbitrarily determined; the gold standard is a government price fixing scheme; the gold standard subjects a country to alternating inflation and deflation; the gold standard requires high costs devoted to resources; and the gold standard results in high interest rates.

10. The Gold Standard in Theory and Myth

Friedman’s book, Monetary History of the United States, tried to show the depression was caused by a deflation of the money supply by the Fed. Rothbard’s America’s Great Depression was published the next year in 1963. Rothbard argued that the Fed was actively inflating the money supply. 

9. Money and Gold in the 1920s and 1930s: Defending the Rothbardian Position

The debate still continues. It is all about Mises’ initial article and then book on Socialism in 1922. He demonstrated the necessity of the price system and showed how subjective values were transformed into objective prices which could be used as meaningful cardinal numbers in economic calculation. 

8. The Debate on the Socialist Calculation Debate

The founder of the Chicago School, Frank Knight, was an avowed egalitarian. Rousseau was his influence. Jacobins believed in mass democracy and politics as the only way to implement their ideas. They hated aristocrats and religious leaders. Knight believed in progressive taxation. He wanted neocon social democracy. 

5. Modern Monetary Theory: The Austrian Contribution

Download our free app to listen on your phone