Reply To: Should we Balance the Budget?


Austrian economists have proposed two types of plans to restore commodity money. One is to make the dollar redeemable into gold and then leave gold production up to the market.

Rothbard lays out one version of this type at the end of The Case Against the Fed:

Mises has a version of this type in part four of The Theory of Money and Credit:

The second type is to remove all legal barriers to private money and all legal privileges for government money and let the market take over.

Advocates of this view include Hans Sennholz, Guido Huelsmann, Joe Salerno, and Peter Klein. For example, Huelsmann mentions this at the end of The Ethics of Money Production:

These different proposals have different effects on debtors. For example, One of Rothbard’s plans calls for redeeming all currency into the Fed’s gold stock dollar for dollar and making banks keep a 100 percent reserve of money against their customers’s checking accounts. This plan would destroy the created credit that was based on the issue of fiduciary media. In other words, banks would have to call in loans or not renew loans in order to build up their reserves to 100 percent. Rothbard has a second plan, which like Mises’s, prevents any further fiduciary media issue and credit creation. These plans, along with the second type of reform measures would leave existing dollar debts intact to be paid off, but not renewed and as that happened the credit supply would gradually shrink.