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Fisher and Keynes v. Ludwig von Mises and the Austrian School of Economics
Our politicians on both sides of the aisle are constantly talking about taxes, spending, the deficit and the debt. What you rarely hear them discussing is the monetary system itself; the system that supports the government's ability to have unlimited spending and debt. Without the ability to monetize debt/print money, the government could not spend like it does. We are borrowing over forty cents for every dollar we spend, which equals a deficit of 1.65 trillion for 2011. All of the money we are borrowing is not coming from real borrowing. A good percentage of that money is coming from monetizing debt, which is similar to counterfeiting and is effectively taxing and stealing money from citizens without their realizing they are being robbed. For instance, how many times do you hear politicians discuss the increase in the oil prices and at the same time discuss that the dollar has been devalued by the Fed (which is a major cause for the increased price of oil!). No wonder the Arabs will not take $60 any more for a barrel of oil. Oil costs more because the dollar is worth less.
When we discuss the monetary system itself, we do not differentiate between the two basic schools of thought on the monetary system. One school of thought, developed in the 1890's by Irving Fisher and followed by Englishman John Maynard Keynes, believes that central banks printing money (to spend our way out of booms and busts) is the best way to handle a monetary system and to stimulate an economy. This method has been tried for almost ninety (90) years now and has failed dismally throughout that time. It is interesting that conservatives never label liberals Keynesians and attack that failed theory. They also seldom champion Von Mises or the Austrian School as being correct on economic matters since 1928. Both sides simply demagogue each other. There have been numerous books and articles written on the Austrian School. Von Mises, in 1928, predicted exactly what was going to happen in the 1929 crash but nobody wanted to listen. Irving Fisher, on the other hand, said at the same time that the economy was in excellent shape and prosperity would continue indefinitely. He said the same thing in 1932. He said the same thing in 1936, right before he died in poverty, living off his children. That is Keynes theory. The Austrian School of Economics has been correct. The Keynesian School has failed.
For a useful expansion of this subject, see this PDF of the article "The Great Depression: Mises vs. Fisher" by Mark Thornton from mises.org.