Guess Who Is A Shocking Fan Of Austrian Economics

Tyler Durden's picture


The statement below, coined by Friedrich Hayek in his 1931 "Prices and Production", is well-known by any fans of the Austrian school of economics (and by implication, loathed by all Keynesians):

“There can be no doubt that besides the regular types of the circulating medium, such as coin, notes and bank deposits, which are generally recognised to be money or currency, and the quantity of which is regulated by some central authority or can at least be imagined to be so regulated, there exist still other forms of media of exchange which occasionally or permanently do the service of money. Now while for certain practical purposes we are accustomed to distinguish these forms of media of exchange from money proper as being mere substitutes for money, it is clear that, other things equal, any increase or decrease of these money substitutes will have exactly the same effects as an increase or decrease of the quantity of money proper, and should therefore, for the purposes of theoretical analysis, be counted as money.”

One may usually find it in letters of the few renegade hedge fund managers who dare to call out the Chairsatan for his utter bubble pumping insanity, in the writings of those who have not been indoctrinated into the fallacies of the Keynesian pseudo-religious dogma, and generally discussed by those who actually do understand real credit and thus, monetary creation.

One will certainly not find it in the mecca of Keynesian ideology - the US Treasury - where the dominant thought paradigm these days appears to be that sovereign debt is, in fact, an asset, that record debt will be cured with more record debt, and that the only thing that matters when accounting for money is M1, maybe M2, but certainly not M3, and where nobody has even heard of shadow money (the same reason why we predicted - correctly - over a year ago why the Fed will continue to monetize debt long before QEternity was announced).

Or won't one?

We were quite shocked to find precisely this fragment in its entirety not in some fringe economics department of the Sorbonne, but on page 86 (of 126) in this quarter's refunding presentation by the Matt Zames (JPMorgan)-chaired Treasury Borrowing Advisory Committee to the US Treasury, specifically in the appendix to the presentation we showed last week explaining just why the US has an $11.2 trillion asset shortage, why Bernanke has trillions more of monetization left to go, and why all conventionally-based understanding of monetary theory - any that ignores shadow money - is and has always been 100% wrong.

That's right: it would appear that the long hand of Austrian economics has penetrated deep into the narrative offered by the JPM and Goldman-chaired TBAC.

But... if that is the case, and if indeed the Treasury's advisors are fundamentally at heart, Austrian, then that would diametrically change the entire ballgame. Simply because it would mean that whoever wrote the TBAC's most recent slideshow understand perfectly well that the path the US has set off on is not only not going to have a happy ending as the Keynesian borg Kolhoz claims (courtesy of the endless monetization of debt), but will, naturally, end in tears.

So, one wonders: is that precisely what JPM and Goldman (the two heads of the TBAC) have had in mind all along?

And if so, one also wonders just how they really feel about gold...

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Wed, 05/08/2013 - 16:04 | 3542356 NotApplicable
NotApplicable's picture

Well, of course it is.

Don't have to be a weatherman to know which way the wind blows.

Wed, 05/08/2013 - 16:04 | 3542361 Pinto Currency
Pinto Currency's picture



Many bankers are aware of Austrian Economics and utiilize it to understand what is going on.

Keynes is the trash they feed us to keep us huffing and puffing on their treadmill.

Wed, 05/08/2013 - 16:06 | 3542369 THX 1178
THX 1178's picture

Sure. I think the guys in the banking sector are generally Austrian in understanding and Keynesian in practice cuz tey get som much profit from it. The govt on the other hand is Keynesian thru and thru. I've said it before, the bankers are evil, not stupid. The government is both.

Wed, 05/08/2013 - 16:12 | 3542399 NotApplicable
NotApplicable's picture

Then there's always the old adage, "You can't fight City Hall." So, like the rest of us, they muddle-through despite the incoherence of their short-term actions.

Just think how disconcerting it must feel to get out of school only to find your entire education is not applicable, thanks to the ponzi in progress.

Wed, 05/08/2013 - 16:17 | 3542427 Dr. Richard Head
Dr. Richard Head's picture

I was thinking the whole "Don't piss on my back and tell me its raining" type of attitude.

Wed, 05/08/2013 - 16:19 | 3542436 Pinto Currency
Pinto Currency's picture


Either way, we clearly need more debt to resolve the debt bubble that we are in.

Oh, and bonds are a safe haven and gold is risky and volatile.

Wed, 05/08/2013 - 16:27 | 3542444 ZerOhead
ZerOhead's picture

It will end in tears alright...

Tears of JOY for the bankers... who with the only access to trillions in fresh Fed credit will eventually own every tangible asset left.


Wed, 05/08/2013 - 16:27 | 3542467 Manthong
Manthong's picture

Maybe someone is confusing Austrian with Austere-ian policy implications

Wed, 05/08/2013 - 16:40 | 3542495 economics9698
economics9698's picture

Keynesian economics was always bull shit designed to feed the masses crap.  No serious banker ever believed it.

Wed, 05/08/2013 - 16:57 | 3542547 SafelyGraze
SafelyGraze's picture

"the US has an $11.2 trillion asset shortage, why Bernanke has trillions more of monetization left to go"

tens of trillions

when you print 10T to "bail out" the TBTF, the 10T is then used as collateral to borrow 100T


Wed, 05/08/2013 - 17:24 | 3542614 Manthong
Manthong's picture

"You can't fight City Hall."

some guys that pledged “lives, treasure and sacred honor" might have differed with that opinion.

Wed, 05/08/2013 - 17:29 | 3542625 Pinto Currency
Pinto Currency's picture


Soros was a student of Hayek's in London. 

His investing inights are not related to Soros' special ability.

Wed, 05/08/2013 - 17:46 | 3542695 James_Cole
James_Cole's picture

What should be pretty obvious by now to anyone with a brain is these people (and a good deal of most on planet Earth) will be / say whatever is most opportunistic to them in the present circumstances.

Wed, 05/08/2013 - 23:49 | 3543589 FiatFobia
FiatFobia's picture

"When it becomes necessary, you have to lie"


   -European technocrat

Wed, 05/08/2013 - 16:29 | 3542471 francis_sawyer
francis_sawyer's picture

True dat ~ But I still got my my money on Johnny Pitchfork...


After all... It's one thing to be a douchebag tribe... wiggle your way in to a money printing franchise... saddle the world with debt [based on that concept]... Then, harvest all the paper titles...

It's QUITE ANOTHER THING... To lord over that when the sleepy aspect of human nature wakes up...

Wed, 05/08/2013 - 16:39 | 3542482 ZerOhead
ZerOhead's picture

You lost me at "Wakes up"...

Besides... when this Shitstorm hits people will have the more immediate needs of survival and security of future on their minds rather than the luxury of seeking vengence...

It will be epic.

Wed, 05/08/2013 - 16:46 | 3542510 Rubicon
Rubicon's picture

There's Bitcoin in there them hills

Wed, 05/08/2013 - 16:51 | 3542523 francis_sawyer
francis_sawyer's picture

"Wakes Up" = Imminent Survival Face Slap... [whereby the 'learning curve' is rather fast ~ & which is an aspect of human nature that I fully believe in]...


Trouble is... It's ALSO a human nature to 'cram for exams'...

Wed, 05/08/2013 - 18:33 | 3542833 Jack Napier
Jack Napier's picture

... and forget it all the day after.

Wed, 05/08/2013 - 17:21 | 3542603 auric1234
auric1234's picture

Some humour today: According to Bloomberg, natural gas is the new safe haven:


Wed, 05/08/2013 - 19:18 | 3542931 GoinFawr
GoinFawr's picture

Aieeeeee! NOOOOO0000000000ooooooo......... . .   .   .       .              .

Wed, 05/08/2013 - 20:12 | 3543090 Diogenes
Diogenes's picture

Until the methane hydrate mines and wells come on stream. Apparently there is enough of this stuff to last 1000 years at present rates of consumption.

Wed, 05/08/2013 - 20:45 | 3543174 Doubleguns
Doubleguns's picture

 any increase or decrease of these money substitutes will have exactly the same effects as an increase or decrease of the quantity of money proper, and should therefore, for the purposes of theoretical analysis, be counted as money.”

Sex is a money substitute so the FED cant run out of money cuz we are gonna get a whole lot of fucking from them. Frankly their money supply appears endless. 

Wed, 05/08/2013 - 17:18 | 3542594 qualityhardware
qualityhardware's picture

And the .gov has guns. Lots and lots of guns.

Wed, 05/08/2013 - 16:07 | 3542374 Pladizow
Pladizow's picture

"So, one wonders: is that precisely what JPM and Goldman have had in mind all along?"

YES!!! order out of chaos.

A NWO will not rise out of peace!

Wed, 05/08/2013 - 16:19 | 3542437 McMolotov
McMolotov's picture

Paraphrasing Jim Morrison:

"Blood will be born in the birth of a NWO."

Wed, 05/08/2013 - 18:02 | 3542755 BoNeSxxx
BoNeSxxx's picture

Have you seen the murals at the Denver airport?  I mean, not in some crackpot Youtube video or tin foil hat conspiracy article... I mean just looked at them on their own with nothing to color your judgement?  

That is some creepy shite... It's as big a WTF moment (or was for me when I took the time to visit them).

Anyway, your JM paraphrase brought them immediately to mind...

Wed, 05/08/2013 - 18:22 | 3542802 TeamDepends
TeamDepends's picture

Yes, yes we have and you are right.  What, in God's name, is a death/stormtrooper and apocalyptic scenes complete with dead children doing in a public airport?  Did you ever see the blue (dead) horse with glowing red eyes (not making this up) on the approach to the terminal?  They are taking it down!  Is this another sign the end is near?

Wed, 05/08/2013 - 19:36 | 3542985 formadesika3
formadesika3's picture

it was foretold on the day he crushed his creator that the donkeys would never win the Super Bowl again until Blucifer is repainted white with an orange mane.

Wed, 05/08/2013 - 20:06 | 3543069 Doctor of Reality
Doctor of Reality's picture

Georgia Field Stone

Wed, 05/08/2013 - 17:10 | 3542569 Groundhog Day
Groundhog Day's picture

So what is the outcome of plugging the 11trillion hole.   Gold at 5k or 10k

Wed, 05/08/2013 - 16:09 | 3542388 Moe Hamhead
Moe Hamhead's picture

Showing your age there NA!

Wed, 05/08/2013 - 16:14 | 3542405 Harbanger
Harbanger's picture

Like a politician who plays to a changing trend.  While they fleece us with more keynesian debt.

Wed, 05/08/2013 - 16:16 | 3542417 prains
prains's picture

I think the Sach and JPM are hoping gold can stop bullets and won't burn

Wed, 05/08/2013 - 17:36 | 3542645 GeezerGeek
GeezerGeek's picture

It is true that you don't need a weatherman to know which way the wind blows. 

It is also true that you don't need a Goldman to know which way the gold flows.

Wed, 05/08/2013 - 18:31 | 3542828 El Oregonian
El Oregonian's picture

"Well, of course it is.

Don't have to be a weatherman to know which way the wind blows."


Unless , you're weatherman Bill Ayers, then of course, it blows up...

Wed, 05/08/2013 - 18:48 | 3542868 El Oregonian
El Oregonian's picture


Wed, 05/08/2013 - 16:04 | 3542359 Tinky
Tinky's picture

Can they mention this to the IRS, while they're at it?

Wed, 05/08/2013 - 16:04 | 3542360 Pinto Currency
Pinto Currency's picture



Wed, 05/08/2013 - 16:04 | 3542362 johnlaw1971
johnlaw1971's picture

Zerohedge Rocks!

Wed, 05/08/2013 - 18:47 | 3542873 HeavyShadow
HeavyShadow's picture

...follow the yellow brick road...

Wed, 05/08/2013 - 16:05 | 3542367 Dareconomics
Dareconomics's picture

The single most important factor in the financial and economic spheres is central bank money printing.  Eventually, the world will adjust to this attempt to game the system, but not today.

Wed, 05/08/2013 - 16:06 | 3542373 youngman
youngman's picture

Don´t worry..the big boys in JPM and Goldman have lots of Gold...the real stuff too...and not in offshore somewhere..they know value and how to protect it..

Wed, 05/08/2013 - 16:07 | 3542378 IridiumRebel
IridiumRebel's picture

Shocked, SHOCKED, that JPM isn't all Austrianed Econ'd out like the sentient Mr Zames.

Wed, 05/08/2013 - 16:09 | 3542383 Ness.
Ness.'s picture

I bought the highs on the close today woohoo!! - I was worried I would never see these prices again /sarc.


 Full fucking FUBAR.



Wed, 05/08/2013 - 16:19 | 3542385 Shell Game
Shell Game's picture

Amazing catch, Tylers!   Another brick laid down to pave the path..


' also wonders just how they really feel about gold...'

Wed, 05/08/2013 - 16:09 | 3542386 Charles Nelson ...
Charles Nelson Reilly's picture

Krugman just slit his cats throat!

Wed, 05/08/2013 - 16:13 | 3542403 Bastiat
Bastiat's picture

How sad: it was the only pussy he could get close to.

Wed, 05/08/2013 - 22:54 | 3543472 Keynesian Mess
Keynesian Mess's picture

He's just cranky that he didn't have the credibility to be asked to offer his "wisdom" to that elite group. Perhaps the boobs on CNBC will listen to him instead.

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