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'Rothbardian' errors exposed

October 5, 2005

Oh Dear! We're being chastised by the 'real' bills crew again. This time though, not only are the truly extraordinary mental contortions of the Feketians on display but methinks their inflationist mask has slipped just a little more than they intended [please read on] I quote:

To start with, Rothbardians have not adequately researched history [sic!] because they believe so deeply in the rationalist myth that truth can be discerned solely through the spinning out of deductive logic [sic]. Consequently they have confused the Financial Bills Doctrine of central government banking with the Real Bills Doctrine of Adam Smith. They misunderstand the nature of credit, for they perceive it as monolithic, rather than dual.

They misunderstand interest, believing that there is no difference in the interest rate and the discount rate. They fail to grasp the difference between the propensity to save and the propensity to consume. They think the distribution of consumer goods can be financed like the production of fixed capital assets through borrowing and lending. They presume in their ivory tower world of deductive logic that gold will easily adjust prices down to accommodate expanded productivity.

As a result of these misperceptions [sic], they fail to see that under a 100% gold system we would have to endure a much lower standard of living because the trillions of dollars of credit necessary for the production and distribution of consumer goods would have to be taken out of savings, i.e., gold reserves, and thus could not be used to finance factories, technology, plant and equipment, etc. This makes their 100% gold paradigm unworkable for any society that wishes to achieve modern levels of capital accumulation.

[emphases mine] I rest my case!

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