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Articles, Authors

Switzerland and the monetary crisis in Europe
Author: Prof. Antal E. Fekete

Compromising currency stability
Before the rise of Keynesianism, securing the stability of currency was an indispensable task of monetary policy. The constant value of the currency is a precondition for making the economy flourish and progress. Not only is a variation in currency values a source of great social injustices, it also renders economic calculation impossible. It frustrates the rational utilization of the factors of production. It severs the essential correlation between labor and wages. In consequence of these ill effects, the economy is turned upside down, existing capital is being eroded, the accumulation of new capital discouraged. Production declines. A floating currency is in fact so destructive that it is incomprehensible how it could have lasted 40 years without anybody noticing its negative features. The only explanation for the maintenance of this destructive system seems to be the monopoly of the Federal Reserve banks in dictating the research agenda of universities and other think-tanks. No criticism of open market operations is allowed to appear on the pages of mainstream economic journals.

Cheating the laboring classes
Principles demanding currency stability were universally taken for granted before 1930. Then they were thrown to the winds during the Keynesian revolution. Deliberate inflation was made respectable for the first time, largely through the demagogic appeal that inflation is a legitimate tool to combat unemployment, and that credit is a valid substitute for capital. However, what is involved here is the assumption that wage earners and their unions are so dumb that they always stand ready to trade real wage increases for nominal wage increases. Keynesian monetary theory has done nothing to further the cause of welfare among wage earners.

Another foolish Keynesian tenet is that prior saving is not a necessary prerequisite for spending. In fact, it suggests that in certain situations prior spending is needed to do the “pump priming”. Compare this with the dictum of Austrian Economics. According to it the only way to increase employment and real wages permanently is to increase the per capita quota of accumulated capital. The validity of tenet still stands. The rest is smoke and mirrors designed to fool wage earners. Meanwhile, deliberate inflationary policies made respectable by Keynes bring about all the negative consequences of destabilizing the currency and interest rates, weakening the financial system and pauperizing labor.

Another obnoxious dogma of Keynes is that it is legitimate to sneak items from the liability to the asset column of the balance sheet of the government. “One pocket owes it to the other” - goes the Keynesian slogan. This is a deliberate overthrow of valid accounting principles. It is tantamount to throwing the ship’s compass into the ocean. The penalty for this foolishness is not instantaneous, but it is compounding with time.

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