The Austrian School is one of the schools of economic thought. Due to its methodological individualism, it is situated in opposition to the mainstream economics, which is based on large aggregates and mathematical models. The Austrian school was founded in 1871 with the publication of Carl Menger’s Principles of Economics, developing the marginalist revolution in economic analysis. Since it early representatives lived in Vienna, the term ‘Austrian School’ was coined, but its influence spreads across the world.
The main contributions of the Austrian School are the subjective theory of value, the formulation of the economic calculation problem, theory of capital, theory of money, theory of entrepreneurship and the Austrian business cycle theory, honored by the Nobel Memorial Prize in Economic Sciences. It differs from other schools of economic thought primarily in methodology, rejecting econometric verification, and by its commitment to the free market and the gold standard.
Austrian School and Gold
Austrian economists advocate the gold standard. They oppose fiat money, as prone to inflation, arguing that contemporary paper currencies did not spontaneously emerge in the free market. Instead, gold and silver were used as money in the free market. The supply of gold cannot be increased by political will, therefore the gold standard is the best protection against inflation. In other words, Austrian economics says that gold was chosen as money by the free market and the monetary system based on fiat money is inherently unstable.
This is why gold is a safe-haven and a bet against the U.S. dollar. Gold used to be money for thousands for years, whereas our fiat money experiment has been here only since 1971. Thus, when this faith decreases, especially in the U.S. dollar, the unofficial world currency, gold prices rise.
However, investors should remember that the Austrian School neither predicts the price of gold, nor claims that the price of gold is manipulated or should always be rising. Nobody knows when the current monetary system will crash – it may actually take decades or centuries and there is no guarantee that gold would become the basis of a new monetary system.
We encourage you to learn more about gold – not only how to use it as insurance against the collapse of the fiat money economy with the greenback as the world reserve currency, but also how to successfully apply gold as an investment and how to profitably trade it. Great way to start is to sign up for our gold newsletter today. It's free and if you don't like it, you can easily unsubscribe.