Austrian Economics: How Ron Paul Changed My View of Money

I mentioned earlier this week that the inaugural Phoenician League Investment Summit was the culmination of a multi-decade chain of events.

It all started on the floor of Wells Fargo’s loss mitigation department in the wake of the 2008 financial crisis. That’s where I learned the importance of incentives… and I started to see the financial system for what it truly is.

At the same time, a gentleman by the name of Dr. Ron Paul was running for president. I’d tune into the debates, and this guy kept talking about gold, Austrian economics, and the boom-bust cycle – all things I’d never heard about before.

That was curious to me. I happened to hold a finance degree from a large public University, but this guy obviously knew something about the financial system that I did not.

So every time Dr. Paul would name an Austrian economist in one of his debates, I would go to Amazon and order one or two of their books. I picked up Henry Hazlitt’s Economics in One Lesson… I got Friedrich Hayek’s Road to Serfdom… I ordered Ludwig von Mises’ Theory of Money and Credit – and Amazon had them on my doorstep within a couple of days.

I spent all my spare time reading those books… and then I went looking for more. That’s when I stumbled upon an economist named Murray Rothbard. He had written a book called A History of Money and Banking in the United States, and it looked fascinating. So I ordered it.

Rothbard also had this book called What Has Government Done to Our Money? I picked that one up also… and it’s the one that pushed me over the ledge. It illustrated in simple terms how the modern financial system ran on fiat money – currency that governments decreed to be money.

The book also helped me see that this fiat money came into existence through debt. That is to say, whenever someone takes out a loan – be that a government, a corporation, or an individual – that loan creates the equivalent value in new dollars.

Put more simply, our money today comes from debt.

So I got to thinking – if bank loans simply conjure money into existence, how is it that they can charge interest on that money? I mean… the money is just an accounting journal entry. It’s not real.

Needless to say, I couldn’t work in the corporate banking sector anymore after that. I just could not look at myself in the mirror knowing that I was part of such a system.

It took me a little while to make my escape, but I quit my job, sold my home in the city, and used the proceeds to buy a 5-acre property at the end of a gravel road way up in the mountains of Virginia. From there, I had the time and energy to focus on the world of investing.