I have to confess that when I completed my studies in economics with a PhD magna cum laude in 1969, I had never heard the names of the great contemporary “Austrian School” economists such as Friedrich von Hayek (1899 – 1992), Ludwig von Mises (1881 – 1973), and Murray Rothbard (1926 – 1995). Later, when I acquired my book collection relating to economics and to social sciences, I stumbled upon Rothbard book America’s Great Depression, 1963,because I was at the time captivated by business cycles and especially the Great Depression.
Later, I bought some other books of his but I did not read them all from the introduction to the conclusions.
Based largely on Wikipedia, Murray Newton Rothbard (1926 – 1995) was an American economist of the Austrian School, economic historian, political theorist and activist. Rothbard was a central figure in the 20th-century American libertarian movement, particularly its right-wing strands. He wrote over twenty books on political theory, history, economics, and other subjects.
Rothbard argued that all services provided by the “monopoly system of the corporate state” could be provided more efficiently by the private sector and wrote that the state is “the organization of robbery systematized and writ large”. He called fractional-reserve banking a form of fraud and opposed central banking. He categorically opposed all military, political, and economic interventions in the affairs of other nations.
The following brief paragraph is from an essay by Rothbard, which is based on an article he wrote that was entitled “The Fallacy of the ‘Public Sector,” that originally appeared in the New Individualist Review in 1961.
The Difference Between the Market and the Bureaucracy
(published by Mises Wire on January 25, 2025 at www.mises.org)
“In a business firm on the market, the desires and goals of the managers are yoked to the profit-making goals of the owners. As Mises says, the manager of a branch must make sure that his branch contributes to the profit of the firm. But, shorn of the regiment of profit-and-loss, the desires and goals of the managers, limited only by the prescriptions and budget of the central legislature or planning board, necessarily take control. And that goal, guided only by the vague rubric of the “public interest,” amounts to increasing the income and prestige of the manager. In a rule-bound bureaucracy, that income and status inevitably depend on how many sub-bureaucrats report to that manager. Hence, each agency and department of government engage in fierce turf wars, each attempting to add to its functions and the number of its employees, and to grab functions from other agencies. So that while the natural tendency of firms or institutions on the free market is to be as efficient as possible in serving the demands of consumers, the natural tendency of government bureaucracy is to grow, and grow, and grow, at the expense of the fleeced and benighted tax-payers.”
The December 2024 report was entitled: The Trump Top. While nothing is written in stone in a monetary inflationary environment, it increasingly looks as if the leaders of the last few years (the magnificent 7, including Tesla and Nvidia, semiconductors, cryptocurrencies, and all AI related stocks, etc., are losing their upside momentum and that they are beginning to underperform or decline absolutely.
Contrarian plays are likely to be found among European equities (see last month’s report), Treasury bonds, emerging market equities (especially Hong Kong/China), the energy sector (it is my understanding that a joint Israel/US attack on Iran is imminent), gold miners, real estate, and non-US dollar currencies.
In recent reports, I have repeatedly distinguished between asset inflation and consumer price inflation. Since every inflation eventually ends in a deflationary bust, the economic damage caused by the coming asset deflation is likely to be colossal. The question investors should consider is no longer about “what assets will go up the most” but about “what assets are likely to decline the least?” Looking at how wealth is invested around the world, what is striking is that so little money is invested in physical precious metals and gold miners.
Finally, do remember the words of Murray Rothbard who sarcastically opined that, “A robber who justified his theft by saying that he really helped his victims, by his spending giving a boost to retail trade, would find few converts; but when this theory is clothed in Keynesian equations and impressive references to the “multiplier effect,” it unfortunately carries more conviction.”
With kind regards
Yours sincerely
Marc Faber
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