In the first of a series of articles on identifying reactionaries, I discuss Austrian Economics and its intellectual “heirs”.

The Austrian School — named because its creators lived in Vienna, Austria — is a heterodox school of economics that starts with the classical liberal economics of Adam Smith, then expands it with the idea that economics is shaped by subjective forces: in the absence of force, coercion, or fraud, a transaction between two people is necessarily beneficial to both people, because it reveals that they assign different values to the items in the transaction.

This, by itself, is pretty reasonable. It oversimplifies a bit, but the idea that some rational people can want an item more than other people who are equally rational is a good one. In particular, the theory of “marginal utility” originated with the Austrians, and it is now mainstream and widely accepted as true.

Adherents of the Austrian School — whom I will call “Austrians”, with no deeper relation to the people of Austria — then went further and claimed that, since economics is subjective, empirical data is useless. They claim that, instead, we must rely on “praxeology”: we must study human behavior through the exclusive use of thought experiments, and those thought experiments are more trustworthy than any real-world facts that contradict them.

[Economic] statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori.

— Ludwig von Mises, “Human Action”, as quoted on the Mises Institute webpage

Put simply: no amount of evidence will convince an Austrian that he is wrong about his economic theory.

One of the defining Austrian beliefs is that inflation is nothing more and nothing less than an increase in the total amount of money in circulation, whereas deflation is a decrease. Essentially, the government creates money and gives it to banks, who loan it to people, who buy goods, and the sellers of the goods are forced to raise prices because the sudden buying spree induces scarcity. Austrians further believe that inflation causes market bubbles, and market bubbles cause recessions when they pop, and this is the why the business cycle exists.

All of this ignores a lot of facts about how money actually works.

In particular, consider this puzzle:

  • In the entire world, across all forms of property and ownership, there exists $510 trillion USD in wealth.

  • In the entire world, across all forms of paper money and bank accounts, there exists $40 trillion USD in money.

Why are the two not equal? How could people own so much wealth that there isn’t enough money to buy it all?

The primary answer to that is that not all forms of wealth are currently “for sale”: a lot of that wealth, while it would have a dollar value X if it were sold, is not actually available for purchase.

We see then that there needs to be enough money to cover what people are actually buying and selling in the economy today; what people could buy is irrelevant. It follows then that, for the economy to function, the amount of money in circulation needs to be proportional to the economic activity that the money is lubricating. If the economy slows, money needs to be removed, and if the economy speeds up, money needs to be added; otherwise, prices swing irrationally.

The secondary answer is that many of the goods and services being bought and sold with money are fleeting: food and fuel and electricity are not wealth, because these goods must be consumed in order to make use of them.

Capitalists sell these non-wealth goods in exchange for money, and then exchange the money for durable wealth. As many of the durable forms of wealth are themselves capital — that is, like farmland and power plants, they can be used to create more goods and more wealth — the already-wealthy get wealthier and the poor get poorer.

Eventually, the poor become so poor that they can no longer afford some goods. This causes a reduction in spending levels, which causes a recession. The government then tries to paper over the problem by creating money and giving it to banks, who loan it out to the rich, who use it to increase the wages of the poor, who can now afford those non-essential goods again, continuing the business cycle.

The original Austrians believed that both inflation and deflation were bad, because they both distort the market. But later Austrians decided that, since the government did inflation and they hated the government, that deflation must be good, actually.

When most governments around the world (including the United States) abandoned the gold standard in 1932, these Austrians got very upset. The gold standard was naturally deflationary, as the total amount of gold coming into the system from mining is less than the total amount of gold coming out of the system due to jewelry and industrial uses. When governments abandoned the gold standard and allowed themselves to print money without holding an equivalent amount of gold uselessly in a vault somewhere, it enabled monetary policies with long-term growth of the money supply — the policies that the Austrians deride as “inflation”, even though they don’t necessarily cause prices to rise so long as the money is created in proportion to economic activity.

Combine that with the creation of the Federal Reserve System in the United States in 1913, and many Austrians started spinning conspiracy theories about the Federal Reserve and the end of the gold standard. This naturally linked up with anti-Semitic conspiracies like the “Protocols of the Elders of Zion”, a book fraudulently attributed to Jews that claimed that they ran the banks and financial systems of the world. In their private spaces, many can be found darkly muttering things about the “globalists” and “Rothschilds” and “illuminati” (all dogwhistles for Jews).

This subset of Austrians came to be called “goldbugs” due to their obsession with gold as a store of value.

Modern goldbugs can be found online in many right-wing and “libertarian” spaces. The most dedicated congregate in places like the online fora of the Ludwig von Mises Institute, but they are also common on Reddit, 4chan, and even on television on Fox News. Many have also adopted the “prepper” culture, arguing that we’re on the verge of a world-wide economic apocalypse and that gold metal will be the only thing of value for barter with the other survivors.

Enter Bitcoin and other cryptocurrencies.

Bitcoin (BTC) is explicitly founded on Austrian and goldbug deflationary principles: it was designed so that there will never exist more than 21 million bitcoins, even though bitcoins are frequently lost forever (effectively destroyed) by people forgetting the passwords to their bitcoin wallets.

The first wave of Bitcoin users genuinely believed in its value as a medium of exchange. Bitcoin Pizza Day is a holiday for some bitcoiners, as it marks the day of May 22, 2010 when Laszlo Hanyecz became the first person to purchase something with Bitcoin as the currency: two Papa John’s pizzas, at a cost of 10,000 BTC. However, the value of 10,000 BTC (in USD or in pizza) has risen dramatically since then: current exchange rates mean that, as of this writing, Hanyecz’s two pizzas cost him $473.5 million dollars, versus if he had held the 10,000 BTC and paid for the pizzas in USD.

This shows the first of three fatal flaws with Bitcoin as a currency: it deflates so quickly that people who possess BTC are strongly incentivized to hold on to it rather than spend it. As we saw above, money is a medium of exchange, not a type of wealth in itself, because it has no use except to be spent. In a functioning economy, there is no incentive to hoard money except as a “liquidity cushion” (i.e. enough to pay for surprise expenses).

The second fatal flaw with Bitcoin as a currency is that Bitcoin is limited to 7 transactions per second, world-wide. The more people use Bitcoin, the harder it is to be one of those 7 transactions; you have to bribe people to accept your own transaction over other transactions, by paying “mining fees” that can stretch to $500 USD or more per transaction. Imagine a credit card that cost you $500 in fees each time you swiped it. And tomorrow, the “mining fee” might be half as expensive, but it could just as easily be twice as expensive.

The third fatal flaw with Bitcoin is that it relies on “proof of work”, or more honestly “proof of waste”. The Bitcoin “miners” that confirm the transactions and make the blockchain work are all in competition with each other, and Bitcoin mining automatically scales to require more and more computer power as more miners join the rush. The current estimate is that the per transaction cost of Bitcoin is 1,173 kilowatt-hours of electrical energy (4.2 gigajoules), plus 272 grams of e-waste. Each time you “swipe” your Bitcoin card, you are burning 140 kilograms of coal (310 pounds of it) and throwing away two iPhone 12 Minis.

Since Bitcoin was first invented, there have been many other cryptocurrencies. Approximately all of them share the same three fatal flaws as Bitcoin; many of them even have additional fatal flaws, making them strictly worse than Bitcoin.

But the cryptocurrency enthusiasts no longer care about using their coins as an actual currency. They are now reduced to hoarding their virtual coins on “exchanges”, which are centralized, non-blockchain businesses that allow users to trade between cryptocurrencies and to trade cryptocurrency for actual money. These exchanges have been the site of some spectacular frauds, all of which are oriented around artifically pumping up the price of the coins in order to attract new “investors”, forming a pyramid scheme. Meanwhile, the older investors are desperate to dump their actually-worthless cryptocurrency holdings on new suckers.

The center of this fraud today is a company called Bitfinex, which produces a “stablecoin” called Tether (USDT). Bitfinex maintains the fiction that 1 Tether is worth 1 US Dollar, but as can be seen by the multitude of exchanges that are giving away hundreds of free USDT in exchange for signing up as a cryptocurrency day trader, this is a lie. It is flatly impossible that Tether users will ever be able to redeem the $78 billion USDT that Bitfinex has printed, because Bitfinex doesn’t even have $1 billion USD in the bank, nevermind $78 billion USD. Bitfinex claims that it holds a “basket” of assets with equivalent value, but it’s widely believed that those assets are themselves cryptocurrency coins, and Bitfinex would be required to sell those coins for real USD, not USDT, in order to pay out USDT holders. This would cause the price of all cryptocurrencies to crash, as measured in USD.

Nowadays, even the goldbugs look at cryptocurrency enthusiasts as nuts.

How can you identify these reactionaries?

  • Encouraging people to “invest” in gold or in cryptocurrencies
  • Using phrases like “NFT”, “Web3”, “DeFi”, “blockchain”, “hodl” (hold), “number go up”, or “pump” in a positive way
  • Being really, really interested in talking about “inflation”
  • Linking to sites like
  • Promoting F. A. Hayek, Murray Rothbard, George Mason University, or the Cato Institute
  • Putting excessive blame for economic conditions on the Federal Reserve
  • Making dark hints about the year 1913 (creation of the Federal Reserve)
  • Making dark hints about the year 1933 (end of the U.S. gold standard)
  • Making dark hints about the year 1971 or 1973 (end of the Bretton Woods agreement, which only affected international trade and not domestic economic policy)
  • Conspiratorial thinking about the financial system or banking specifically, as opposed to all rich people
  • Any mention of “globalists” is guaranteed to be consciously or accidentally promoting anti-Semitic conspiracy theories

Further reading:

Screenshot of the three Twitter tweets linked below
Source: 1, 2, 3