Criticism
Mainstream economic theorists criticize gold-standard-oriented monetary economists and vice-versa. Most criticism levelled against Fekete originates from doctrinaire Austrian Economists.
The key Austrian criticisms of the Real Bills Doctrine are that this practice would still inflate the "broad" money supply; it would not reduce or eliminate bank runs (as would full reserve banking); and when actually tried, it resulted in numerous financial panics in 19th century Europe and the U.S. (albeit on a smaller scale than those experienced in the 20th century). Fekete's position is that the practise of discounting does not involve banks at all, so the criticism of bank runs is a non sequitur. Bank runs have other sources such as fraud or duration mismatch but not fractional banking nor discounting.
The Austrian School's critiques of Fekete could be considered "purist" critiques, and most Austrians would support the Real Bills Doctrine if the choice was between the current purely fiat credit money system and real bills. Fekete's rebuttal has been that the doctrine is descriptive, not prescriptive; the bills themselves and clearing systems that make them liquid are a market invention; the only support they require is the freedom to form enforceable contracts, a market for urgently needed goods, and monetary gold to extinguish the debt at its (short-term) maturity.
Read more about this topic: Antal E. Fekete
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