In Jim Cook's Archive


Back in 1975 I had lunch with a friend who brought with him a young money manager.  This fellow eventually became a well known financial guru around town and still heads a prominent management group.  I had started Investment Rarities in 1973 and had immersed myself in hard money literature.  I had especially studied the Austrian School of Economics whose firm belief in sound money was best expressed by the great economist Ludwig von Mises.  Over lunch my views clashed with the Wall Street advocate.

He saw no chance of future inflation.  I claimed it was inevitable.  Professor Mises had pointed out in his opus, “Human Action,” that central bank increases in a nation’s purchasing media must inevitably be reflected in the price of goods.  He called this process inflating.  The price increases would not necessarily be immediate but must eventually show up.  When I advanced this argument over lunch my new acquaintance assured me it could never happen.  However, within a few years inflation roared into the double digits.  Wall Street (and government) has always been woefully inept at predicting inflation.

Adherents to the Austrian School have a brilliant record of predicting the excesses and setbacks of our economy.  If you understand Austrian economics you can see what’s coming.  At a dark moment in my life I banked on the hope that my Austrian school economic views would be right.  In 1988 and 1989 the precious metals business hit bottom.  My company was failing and creditors were closing in.  I debated whether to continue.  Another business could be far more profitable.  Hardly anyone in America believed the way I did.  I went back to the books of Mises and eventually concluded that he had to be right; America was on the wrong path and eventually gold and silver would be in great demand.  I made the necessary cuts in my company’s overhead and plodded on.

Not long after that I made friends with the only newsletter writer whose views I shared at that time.  His name was Kurt Richebacher.  Although no big fan of gold and silver, this German banker sounded strong warnings about the outrageous credit excesses in America.  He reinforced my views and we used his predictions as a springboard for our marketing.  When Bill Clinton was elected in 1992, the buying of gold and silver picked up and we were out of the woods.  Needless to say, Dr. Richebacher‘s dire predictions proved to be on the money.  Were he still alive I can assure you his predictions would curl your hair.

The quotes that follow this article are culled from publications that express the views of the Austrian School of Economics.  There are a lot more advocates of this anti-Keynesian philosophy now than there were twenty years ago.  For one reason, the Austrian thinkers have clearly forecast future economic events.  Will they prove to be correct in the years ahead?  I think so.  It’s certainly worth you considering the possibility.

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