Money Matters - August - 2021

Austrian Economics – An Economic Perspective

During the run-up to the 1848 French Revolution, Fredrick Bastiat, French economist, journalist, and proponent of Austrian Economics, observed, “Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone.”

As the post-pandemic economy is underway, we’ve seen impressive job growth, a shift to a demand for labor, and high inflation. In June, there were 850.000 new jobs in the US, with an unemployment rate of 5.9%, compared to 14.5% a year earlier. Currently, the national inflation rate is 5.4%, well above its forecast of 4.9%. Among industries hardest hit are transportation services, at 10.4%, and gas, at 45.1%.

However, at empiriKal partners, we look beyond the financial fundamentals and utilize a geopolitical perspective when evaluating investment opportunities. Cuba provides a current example. As Cubans take to the streets demanding resources and economic freedom, I’m reminded of a personal trip to the island nation as a Political Science student almost 20 years ago. I remember a small business economy emerging as young people sold music, textiles, and cigars to tourists on the streets of Havana. I asked a local why this was happening. She told me the Cuban government had lifted restrictions since the fall of the USSR, which had been subsidizing the Cuban economy.

I reached out to emperiKal partner’s CEO, Eric Harding, for his assessment of the situation. Here are my questions and Eric’s answers.

Will Cuba be a free market economy soon?

“Cuba, and unfortunately, even the US could use a shift toward Austrian Economics.”

What is Austrian Economics?

“This system rewards productivity. The best level of production occurs without government interference.”

Why is it relevant today?

“With too much government assistance today, we are in a failing system. The US printing more dollars is driving up inflation.”

How will introducing Austrian economics help the current economy?

“It’s a philosophy that rewards individualism and encourages individual responsibility. It’s based on freedom. Contrary to popular beliefs, it’s the real meaning of liberalism. Deregulate. Remove regulatory weight that holds back human action and decentralize allowing human creativity to flow organically – not having to compete with government.”

What does this mean for investors?

“Our current political leadership has placed us at the threshold of an inflationary economy. For now, investors need to utilize a strategy that performs well during inflation. It’s ‘Crony Capitalism’ that’s holding the natural supply and demand levers back in the market from where they should be.”

Perhaps Austrian economics is something that every American should study, especially those who are younger with years to execute, knowledge to create, and a desire to make social change. Those who adopt Austrian economics have the most to gain because they’ll capitalize on the economic disruptions of our time and will own the rewards as society benefits.

Eric commented, “As seen in the Game Stop example, younger investors have a lot of knowledge and ability to move the markets. The Game Stop scenario is a populist movement.”

For investors wishing to hedge against the current risk of inflation, there are several investment strategies we can help you implement. While some full-service investment advisors are willing to accept smaller accounts, at empiriKal partners, llc ©, we’re geared to help all ATRA members, regardless of their stage of life or portfolio size.

Let us help you rather than going it alone. If you already have an investment advisor, congratulations. However, if you’d like to learn more about what investment advisors do for their clients, please feel free to reach out to me at empirKalpartners.com for an individual assessment.


Edward Vela is an Investment Advisor and Estate Planning Specialist at empiriKal partners, llc©, with 13 years of wealth management experience. He earned a Journalism Certification from the University of Massachusetts, a BA in Political Science, a Financial Planning Certification at UCLA, and an MBA from the UCLA Anderson School of Management. You can contact Edward at 925-300-8805 or email edward@empiriKalpartners.com.


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