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The Austrian theory of credit is revolutionary in the way it identifies the role of the credit market in spontaneously allocating resources to the most productive activities in an economy, and the nefarious consequences of government interference in this process. With all its merits, however, its a priori methodology leads to severe problems. On one hand, it roots credit exclusively on the lender's time preference, overlooking the role of the borrower's productivity in defining interest rates. On the other, it sees saving as the only source of credit, overlooking an entire different credit instrument based on clearing: real bills of exchange.
From an individualistic methodology to an accurate theory of economic cycles, the Austrian School of Economics is one of the great schools of thought of our times. Since Ludwig von Mises, however, the school has adopted a subjectivist epistemology. Founded by Antal E. Fekete, the New Austrian School of Economics tackles that issue, replacing Mises' subjectivism with an objective epistemology. This first article details the differences between methodology of both schools, and how they impact their theories of value and money.
Recently, Modern Monetary Theory has been gaining visibility in the US at an alarming rate, to the point where elected public representatives such as Bernie Sanders and Alexandria Ocasio-Cortez have begun to use it as a theoretical background for public policy. As we will see, however, there is nothing new about this modern theory; it is a very old idea, whose recent popularity is merely the natural result of the expansive tendency of the contradictions that already exist in orthodox positivist economics
