A Tribute to Austrian-School Economist Kurt Richebacher

Kurt Richebächer died two weeks ago at his home in Cannes, France, at 88 years old. R.I.P.

One of our greatest complaints is the way the modern world pays homage to its dead. When a good man finally has the mud tossed on his face, he is almost instantly forgotten; so little notice is taken, it hardly seems worth dying. Meanwhile, those who are widely mourned and greatly regretted usually don’t deserve it. When Paris Hilton dies, for example, America will probably declare three days of national mourning and hang black crepe on the capitol.

Kurt Richebächer met his end with hardly an “ave” from anyone but friends and family. We pause to remember him here for both sentimental reasons and practical ones. On the sentimental side, we remember him as an old friend and fellow idealist. On the practical side he, and practically he alone, understood the worldwide economic boom for what it really is – a sham.

Kurt Richebächer was born at the wrong time, in the wrong place. He came into this life in the middle of WWI, on the losing side. He was a young man when another losing war got underway. He was one of the generation who were plucked up by the Wehrmacht in ‘39…and lucky to still be alive by ‘45. Kurt was lucky, in a way. He suffered a disabling accident while still in training. He spent the entire war in various military hospitals, unable to walk; the rest of his life he walked only with a cane. Doctors didn’t know exactly what was wrong with him; at one point German military officials threatened to prosecute him for malingering. Had Kurt’s father, a Nazi party member, not intervened, he might have been shot. Instead, in his hospital bed, he began to read economics.

The classical economics texts Kurt read made sense to him. They described not merely the world as it was, but the world as it ought to be. They emphasised discipline, hard work, and capital formation as the essential elements of wealth creation. And they warned against excess credit and inflation as if they were loose women and demon rum; both were sure to lead to ruin.

The war over, Germany threw off the bad advice of its American overseers. The deutschemark was made a rock-hard currency. Germans clove to the old economics. The country prospered. And Kurt Richebächer rose to be chief economist for Dresdner Bank.

But then, in the 1970s, classical economics – known as the Austrian School today – was going out of style, even in Germany. Economists – those in the United States and Britain – found they could upgrade their trade. Instead of merely reminding people of the old, un-yielding truths they began offering new tricks and innovations. They promised not merely to explain how the world works, but to make it work better…by taking the devil out of it and making it a more agreeable place. Using their new tools, econometrics and statistical analysis, they believed they could manage an economy in such a way that full employment and steady growth could be achieved, then maintained forever.

Kurt saw the new trends in his profession as dangerous; he regarded their proponents as quacks.

“You anglo-saxons…” he said to us once… “you just have no concept of financial discipline. Just look what you are doing – at every level. In Europe, we have high levels of state debt, but at the individual and business level, our balance sheets are pretty strong. But in almost every English-speaking country, people borrow for everything.

“All this emphasis on statistics and calculations…,” he went on, rapping his silver-handled cane on the table for emphasis, “without a proper theory, it is all nonsense. And your economists seem to have no theory at all…they just think they can manipulate the system in order to get whatever outcome they want. They think economic growth comes from consumer spending and that they can control consumer spending by adjusting lending rates. It is unbelievable that anyone takes this seriously. It is capital formation that really matters. A rich society is one with a great stock of capital…one that builds capital and puts it to work to create more capital. A rich society is not one where people consume. Just the opposite. It is not what is consumed that creates wealth; it is what is NOT consumed. Yet, all the Anglo-Saxons focus on motivating consumers to consume. And now they are consuming more than they make. I tell you, in 70 years of studying economics, I have never seen such nonsense.

“I have always thought it was the duty of each generation to leave the next one a little better off. That means, each generation has to consume less than it produces. It has to leave a little something extra. The problem, you see, is not an economic one…what we are doing to our children with this use of credit and debt is deeply immoral. It is wrong. It is wrong to burden the future with our mistakes, our conceits, our ambitions. This is what we are doing, and it is shameful.”

Kurt warned against the bubble in tech stocks in the late ’90s. Then, he warned against the great bubble in housing. In September 2001, he wrote: “The new housing boom is another rapidly inflating asset bubble financed by the same loose money practices that fuelled the stock market bubble.”

In one of his final letters, he concluded, “The recklessness of both borrowers and lenders has vastly exceeded our imagination.”

He went on to predict “that the housing bubble – together with the bond and stock bubbles – will invariably implode in the foreseeable future, plunging the US economy into a protracted, deep recession.”

Paul Volker once remarked that the challenge of modern central bankers “is to prove Kurt Richebächer wrong”. Instead, they are proving him right.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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2 Comments on "A Tribute to Austrian-School Economist Kurt Richebacher"

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The odds of a public mourning in America for an man of such principles as Kurt are slim to none. The agenda of our news agencies, those who would promote the mourning, is in direct competition with his principles. This agenda is being directed by those with the most to gain (up until the collapse) by ignoring his advice and plunging us further into the madness.

A fond farewell from yours and the limited few who see ahead is all that can be expected.


People like Kurt are a rare breed. He should be applauded for his logical and razor sharp analysis of global economics.

If more people were to heed his advice we would not be heading quickly towards total ruin fueled by greed.

More people should simply decide not to participate in the madness, but greed is a powerful motivator.

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