for instance. Austrian economics would say that in a fiat currency, a central bank should only issue new currency when there is demand for it to stave off inflation, and not for purposes of "easing" the markets as the federal reserve has been doing recently.
But let's apply austrian economics to this, and for the example let's say that our economy hoisted itself up by it's bootstraps.
We were in a deflationary period, and had there not been an issue of fiat easing, we would have seen the value of the dollar increase. great huh? not really in a fiat world. Our dollar would have risen in value while others decreased. This means that any goods we export would be far too expensive for other countries to purchase, which would have hurt our own economy in the long run. it's the whole "protectionist" thing.
Ultimately you want to have a currency backed up by a tangable material, gold, silver, etc. (gold is no longer viable as too many electronics require it).
A fiat system is basically a checks and balance against other countries based off of debt ratios. to that end, austrian economics can work in a fiat system IF all other major trading partners focus on austrian economics as well. If some trading partners are keynesian and some are austrian, well you find yourself in the situation of germany with spain and greece, where in order for them to survive, germany has to bail out other countries.
In many ways we were lucky that the european union formed when it did. had it not, we would have been in far more trouble. Germany and UK took the brunt hit for greece and spain, rather than WE taking the hit had their currencies not been in trouble.
This was the reason why we saw so many protests in greece over austerity, because germany gave them an ultimatum, either become austire, or go down in flames, and we'll take the hit to our (german) economy.
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