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Antal E. Fekete


Antal E. Fekete is a retired professor of mathematics and statistics at Memorial University (Newfoundland, Canada). He is a proponent of the gold standard and critic of the current monetary system.

His theories fall into the school of economic thought led by Carl Menger. His support of the gold standard has similarities to Austrian Economics; however, Fekete’s treatment of fractional-reserve banking, capital or time preference theory of interest, real bills and quantity theory of money is different from that of Murray Rothbard and Ludwig von Mises. In 2002 Fekete started the Gold Standard University on the Internet. Lecture notes were published and students could consult free of charge through the Internet. Gold Standard University went live in February, 2007, when Fekete started semi-annual sessions at the Martineum Academy (Szombathely, Hungary). There is a substantial body of research material and lecture notes, as well as the Gold Standard Manifesto, made available on his website, that have grown out of this initiative.


Fekete was born in Budapest, Hungary, in 1932. He graduated from the Eötvös Loránd University in mathematics in 1955. He immigrated to Canada in 1957 and received an M.Sc. from the University of Ottawa. He was appointed assistant professor of mathematics and statistics at the Memorial University of Newfoundland in 1958. He retired with the rank of full professor in 1992.

During this period, Fekete had tours of duty as visiting professor at Columbia University (1961), Trinity College (1964), Acadia University (1970), and Princeton University (1974).

After retirement, Fekete was Resident Fellow at the Foundation for Economic Education (Irvington-on-Hudson, New York). Following that, he taught Austrian economics as visiting professor at the Francisco Marroquín University in 1995. In 1996 he won the first prize of the essay competition of Bank Lips, Switzerland, with his entry, “Whither Gold?” His essay was published the same year and a second edition was printed in 1998. In 2001 he was appointed consulting professor at Sapientia University. Since 2005 he has been “professor at large” of the Intermountain Institute for Science and Applied Mathematics (Missoula, Montana).[1] Fekete currently runs the New Austrian School of Economics (Münich, (Germany). His book Le Retour au Standard Or was published in Paris in 2011

At the end of 2012, the New Austrian School of Economics received an endowment to continue its activities in teaching, publishing and research, et al. Spanish professor Juan Rallo, associated with the Juan De Mariana Institute, has taken over the tasks that ensue with running NASoE. Prof. Fekete nevertheless makes regular appearances on television, a.o. the Max Keiser show.



Fekete is the author of Real Linear Algebra, “EUCLID Supplemental Textbook: Economics – Alternative Perspectives” and many other papers on mathematics to be found in specialised journals.

Monetary research

Fekete is an autodidactic on monetary economics. He has several points of criticism against mainstream economics, the main one being that equilibrium models are not fitting for a highly non-linear world. Instead he proposes a disequilibrium theory, based on Mengerian principles of conversion. Other criticisms may be summarized as the teleological use of econometrics by economists and the disingenuous treatment of any research on the gold standard.[2]

In 1984, Fekete was invited by the American Institute for Economic Research to spend a year as visiting fellow. He served as editor of the Monograph Series of the Committee for Monetary Research and Education, while contributing several monographs to the Series, reproduced on his website.[3] He also acted as senior editor for the American Economic Foundation, and produced a pamphlet series Ten Pillars of Sound Money. When in 1984 South Africa celebrated the 100th anniversary of discovering gold in the Witwatersrand, at the conference Gold 100 commemorating that event in Johannesburg, Fekete delivered the keynote address entitled “Gold in the International Monetary System”.

Real bills doctrine

Fekete is a proponent of the real bills doctrine sometimes called the Quality Theory of Money. First described by Adam Smith, real bills are a form of circulation credit collateralized by lower-order goods in the final stages of being brought to market. Fekete’s position can be summed up as follows: self-liquidating, short-dated commercial paper on goods in most urgent demand by consumers should form the flexible portion of a money supply whose other component is a stable store of value. Fekete advocates a worldwide, gold-coin standard with real bills and claims that these parts cooperate to act as both media of exchange and stores of value.

Fekete supports his position with historical notes on banking and international trade practices throughout the Industrial Revolution and with classical economic reasoning about the arbitrage activity of actors on the margin, while recognizing the emergence of real bills some time after the collapse of the Roman Empire but surely in Medieval Europe.

Real bills for goods in high demand cannot logically be “inflationary”, since both goods and coin exist already. Both bills and goods are taken out of circulation simultaneously. The discount practice is therefore a bridge for time (maximum 91 days or 1 season), not for funds. The discount rate cannot be regarded as an “interest rate”, a position Charles Rist and John Fullarton have also taken. The nature and origin of the discount rate are entirely different from that of the rate of interest. The two rates are completely independent of one another. The rate of interest is determined by the propensity to save; the discount rate by the propensity to consume.[4]

The real bills doctrine has a legal dimension to it in as much that real bills are related to but separated from real – that is, tangible – goods and the contractual relations flowing from the consensual agreements made, which separates forward sales contracts from real bills. Forward contracts are settled on a future date and real bills are discounted in the present. Legal remedies and exceptions are possible between buyer and seller of the goods, but these remedies and exceptions would hamper the circulation of the real bill. Subsequently, the lex mercatoria worked out an unconditional full liability for the drawer. This completes the abstraction of the goods from the underlying contractual liabilities.

Real bills have in the past spontaneously emerged (see Lancaster region at the time of Adam Smith), provided that silver and gold were freely minted – that is, not hoarded such as in times of social instability, when there would be a premium on the metals. This would clearly but surely imply a society where law and order prevails, including the enforcement of the contractual liabilities made in general and with real bills in specific.

In his vision of privatized money and a market-determined discount rate, the supply of real bills is directly related to the value of consumer goods coming to market in the near future. Without financing on this basis, a merchant economy loses efficiency adapting to a discount rate signal not of its own making. Trade mediated by less-direct forms of credit is vulnerable to outside financial crises and may seize up, resulting in depression. Discounting bills would be logically preferred over investments in loans, even if the latter were at higher rates. Bills, circulating on their own steam as instruments of added value, are materially different from loans, which are instruments of debt. Besides being a superior instrument over a debt-based instrument, the bills’ maturities differed materially from loans. The discount practice amounts in fact to profit sharing. Merchants engaging in bill discounting are more comparable to business-venture partners than to debtors and creditors, precisely because the different nature of their relationship. The face value of the bill does not relate to debt and the discount rate does not relate to interest.[5]

In Adam Smith’s time, real bills had already a long history (since at least the 13th century)[6] of entering into circulation spontaneously. In 17th century Britain, high-quality commercial paper was for over a century considered a sound reserve asset for banking and brokerage purposes. In Fekete’s opinion, real bills are earning assets and bank notes are liabilities,[7][8] differing like “chalk and cheese”. Bank-note currencies are therefore inferior to real bills as they require a larger element of trust in a smaller number of economic agents (that is, in the adequacy of the banks’ fractional reserves).

However, current economic thinking, epitomized by J.M. Keynes, criticizes the gold standard for being the cause (and international transmission vector) of the 1930s depression. Fekete’s rebuttal is that the Great Depression (and interest rate volatility generally) were a response to legislatures and central banks suppressing the market in real bills and taking gold coins (into which bills mature) out of consumers’ hands.[9] He cites events of 1909 in France and Germany,[10] obliging their civil servants to accept paper money in lieu of gold coin, and says international trade sanctions after World War I destroyed the international commercial paper markets.[11][12]

Both the quantity and quality sides in the debate over a correct theory of money acknowledge that a worldwide, gold-coin standard would seriously reduce government sizes, limit their indebtedness, and curtail their ability to run large deficits.[13] Therefore, the debate between full-reserve-banking Austrians and advocates of real bills such as Fekete can be considered “technical” in nature. Both strongly advocate a return to the gold-coin standard in preference to the current monetary system, which both groups consider unsustainable and destructive.[14]

Discount vs interest

Fekete maintains that the influx of fresh monetary metal into an area is not inflationary and contends that it is a widespread academic myth.[15] Pointing out the difference between discount and interest (see above), emerging new gold will give rise to a diminishing discount rate on real bills. The real bills would be drawn on newly manufactured goods. Both goods and bills disappear from circulation, as soon as the final, gold-paying consumer withdraws his goods from the shop. A high discount rate would tend to draw gold to a region and a low discount rate would tend otherwise.[16] If and when new gold purchasing media comes to the market, discount rates on real bills would drop – hence its unattractiveness for investors. Previously submarginal goods would as a result of the new purchasing media become marginal again. Manufacturing of new goods in high demand by consumers would emerge together with new gold.[17]

Real bills are withdrawn from circulation after one season as soon as the corresponding goods (of which abstraction was made in the form of a real bill) are consumed (being 91 days maximum).[18] Neither the circulating real bill nor the new purchasing media are therefore inflationary. The assumption is an honest and publicly scrutinized discount system, rejecting both the Acceptance House shelter and rollover practices of real bills and phantom goods, which would be inflationary. If prices of certain or all goods or services were rising under an unadulterated gold standard there would be another explanation (for example, war).

The linear quantity of money theory also does not hold when one takes into consideration that new monetary metal is even more likely to enter the markets of financial instruments and savings. Under the hexagonal model, new savings would be available for research and development (R&D) and entrepreneurs alike increasing scope, quality and quantity of production as well as increasing productivity without dramatically bringing down interest rates. Under a fiat currency standard, the addition of new purchasing media brings down interest rates over sustained periods of time, marginalising existing manufacturers. It erodes the purchasing power and siphons money into government bonds, which are offering a capital gain with every increase in the quantity of money through open market operations. With risk-free profits offered to the banking fraternity, money tends to be used for speculative purposes rather than for R&D or production facilities, which are not risk free.

Hexagonal model of capital formation and interest

Equilibrium Theory is one-dimensional and flawed according to Fekete.[19] Supply/demand arguments, including the Quantity Theory of Money (Milton Friedman, going back as early as Richard Cantillon) are suspect as it does not stand up to scientific scrutiny.[20] Using a Mengerian disequilibrium model, Fekete maintains that there are two rates of interest: a floor and a ceiling rate. Under an unadulterated gold standard, the floor rate of interest is determined by the marginal time preference theory and the ceiling rate is determined by the marginal productivity of fixed capital.[21][22] The same disequilibrium model is valid under a debt based monetary system, but the floor rate of interest is now determined by the marginal liquidity preference of bondholders (also going by the name of the yield curve). The ceiling rate is determined by the marginal productivity of speculation.[23] Fekete contends that under an unadulterated gold standard, interest rate variations were mild and easily absorbed. During the period of the gold coin standard (although not entirely unadulterated), in use in a large portion of the world during almost 100 years since the beginning of the 19th century in the British Empire, interest rates and prices were amazingly comparable and stable among the participating countries.[13] Under a debt based monetary system, however, interest rates are not stable and have been biassed downward especially since 1980. Whereas stable rates are acceptable for every protagonist under a gold coin standard, gyrating rates are destructive for capital providers. Mainstream economists maintain that lower rates are necessary to reflate the economy. Fekete contends that liquid capital, when dissatisfied with its remuneration, has been seeking better opportunities by expanding Eastwards (risk seeking capital) or by seeking shelter in the bond market (risk averse capital).[24] As far as the risk averse investors are concerned, their capital finds its way into the bond markets, hence the disproportionate size of both capital and bond markets. In macro-economics, this is called the liquidity trap. Most economists maintain that Western economies are evolving from a manufacturing into a service-economy. Fekete contends that the unstable interest rate regime destroys the industrial capital base of Western developed economies. The destruction takes two forms: One, new risk seeking entrants convert liquid capital into fixed capital but are trapped by ever lower rates, and incur opportunity costs. Only few economic participants are able to renegotiate lower rates with financiers or issue reverse convertible bonds. Two, older participants realize they cannot compete with new entrants locally or abroad who financed their plant at lower rates – their role is reduced to price takers – and are eventually forced to convert fixed capital back to liquid capital, taking losses and shedding their labor complement in the process. The risk averse investor is in the majority and shelters his capital in the government bond market, withholding much needed equity from the economic scene.[25][26]

Basis trading

Fekete disputes the claims of “naked shorting” of precious metals markets. He contends that holders of monetary metal are to a large extent professionals and are using the futures market to hedge their physical long positions with an equivalent short in the futures market, in much the same way as a grain elevator operator. The offsetting of long positions with short futures would only appear to be naked, as participants to the futures market are under no obligation to divulge their hedge.[27][28][29] The long time contango of the futures market is what provides metal holders (longs) with an income. This type of professional trading is known as Basis Trading. If spot prices of gold or silver are permanently above their futures price, the precious metals market is going into permanent backwardation. According to Fekete, the silver market being more volatile and narrower, once going into permanent backwardation, will function as an early warning system for the end of the fiat currency system.


Mainstream economic theorists criticize gold-standard-oriented monetary economists and vice-versa. Most criticism leveled against Fekete originates from doctrinaire Austrian Economists.[30][31]

The key Austrian criticisms of the Real Bills Doctrine are that this practice would still inflate the “broad” money supply; it would not reduce or eliminate bank runs (as would full reserve banking); and when actually tried, it resulted in numerous financial panics in 19th century Europe and the U.S. (albeit on a smaller scale than those experienced in the 20th century). Fekete’s position is that the practice of discounting does not involve banks at all,[32] so the criticism of bank runs is a non sequitur. Bank runs have other sources such as fraud[33] or duration mismatch but not fractional banking nor discounting.[34][35]

The Austrian School’s critiques of Fekete could be considered “purist” critiques, and most Austrians would support the Real Bills Doctrine if the choice was between the current purely fiat credit money system and real bills. Fekete’s rebuttal has been that the doctrine is descriptive, not prescriptive; the bills themselves and clearing systems that make them liquid are a market invention; the only support they require is the freedom to form enforceable contracts, a market for urgently needed goods, and monetary gold to extinguish the debt at its (short-term) maturity.

Some economists have accused Fekete of displaying many of the key aspects of being a monetary crank.[36]

Contributions to economic thought

Fekete’s contribution to the development of economic thought is his introduction of speculation via his Theory on the Formation and Origin of Interest, on Hoarding and on Speculation. Speculation is absent in Keynesian, Marxian, Walrasian, and Austrian economic theory. By merging the Time Preference Theory on the Origin of Interest with the Productivity of Capital, resulting in what he calls his Hexagonal Model, the drivers for the ceiling and the floor rate, Fekete maintains that economic thinking has been enriched, since the above has been missing in both Austrian and traditional economic thought.[26][37][38][39] Grounded in Mengerian roots, the floor rate of interest is formed by the time preference theory as treated by Von Mises but adapted to the marginal time preference and the ceiling rate of interest is formed by the marginal productivity of capital theory as treated by Eugen Böhm von Bawerk. He has reconciled both theories existing for more than a 100 years in a single disequilibrium model, the only one of his kind. This reconciliation ends all reason to treat both theories as opposing each other. The same model works, slightly adapted for a fiat credit system such as the one in operation worldwide to date.

Selected bibliography

  • Le Retour au Standard Or (October 14, 2011 published by Le Jardin des Livres, Paris) (ISBN 978-2-914569987).
  • Real Linear Algebra (January 25, 1985) (ISBN 978-0-8247-7238-3).
  • The Paradox of interest revisited (Revue Bancaire, Brussels, September 2007, published by the National Bank)
  • Interest and Discount (Revue Bancaire, Brussels, November 2007, published by the National Bank)
  • Borrowing Short and Lending Long: Illiquidity and Credit Collapse (Monograph, Committee for Monetary Research and Education, 1983)
  • Resumption of Gold Convertibility of The US Currency (Monograph, Committee for Monetary Research and Education, 1984)
  • Irredeemable Currency: The Destroyer of Capital (Monograph, Committee for Monetary Research and Education, 1985)
  • Deflation: Retrospect and Prospect (Monograph, Committee for Monetary Research and Education, 1986)


  1. Hugo Salinas Price, About Prof. Fekete, retrieved on July 2008
  2. “Commentaries – Antal Fekete”. Kitco. 2007-01-01. Retrieved 2012-09-20.
  3. List of essays by Antal Fekete on popular economicsscholarly economics, and money and credit
  4. Van Coppenolle, Peter (2013). The Austrian Business Cycle Revisited. Pintax. ISBN 9789082065503.
  5. Peter M. Van Coppenolle, “Rejoinder: The Debasement Puzzle of the Middle Ages”, WP for New Austrian School of Economics, 2011
  6. Edward D. “Banking during the Middle Ages.” Encyclopedia of the Medieval World, vol. 1. New York: Facts On File, Inc., 2005.
  7. Francis Baring, Observations on the establishment of the Bank of England, and on the paper circulation of the country.
  8. Walter Bagehot, Lombard Street: A Description of the Money Market
  9. “What Really Started the Great Depression”
  10. (Germany) § 793 BGB et seq.
  11. “A Revisionist Theory of History and Money”
  12. Heinrich Rittershausen, “Monetary Theory” (unfinished manuscript) translation by Theo Megali.
  13. Melchior Palyi, The Twilight of Gold, 1914–1939
  14. Fritsch, Rudy (2010). Beyond Mises. Canada: Hypnonaissance. p. 144. ISBN 9780615373409.
  15. “Dr. Antal Fekete Discusses the Controversial Real Bills Doctrine and Free-Banking” (in (German)). The Daily Bell. 2009-05-03. Retrieved 2012-09-20.
  16. Peter M. Van Coppenolle “Rejoinder: the Debasement Puzzle of the Middle Ages”
  18. J.W. Gilbart, The History, Principles And Practice Of Banking, 1797. The Suspension of Cash Payments. Part 3
  19. Towards a Dynamic Microeconomics, Laissez Faire, 1996, issue 5, pp. 1–14.
  20. Two views on the self-immolation of paper money
  21. Antal E Fekete, Towards a Dynamic Microeconomics, Laissez-Faire (Universidad Franscisco Marroquin, Guatemala City) No 5, September 1996
  22. Revue Bancaire, Brussels, November 2007, The Origin of Interest Revisited, published by the National Bank of Belgium
  23. Gold Standard University Live Session Four, Szombathely, Hungary, Lecture 4 and 5, July 2008
  24. Revue Bancaire, Brussels, December 2007, published by the National Bank of Belgium
  25. Gold Standard University Live Session Four, Szombathely, Hungary, July 2008
  26. The Fiscal Uses of Precious Metals, A Master Thesis by P. Van Coppenolle, MSc Fiscal Economics, Brussels, 2008
  27. Weiner, Keith. “A Free Market for Goods, Services and Money”.
  28. Gold Standard University Live Session V, Canberra, Australia
  29. “Today In Silver » Allegations of “Naked” Short Selling May Prove to be Naked”. 2008-09-18. Retrieved 2012-09-20.
  30. Nelson Hultberg (2005-09-27). “Americans for a Free Republic”. Retrieved 2012-09-20.
  31. “Farewell Address – Fekete”. Retrieved 2012-09-20.
  32. R. De Roover, Money, Banking and Credit in Mediaeval Bruges – Italian Merchant Bankers, Lombards and Money Changers – A Study in the Origins of Banking, Rinsland Press, 2008 – 464 pp.
  33. “Professor Antal E. Fekete – Mathematics”. Retrieved 2012-09-20.
  34. “Fractional Reserve Banking Revisited by Antal E. Fekete”. Retrieved 2012-09-20.
  35. “Fractional Reserve Banking Revisited”. Retrieved 2012-09-20.
  36. “What Constitutes A Money Crank? – Philip Pilkington”. Fixing the Economists.
  37. The Hexagonal Model of Capital Markets
  38. Money Upside Down – A Paradigm Shift in Economics and Monetary Theory, Doctoral Thesis by Harald Haas, 2003, University of Bremen
  39. Ferdinand Lips Gold Wars: The Battle Against Sound Money as Seen From A Swiss Perspective (Foundation for the Advancement of Monetary Education, 2001) 304 pages/ ISBN 0-9710380-0-7