Monday, April 12, 2004

The Austrian Theory of the Business Cycle

in a nutshell:

Monetary expansion cannot go on indefinitely or without consequence. The bust, then, is the period where market forces tack back toward where they would have gone without the fog of monetary intervention leading them astray. This requires liquidation of projects and businesses that no longer appear profitable. Workers and capital are redeployed to more profitable lines.

From Japan's Bust: An Austrian Critique of the Fed's Explanation, by Christopher Mayer Posted April 12, 2004]. An Explication of how the love of money (or religious faith in it) is the root of all evil.

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