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What Exactly is a "Crisis"?

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Phriend posted on Wed, Dec 1 2010 11:44 AM

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Hi everyone,

A friend of mine is writing a paper at the University of Georgia and he recently asked me:

"From the perspective of the Austrian school, what constitutes a (housing, economic, whatever) crisis? I don't mean the general feeling of panic or anxiety, but what precisely is (and is not) a crisis?"

So what do you guys think? From the Austrian perspective, what exactly defines a "crisis"? Is there a hard & fast definition for it?

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Gero replied on Wed, Dec 1 2010 12:33 PM

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I do not believe the term crisis is used in Austrian economics. A crisis (An emotionally stressful event or a traumatic change in one's life) can be an outcome when an economic bubble pops.

If your friend is asking how a housing bubble occurred, the Cato Institute has a good overview.