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Inflation Is a Policy that Cannot Last

March 14, 2008
To Austrian economists, the so-called international credit market crisis is a prima facie case of the inherent destructive tendency of government-controlled paper money: it is the consequence of an excessive expansion of credit and money, which encourages uneconomic investment and leads to unsustainable debt burdens. Once the inflation-fueled boom (the time span in which malinvestment occurs) is about to turn into bust (the period in which malinvestment is corrected), the government-sponsored central bank steps in and lowers the interest rate, in an effort to reverse the economic downswing into a boom. Mises was aware that an inflation policy could not go on forever, but must break down sooner or later: "the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears." FULL ARTICLE

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