Booms and Busts

Are economic crashes inevitable, or are they the direct result of government meddling? History shows a pattern—but politicians and central bankers refuse to take the blame.

Although tariffs and other issues are getting the most news coverage, a harbinger of recession is looming: the slow collapse of commercial real estate values. This is the result of reckless policies at the Federal Reserve and the Fed cannot fix it.

Thanks to the reckless policies of the Federal Reserve, businesses are now facing the realities of an economy ravaged by inflation. Look for more signs that say “Closing.”

President Trump has indicated that a recession could be coming and the pundits are playing the blame game. Don‘t look to anyone in Washington for a coherent explanation for the downturn, however. Look to the Austrians instead.

Despite the government‘s efforts to prop up real estate prices, the markets are having the last word. Commercial real estate is especially vulnerable to the latest trends.

Mainstream economics tells us that we need a growing money supply to keep an economy growing. But what if a growing money supply diminishes economic growth? The Austrians have something to tell us about money growth.

Perhaps John Maynard Keynes' best con job was convincing people that a growing economy needs inflation, lots of inflation. As David Gordon points out, however, Ludwig von Mises eloquently explained why inflation undermines the free market economy.

The Federal Reserve‘s reckless policies have created havoc in the housing markets, with the government and monetary authorities helping to create the apartment bubble, which is in the process of bursting. As usual, bad policies bring bad people into the markets.

One of the fallacies pushed by monetary economists is that a growing economy needs a growing supply of money in order to prevent deflation, which they claim is as harmful as inflation. However, as Austrians point out, there is no “optimum” amount of money in the economy, since prices adjust.

In replying to a previous article by Frank Shostak, Douglas French writes that if an increase in the supply of gold ultimately leads to an expansion of bank credit, that is enough to start the boom-and-bust cycles, even if there is no central bank to accelerate the process.