Booms and Busts

As money loses its purchasing power, income and wealth are stealthily redistributed. Some individuals and groups of people are enriched at the expense of others.

"I am not saying that fiat money, once established on the ruins of gold, cannot then continue indefinitely on its own. Unfortunately … if fiat money could not continue indefinitely, I would not have to come here to plead for its abolition."

It is a huge mistake to call the repeating cycle of boom and bust a business cycle. That name implies the bust is the failure of markets and capitalism. But it is really due to monetary and credit inflation licensed and promoted by governments and central banks.

As long as there is still room for pushing the market interest rate down even further, the chances are reasonably good that the boom continues, and that the bust will be postponed into the future.

Suppose that a convincing orator should go on TV tomorrow, and urge the public: "The banking system of this country is insolvent."

The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration.

One of the characteristic features of this age is the general attack launched by all governments and pressure groups against the rights of creditors.

State intervention and a crushing fiscal policy made the whole empire groan under the yoke; more than once, both poor men and rich prayed that the barbarians would deliver them from it.

Richard Vague's new book on financial crises repeats many old myths about economic booms, while failing to understand the role of malinvestment and central banks.

Business owners have always made errors, and external factors can lead to economic crises of various sorts. But the cyclical pattern of booms and busts we now see are a result of government interventions not seen in a free marketplace.