Booms and Busts

Booms are not periods of prosperity but of the squandering of wealth. The longer they last, the worse is the devastation that follows.

A pure gold standard is not conducive to business cycles. Contrary to mainstream economists, it is the attempts of the central banks to bring about price stability and full employment that set in motion the menace of boom-bust cycles.

Deposit banking rests on the bank honoring property rights. Loan banking rests on making good loans that will pay off. But when loan banking and deposit banking merged, the temptation to loan out much more than was actually in the bank arose.

Like today's central bankers, John Law proposed to "supply the nation" with a sufficiency of money. The increased money was supposed to vivify trade and increase employment and production — the "employment" motif providing a nice proto-Keynesian touch.

Hazlitt not only has a clear and lucid writing style; of all economists who are gifted at writing for a popular audience, Hazlitt has by far the soundest grasp of his subject. Hence, he is able to put correct and even profound analysis into a highly readable style.

Recorded at the Mises Circle at Furman Universityon November 13th, 2010.

Recorded at the Mises Circle at Furman University on November 13th, 2010.

When governments try to confer an advantage to their exporters through currency depreciation, they risk a war of debasement. In such a race to the bottom, none of the participants can gain a lasting competitive edge.

Central bankers cannot be trusted with the printing press, especially when there is no formal check on their inflationary policies. It is no coincidence that gold is hitting such heights as investors the world over hunker down for what may very well be a collapse of the dollar system.

The key to avoiding "busts" is to avoid the credit expansion and "booms" that cause them. Booms are not periods of prosperity but of the squandering of wealth. The longer they last, the worse is the devastation that follows.