There is reason to believe low-interest rate policy has lowered productivity, lessened economic growth, and favored large firms at the expense of small firms and innovation. Greater inequality and stagnating wealth has resulted.
The gold price is heading up at the moment, but we can still learn a lot from three big collapses in the gold price which occurred after 1934.
The central bank can try to manipulate the interest rate to whatever level it desires. However, it cannot exercise control over the underlying interest rates as dictated by people’s time preferences.
The "Velocity of Money" Is a product of human choices and human values. It's not something we can just plug into an equation.
While many attempt to look to "de-regulation" or tax cuts to explain economic cycles, it makes more sense to zero-in on the role of central banks.
What matters is not price rises as such, but the increase in the money supply that sets in motion the exchange of nothing for something or "the counterfeit effect." Business cycles and recessions follow.
The Bolsheviks were shocked to discover the destruction of money failed to bring about the rational economic order that the Communists believed to be inevitable.
Mises declared in 1951: “No boom is possible without credit expansion... the boom which causes the following depression could not occur if the banks did not expand credit."
Ignoring time preference is the fundamental error behind monetary planning. It is why in a successful economy, monetary intervention by the state is kept to a bare minimum, or preferably banished altogether.
Contrary to popular thinking, the velocity of money does not have a life of its own.
