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Ludwig von Mises is probably the most important yet
least understood economist of the 20th century.
According
to Wikipedia, "Ludwig Heinrich Edler von Mises (September 29, 1881
– October 10, 1973) was an famous Austrian Economist [who argued that]
significant credit expansion causes business cycles."
According
to Mises.org, von Mises' business cycle theory "blamed inflation and
depressions on inflationary bank credit encouraged by Central Banks...Credit
expansion by the banks, in addition to causing inflation, makes depressions
inevitable by causing malinvestment...Mises, and his follower Hayek,
developed this cycle theory during the 192Os, on the basis of which Mises was
able to warn an unheeding world that the widely trumpeted 'New Era' of
permanent prosperity of the 192Os was a sham, and that its inevitable result
would be bank panic and depression."
Ludwig
von Mises quotes:
“It
is not real prosperity. It is illusory prosperity. It did not develop from an
increase in economic wealth. Rather, it arose because the credit expansion
created the illusion of such an increase. Sooner or later it must become
apparent that this economic situation is built on sand.” –
“The
sooner the credit expansion policy is brought to a stop, the less harm will
have been done by the misdirection of entrepreneurial activity, the milder
the crisis and the shorter the following period of economic
stagnation.”
“The
point of view prevails generally among politicians, business people, the
press and public opinion that reducing the interest rates below those
developed by market conditions is a worthy goal for economic policy, and that
the simplest way to reach this goal is through expanding bank credit. Under
the influence of this view, the attempt is undertaken, again and again, to
spark an economic upswing through granting additional loans. At first, to be
sure, the result of such credit expansion comes up to expectations. Business
is revived. An upswing develops. However, the stimulating effect emanating
from the credit expansion cannot continue forever. Sooner or later, a
business boom created in this way must collapse.”
The
current economic system “is rejected unanimously today by all political
parties and governments. No similar agreement may be found with respect to
what economic system should replace it in the future.”
“All
attempts to emerge from the crisis by new interventionist measures are
completely misguided. There is only one way out of the crisis: Forego every
attempt to prevent the impact of market prices on production. Give up the
pursuit of policies which seek to establish interest rates, wage rates and
commodity prices different from those the market indicates. This may
contradict the prevailing view. It certainly is not popular. Today all
governments and political parties have full confidence in interventionism and
it is not likely that they will abandon their program. However, it is perhaps
not too optimistic to assume that those governments and parties whose policies
have led to this crisis will some day disappear from the stage and make way
for men whose economic program leads, not to destruction and chaos, but to
economic development and progress.”
Fake Ben
Bernanke
FakeBen.com
FakeBen is a blog
to monitor the Fed and its actions and encourage community participation. At
FakeBen, we believe that the Fed policy of the last two decades has created a
credit bubble as large as that created in the 1920s. This bubble will lead to
either inflation, a recession, or both.
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