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Reading through this thread we have a bunch of theories about what must be right. And there are a few predictable responses of "the government didn't do enough.
by clarkmoody 8y ago
Reading through this thread we have a bunch of theories about what must be right. And there are a few predictable responses of "the government didn't do enough."
So I'll throw in the Austrian Theory of the Business Cycle to the mix: https://en.wikipedia.org/wiki/Austrian_business_cycle_theory https://en.wikipedia.org/wiki/Austrian_business_cycle_theory
Basically, the artificial expansion of bank credit kicks off the boom. The bust must inevitably follow. And the credit expansion is enabled by an unsound fiat money and banking cartel protection, such as the US Federal Reserve system.
- nickik 8y agoOne should not that this theory is not incompatible with modern monetarism. Hayek had a concept called secondary deflation they fit the pattern of 2008. The problem with ABCT is that Hayek and Mises both made the mistake that they assumed to much correlation between the boom and the bust. While Hayek had the 'secondary deflation' concept, he failed to realize that this was the far more destructive part (if mishandled by the central bank). So Hayek did not spend enough time on that and it caused him to misunderstand the Great Depression even when his theory was actually capable of explaining it.