Booms and Busts

The standard line among most economists is that deflation is as bad or even worse than inflation. In reality, the economy needs deflation now more than ever.

Washington is pursuing industrial policy again, this time being an attempt to form a minerals consortium with other countries to secure minerals vital to US manufacturing. No doubt, this initiative will end up on the ash heap of bad policy.

The standard line among most economists is that deflation is as bad or even worse than inflation. In reality, the economy needs deflation now more than ever.

Some economists have claimed that “transparent” monetary policy in which the Fed operates predictably will lessen the chances of the boom and bust cycles happening. It isn’t the lack of transparency that creates business cycles; it is Fed-caused malinvestments.

The boom-bust cycle is not a mystery. Understanding why requires grappling honestly with what the last fifty years produced.

A $2.3 trillion contraction met with a $2.5 trillion injection.

Mises described the problem, Hayek proposed the direction, Kirzner explains why the market will not stop. And the market, as so many times before, has already found the first step.

Mises described the problem, Hayek proposed the direction, Kirzner explains why the market will not stop. And the market, as so many times before, has already found the first step.

People claim to support economic intervention because the market cannot be trusted to be “stable” enough to keep the economy out of recessions. However, it is government itself, not the free market, which creates the instability in the first place.

International aid agencies are providing goats for families in Malawi as a way to fight poverty. Like so many other do-good experiments, this one has numerous unintended consequences.