Inflation Must End in a Slump – Mises Institute

It was briefly fashionable to admit that interest rates were too low for too long, leading to a boom built on expansionist monetary policy. Unfortunately (related link my own):

Economic theory has demonstrated in an irrefutable way that a prosperity created by an expansionist monetary and credit policy is illusory and must end in a slump, an economic crisis. It has happened again and again in the past, and it will happen in the future, too.

If one wants to avoid the recurrence of periods of economic depression, one must start by preventing the emergence of artificial booms. One must prevent the governments from embarking upon a policy of cheap interest rates, deficit spending, and borrowing from the commercial banks.

This is, of course, a very difficult task. Governments are in this regard very obstinate. They long for the popularity that booming business conditions seldom fail to win for the party in power. The unavoidable crash, they think, will appear only later; then the other party will be in power and will have to account to the voters for the evils which their predecessors have sown.

Thus there is no doubt that we shall one day have to face again an economic recession, although it is impossible to determine the date of its outbreak and the degree of its severity. It will be bad indeed. But worse than the crisis itself could prove the psychological and ideological consequences of an erroneous interpretation of its causes.

For those consequences, please read the rest of the article: Inflation Must End in a Slump – Mises Institute.

Many remain reluctant to believe in the laws of social cooperation, which are as immutable as the laws of physics, if less susceptible to mathematical analysis. Like gravity, those laws believe in us and they will win eventually.

A good place to start reading into those laws is here.

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