Doug Casey on monetary inflation and the business cycle

If the central bank deposited $10,000 in everyone’s bank account next Monday, everyone would think they were wealthier and start consuming more. This would start a business cycle. The business cycle is always the result of currency inflation, no matter how subtle or mild. And it always results in a depression. The longer an inflation goes on, the more ingrained the distortions and misallocations of capital become, and the worse the resulting depression.

~ Doug Casey, "How Fascism Comes to America," LewRockwell.com, August 20, 2020

Sean Corrigan on business cycles and the futility of engineering a soft landing

As Austrians, we firmly believe that the credit cycle IS the business cycle and that - to draw upon Hayek - crises start out as monetary ones and later morph into real ones.  We frequently tell anyone who will listed that there are NO soft landings - sometimes adding Mises' pragmatical advice that to try to remedy any sizeable inflation through a deliberate act of contraction (rather than by simply desisting from making matters worse and allowing the system to repair itself) is to 'reverse the car back over the pedestrian one has just knocked down.'

~ Sean Corrigan, "Ring out the old, bring in the new," January 2019

Kurt Richebacher on the expected soft landing (2000)

Adhering to the famous postulate of Austrian theory that the length and severity of recessions or depressions depend critically on the magnitude of the dislocations and imbalances that have accumulated in the economy during the preceding boom, we take it for granted that a hard, even a very hard, landing is absolutely inevitable for the U.S. economy.

~ Kurt Richebacher, The Richebacher Letter, July, 2000

(Source: Barron's, July 24, 2000, p. 33)

Milton Friedman on Austrian business cycle theory

The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false.

~ Milton Friedman, "The Monetary Studies of the National Bureau, 44th Annual Report," The Optimal Quantity of Money and Other Essays, Chicago: Aldine, pp. 261–284

Lew Rockwell on The War on Recession

It's time that we question the very foundations of this war on recession. The recession is a regrettable but inevitable backlash against a boom that was not justified by the fundamentals.

That last phrase is the critical thing. I am not saying that the recession is the price we pay for economic growth. Boom times are fabulous times, provided that they are rooted in sound fundamentals. And what are those? Essentially it is this: the timeframe of investment must match the timeframe of society at large. If people are long-term oriented and saving money, resources become available for investment in the future. When production is completed, there are consumers to buy. But if no one is saving money and there is no sound store of capital, there are no resources to invest – unless, of course, the Fed creates that money. The money the Fed creates is wholly illusory, a fiction of investors' imaginations. It will vanish when the economy wakes up to reality.

This is an example of investment unjustified by fundamentals. What to do in that case? There must be a correction. There is nothing the Fed or the Congress can do about it. It certainly shouldn't attempt to prevent it. To attempt to prevent the correction is like turning away from the skid: it only makes it worse.

~ Lew Rockwell, "The War on Recession," LewRockwell.com, March 20, 2008

Murray Rothbard on the drug of credit expansion

Why do booms historically continue for several years? The answer is that as the boom begins to peter out from an injection of credit expansion, the banks inject a further dose. In short, the only way to avert the onset of the depression is to continue inflating money and credit. For only continual doses of new money on the credit market will keep the boom going and the new stages profitable. Furthermore, only ever increasing doses can step up the boom, can lower interest rates further, and expand the production structure, for as the prices rise, more and more money will be needed to perform the same amount of work. Once the credit expansion stops, the market ratios are re-established, and the seemingly glorious new investments turn out to be malinvestments, built on a foundation of sand. It is clear that prolonging the boom by ever larger doses of credit expansion will have only one result: to make the inevitably ensuing depression longer and more grueling.

~ Murray Rothbard

Ludwig von Mises on who people blame for the boom-to-bust cycle

The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse.

~ Ludwig von Mises, Human Action, p. 576

Lew Rockwell on the purpose of recessions

Writing all throughout the 1930s, both Mises and F.A. Hayek tried to explain that the recession itself served a market purpose, in the same way a correction to an inflated stock market serves a purpose. It re-coordinates economic structures that have grown seriously out of balance.

In other words, they urged that we look back before the recession, to the good old days of economic boom, and realize the prosperity of the past was a partial illusion. The recession is the way that the economy tells the truth about the fundamentals. The illusion itself is caused by errors in monetary policy. Interest rates are driven down by the Fed, and this causes widespread errors in the investment sector. These investments are unsustainable over the long term. The recession is the time of cleansing out errors and reestablishing economic soundness.

The housing boom and bust is only a symptom of a wider problem. If the economy has indeed fallen into recession, we can know with certainty that recession is precisely what the economy needs the most. It is the equivalent of the drunk who needs time on the wagon.

~ Lew Rockwell, "Recession or Depression?," LewRockwell.com, January 10, 2008

Ralph Raico on the cause of the Great Depression

The most complete and satisfactory interpretation we have linking booms and busts is the Austrian theory of the business cycle, originated by Ludwig von Mises and developed by F. A. Hayek, Murray Rothbard, and others. (Mises was the only major economist who actually predicted the Great Depression.) In America's Great Depression, Rothbard sets forth in detail how the Federal Reserve acted to stimulate economic growth in the 1920s. Through the artificial creation of bank credit — i.e., credit not based on real savings — the Fed distorted market signals such as interest rates. That induced businessmen to go on an investment spree that could not be indefinitely sustained. Finally and inevitably, the bubble burst. As has recently been suggested, the "Hoovervilles" of the Great Depression should more aptly be called "Federalreservevilles."

~ Ralph Raico, "FDR - The Man, the Leader, the Legacy, Part 7," June 1999