[tyrytyty]

fajnie ujęte

Look, here's the crux of it.

When you and I go out to buy stuff, whether that's food, or real estate, or stock in companies, or when we make loans, or whatever else, those things have prices. We use these prices to evaluate how much of this stuff we can afford. If this thing we're buying costs a greater share of our wealth than we're comfortable dedicating to it, we don't buy. If it's less, we do buy.

If those prices, or our perceived wealth, are being distorted by the creation of currency, we're going to be making irrational choices. If we have a whole ton of currency, and prices are low compared to that, but the reason we have a whole ton of currency is because the local mafia counterfeited it and handed it to us, not because we produced many goods and services and received many currency units in exchange, then we will begin making irrationally large purchases in the market as if we believed there were more resources available than there actually are.

Thus the artificial expansion of the money supply causes irrational purchase and investment. This increase in demand drives up prices, and when these prices rise to a point where the purchases and investments no longer make sense, we stop doing them, and a crash occurs.

The method of currency expansion doesn't particularly matter. If it's caused by QE, or fractional reserve lending, or reducing the precious metal content of your coins, or Spanish ships coming back from the New World full of gold, the effect is the same. It's the irrational signals that matter, not the mode of monetary expansion.

So regardless of which of those theories you consider is true, all that matters is one question - is the mode of monetary expansion sending false signals into the economy? If yes, then the boom and bust that will result is explained by ABCT.

#libertarianizm
#austriackaszkolaekonomii