Austrian Business Cycle Theory.

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CoolApe
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Here some of my rambling thoughts.

An introduction. The austrian business cycle theory, besides what the name might suggest, is a theory related to all business cycles and not those particular only to Austria. Its name originates from Austrian School of Economics. The pioneers of the school were F.A. Hayek, Mises and Rothbard. The ideas pushed by the Austrian School of economics are mutually exclusive with Keynesians economics and differ with Milton Friedman. That's a brief history and more can be found on the internet.

The theory explains the boom of a business cycle is the result of the expansion of bank credit, which is created by the federal reserve through quantitative easing. Artificially low interest rates cause entrepreneurs to malinvest. These malinvestments realize later as unprofitable because there was never enough savings to sustain them. Malinvestments also cause inflation in prices of physical capital, capital machines, intermediate goods and final consumer goods. Eventually, the inflation from the malinvestments runs high enough that the federal reserve raises interest rates. That is the end of boom period. Then the bust occurs. Easy money in the boom elevated asset prices and incomes. This comes crashing down with the rise in interest rates. An increase in interest rates lowers the prices for many assets types and it also makes business ventures unaffordable and unprofitable. The bust ends after the malinvestments emerge as bankruptcies and prices of various asset types bottom out.

End of Part 1)

Part 1) Background information
I might add more later of my thoughts while I thought through the theory, instead of merely background. 


Best.Korea
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Thank you for this. I dont usually have patience to read hundreds of pages of book just to learn something that can be explained in few pages.

The cycle of success and failure exists, no matter how it is explained.

It is confirmed in every country throughout history. 

It seems that every 8 to 15 years there is some economical breakdown occuring in the world.

This includes increase of prices, that negates increase of wages.

Having children is becoming more and more expensive, even with both parents working.

This places society at risk. If we reach the point where we cant afford to have children anymore, our society dies. I am hoping we wont reach that point.
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--> @CoolApe
A natural business cycle no, market manipulation and fraud yes. The Fed printing worthless money in no way equates to any legitimate business practice or market fundamental.  More like a Weimar Republic .
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Cycling to work is good for you.
Athias
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Here some of my rambling thoughts.

An introduction. The austrian business cycle theory, besides what the name might suggest, is a theory related to all business cycles and not those particular only to Austria. Its name originates from Austrian School of Economics. The pioneers of the school were F.A. Hayek, Mises and Rothbard. The ideas pushed by the Austrian School of economics are mutually exclusive with Keynesians economics and differ with Milton Friedman. That's a brief history and more can be found on the internet.

The theory explains the boom of a business cycle is the result of the expansion of bank credit, which is created by the federal reserve through quantitative easing. Artificially low interest rates cause entrepreneurs to malinvest. These malinvestments realize later as unprofitable because there was never enough savings to sustain them. Malinvestments also cause inflation in prices of physical capital, capital machines, intermediate goods and final consumer goods. Eventually, the inflation from the malinvestments runs high enough that the federal reserve raises interest rates. That is the end of boom period. Then the bust occurs. Easy money in the boom elevated asset prices and incomes. This comes crashing down with the rise in interest rates. An increase in interest rates lowers the prices for many assets types and it also makes business ventures unaffordable and unprofitable. The bust ends after the malinvestments emerge as bankruptcies and prices of various asset types bottom out.

End of Part 1)

Part 1) Background information
I might add more later of my thoughts while I thought through the theory, instead of merely background. 
Pretty much explains what governments do, and their asinine reasons in goading the public into accepting policy that would see the intervention of the Federal Reserve expanded, and increases in the money supply.