🚀 go-pugleaf

In article <37013@uflorida.cis.ufl.edu>, jfh@reef.cis.ufl.edu (James F. Hranicky) writes:
>>_Why_ business cycles happen is perhaps the biggest open question in
>>economics today, and has been since at least the turn of the century.
>>No professional economist of whom I am aware considers the question of
>>causality for business cycles to be a closed topic.  This is an area
>>of great controversy and very active research within the profession,
>>so it should come as no surprise that there is so much controversy and
>>confusion about it among the general population.  The available data
>>are inconclusive enough to support many opposing viewpoints.
> 
> Anyone here heard of Ludwig von Mises? His theory of the business cycle
> seems to be the only one which holds water:
> 
>   Government inflation of the money supply causes the boom, and
>   when the inflation is ceased the recession occurs.

	Except history doesn't bear out that theory:

> 3) During the 1980's the Federal reserve increased the money supply from
>    $400 billion to $800 billion. When the inflation stopped accelerating, 
>    we entered this current recession. For the boom to continue under inflation,
>    the growth in the money supply must acclerate, not remain constant.

	Inflation died long before the economy went into a recession.

> The interesting thing about inflation is that if it were merely stopped,
> the economy would get going again on its own. The recession is actually 
> the GOOD part of the business cycle because during the recession the 
> market realigns itself, correcting the malinvestments caused by inflation.
> Our government officals cannot seem to resist temptation, however.

	Adjustments can be made without resorting to a recession.  Unemployment
is not a necessary condition for economic realignment.

> The Fed just recently cut interest rates again, insuring that the ten-dollar
> bill you have in your wallet will be worth less tomorrow.

	Cutting interest rates will not devalue the dollar.

> Another interesting thing about inflation is that is redistributes goods
> and services from the consumers to the government. When the government buys
> goods and services with freshly printed money--it gets them for the current
> price. However, once this money is put into circulation, prices rise, and
> the dollar for everyone else becomes worth less.
> 
> Cool, huh?

	Out of sight.
:)

Brett                                                      
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