 Why this bubble economy keeps going and going by Thurston Pollitt, an audio misis wire narrated by Daniela Bassey Quite a few people may wonder why the global fiat and money System has not yet collapsed. The fiat and money system did not crash in the financial and economic crisis of 2008-09 when a great many people feared the debt pyramid would come crashing down and it hasn't gone belly up in the current Coronavirus crisis in which governments all over the world have shut down economic activity Making production fall over the cliff and unemployment skyrocket Doesn't all this contradict the Austrian business cycle theory which says that a fiat money induced boom must end in a bust? The answer is no it does not the Austrian business cycle theory as developed in particular by Ludwig von Mises is an a priori theory Its statements are consistently grounded in the irrefutably true logic of human action As such the Austrian business cycle theory tells us precisely what will happen to the economy if and when the central bank and Close cooperation with commercial banks increases the quantity of money through credit expansion The market interest rates will be artificially suppressed consumption increased at the expense of savings and Additional investment induced the economy starting to live beyond its means enters a boom period Once the additional credit and money injection have worked their way through the economic system affecting wages and goods prices the market interest rate returns to its original level consumption declines Savings increase and new investments turn out unprofitable as Entrepreneurs realize that their economic calculation has been corrupted by the artificial suppression of the market interest rate It turns out that overconsumption and malinvestment are the consequences of the boom that the production structure has been Misguided and must be corrected which happens through the bust It is in this sense that the Austrian business cycle theory informs us that a boom must sooner or later and in a bust It's reasoning as irrefutably correct as it is in terms of the logic of human action Cannot be used without caveat to explain the real world though This is because the Austrian business cycle theory like any other theory holds true satirist Paribas under the notion of other things being equal To give a simple illustration if the central bank injects new money into the economy through credit expansion And if the free market is allowed to work And if there are no other factors such as increases in productivity changes in consumer tastes Etc, then the boom will turn to bust in the real world. However, things are different Not only do consumers and producers change their behavior as time goes by but there is also government action Which affects the working of the economic system more importantly government interference in the market places on the rise It clamps down on the very forces that can and usually do turn a boom into bust after the latest financial and economic crisis in 2008 and 9 central banks put a safety net under the financial markets and the economies Businesses and investors can be assured that central banks in time of need will come to their rescue and bail them out The same happened in late March 2020 when governments all over the world as a reaction to the political decision to shut down Economic activity put together gigantic bailout packages meant to support credit markets and extending loans and unemployment benefits to struggling businesses and consumers of Of course governments do not have all the money promised to the victims of the lockdown at hand And the money cannot be obtained by raising taxes or by issuing new bonds in the capital markets without making interest rates go up Central banks have started doing the dirty work by rolling out the biggest backstop ever to prevent the bust They are manipulating the interest rates downwards and will print ever greater amounts of money if necessary In particular and most importantly central banks have entered corporate and long-term bank credit markets They have lowered the cost of credit and capital in general The beneficiaries are big business wall street and of course highly leveraged investors banks in the financial industry in general Does this not just postpone the inevitable bust one may ask The Austrian business cycle theory even helps to find an answer to this question For one thing of course, there would be a recession depression like bust at some point If and when market forces have the space to restore the economy to equilibrium However, neither politicians bankers entrepreneurs nor employees want this to happen This gives governments and their central banks Supported by a public that is becoming increasingly fearful of job losses and personal ruin Cart won't to go ahead and do away with what little is left of the free market system To escape the bust the free market system is transformed into a system in which the means of production remain formally in private hands But in which the state and the special interest groups running it are really in the driver's seat Dictating and controlling goods prices interest rates wages incomes labor conditions and even nationalizing and managing banks and entire industries This was the model that the german national socialists erected in the late 1930s The state dictated what was to be produced by whom when where and at what costs History does not repeat itself, but sometimes it rhymes The western world is increasingly and quite rapidly Bidding farewell to the idea of the free market system driven by the attempt to fend off the inevitable bust Which is the consequence of a decade long debt binge caused and made possible by central banks's fiat money regime Although this may indeed keep away the bust for quite some time It will weaken output and employment gains people's standard of living will no longer improve in an acceptable clip And it may even decline with this comes impoverishment These are the very ingredients that facilitate the rise of the totalitarian state So the unpalatable truth is that without allowing for a bust a big crash The fiat money system and all the forces working toward the grandizement of the state are here to stay and will predictably get worse The hefty price of upholding the current boom and the current economic and social structure Is the end of the free market society as we know it That said one should hesitate to feel relieved that the central banks seem to have succeeded once again in fighting the bust The Austrian business cycle and its traditional formulation Enlightens us about the consequences of how the free market system turns an artificial fiat money induced boom into bust It thereby also helps us understand what actions will most likely be taken by those who want to prevent the boom from ending in a bust The free society the free market order will become the victim Fiat money other things being equal is a sure way of gradually overthrowing the present order In this sense it is a tool of stealthy agitation for marxists seeking to overthrow capitalism the private property society In retrospect it therefore seems to have been premature to interpret the latest crash of stock prices The s&p 500 stock market index shed 33 percent from february 12 to slow on march 24th 2020 As an indication of the approaching end of the fiat money regime The power of governments and central banks over economic and societal affairs has not been broken On the contrary one must fear that it has gathered further strength in the course of the latest lockdown More and stronger than ever states in their central banks dismantle the free market system cementing their fiat money And ultimately erecting the almighty state The austrian business cycle theory is a boom and bust theory that does not crash It offers timeless truths about the economic consequences of injecting fiat money into the economy We know that a boom must result in a bust, but we do not and cannot forecast with certainty when it will occur It all depends on the special conditions under which the fiat money regime operates In a hampered market economy the boom might very well last longer than one would expect And the final crash might appear in a rather different format if and when governments increasingly shut down the free market system Namely tyranny For more content like this visit mesas.org