Boom and Bust | Period of Distortion

#economics #businesscycle #statism

Injecting more fiat money into the economy creates an artificial boom. The boom period is not good for the economy. It’s a period of distortion due to investments in the wrong areas. Areas where there isn’t sufficient demand. Its artificial demand created by the injection of new fiat money. The injection kindles the boom and furthers artificial demand. The bust is a reorganization so investments meet demands.

There is not an overinvestment. Rather, its investment in the wrong areas. New currency injected into the market gives the appearance of more capital goods available. However, there is not and the new currency chases capital goods in the wrong avenues. More capital goods don’t magically spring into existence. The boom must fail, sooner or later. The bust will be worse the longer this goes on. The currency could breakdown entirely.

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