Tuesday, November 5, 2013

Austrian Business Cycle Theory To The Rescue!

By, Chris Rossini

When the Federal Reserve artificially suppresses interest rates, it leads to loans and investments that should never take place. For example, dot-coms are built (and financed to the tune of billions) that should never be built. Homes, shopping centers, and neighborhoods go up when they have no business going up.

Lots of people are hired to undertake these the production of these malinvestments. At the time, they don't appear to be errors. In fact, people actually celebrate the false boom. And the champions of the illusions are handed Nobel Prizes. The wealth effect clouds the eyes.

When the Fed eventually spoils the party (as they must) the employees and projects that were done in error have to be liquidated.

That's when the so called "cost-cutting" comes in.

So let's answer the question: What were the companies doing before? They were being duped by the central bank.

End the unnecessary heartache...End The Fed.

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