According to the classical economists, like Mises and Hayek of the austrian school, recessions should not be resisted but embraced. Not that recessions are any fun, but they are necessary to correct conditions caused by the real problem, which is the artificial booms that precede them.

Such booms, created by inflation (increased money supply), send false signals to the capital markets that there are additional savings in the economy to support higher levels of investment. These higher levels of investment, however, are not authentically funded because there has been no actual increase in savings.

Ultimately, when the mistakes are revealed, the malinvestments, as Mises called them, are liquidated, creating the bust.

Peter Schiff, Crash Proof 2.0

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