Business Cycles

Paul Cwik explains how artificial credit expansion triggers unsustainable booms and inevitable busts.

A recession is defined by negative economic activity over several months with an accompanying decline in GDP. However, given the actual makeup of GDP, it is inaccurate to directly tie recessions to GDP at all.

A recession is defined by negative economic activity over several months with an accompanying decline in GDP. However, given the actual makeup of GDP, it is inaccurate to directly tie recessions to GDP at all.

William Nordhaus coined the term “Political Business Cycle” a half-century ago. The idea was that government authorities, particularly the central bank, would manipulate the economy to correspond with election cycles, a practice that continues to this day.

Carl Menger wrote, “All things are subject to the law of cause and effect.” Unfortunately, modern academic economists all too often confuse correlation of economic phenomena with causality.

While President Trump‘s tariffs certainly are causing economic harm, they alone could not cause a recession had there not already been years of artificial credit expansion.

Perhaps John Maynard Keynes' best con job was convincing people that a growing economy needs inflation, lots of inflation. As David Gordon points out, however, Ludwig von Mises eloquently explained why inflation undermines the free market economy.

It should be clear from the articles in this book that the Austrian School is thriving. Per Bylund has rendered a great service in bringing the scholarship in A Modern Guide to Austrian Economics to our attention.

Böhm-Bawerk shows us that the study of human action and the economy in general goes beyond the simple paradigm of the financial and monetary world. Economics is built into all human experience.

One of the unique features of Austrian economics is a coherent and consistent theory of business cycles. To understand business cycles, one must understand the role that interest rates play in the economy.