Repeated Stimulation

Posted: September 6, 2015 in Economics
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“Like the repeated doping of a horse, the boom is kept on its way and ahead of its inevitable comeuppance by repeated and accelerating doses of the stimulant of bank credit.  It is only when bank credit expansion must finally stop or sharply slow down, either because the banks are getting shaky or because the public is getting restive at the continuing inflation, that retribution finally catches up with the boom.  As soon as credit expansion stops, the piper must be paid, and the inevitable readjustments must liquidate the unsound over-investments of the boom and redirect the economy more toward consumer goods production.  And, of course, the longer the boom is kept going, the greater the mal-investments that must be liquidated, and the more harrowing the readjustments that must be made.” -Murray Rothbard

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