Are Booms and Busts in a Free Market Economy Normal?

[sirmontius]

@david_z

not the topic, per se, but you might want to check my thread on Malinvestment, How & Why, also my revised Primer on Malinvestment as it pertains to ABCT

First off, thanks for this. The content of those links are very well done. I’d be interested if you have anything to add to the thread I started the other day over how “natural” the business cycle is in the economy.

Question concerning business cycles

Sorry if this has been asked and answered before, but I couldn’t find much with the search function. Are business cycles ALWAYS a result of the expansion of credit ala Austrian Business Cycle, or are cycles a somewhat natural function of the market? The only reason I ask this is because someone I was discussing this with (who agrees that it is the primary cause of them) said that cycles would still occur in absence of government interference. He makes the claim that malinvestment is literally a…

Specifically, I wonder what insights you have on why “crashes” tend to happen in a single market (housing, tech, etc.) and how you would address the claim that “there is simply not enough time for people to realize the gravity of their (usually undiverse) malinvestments and to allow the feedback mechanism of the market to be effective? In other words, most “financial crashes” happened in the space of a few days, hours even, up to which point, everyone believed their money was sound no matter how long or how fast credit was poured into the market in the first place.”

Just trying to get a little clarification in these areas.

Thanks.