- 18 Agosto 2018
- by Blogger
The key reason for boom-bust cycles is the loose monetary stance of the central bank. This loose stance results in the expansion of money out of “thin air”, which sets in motion an exchange of nothing for something.
On a pure gold standard, an increase in the supply of gold does not set in motion an exchange of nothing for something i.e. an act of embezzlement, but to an exchange of something for something. In the absence of an exchange of nothing for something, there is a very low likelihood of a persistent misallocation of resources, which culminates in boom-bust cycles.