Austrian Business Cycle Theory

It is critical for everyone to understand Austrian Business Cycle Theory because it affects everything. The main idea is rather simple while some of the details are a bit more hard to understand.  Austrian Business Cycle theory simply states that  booms and busts exist and that they are not unpredictable market phenomena. They are in fact very predictable because they are caused by an outside agency (central banks in most cases).  This allows the average person to avoid massive monetary losses by allowing them to identify bubbles before they pop such as the dot com bubble and the housing bubble.  This also allows the average person to make huge profits because they can identify the next bubble at the ground floor and place their money there before the public enters that particular bubble sector in mass.

Here is the famous Peter Schiff video where he predicts exactly how the crash of September 2008 happened (started in sub-prime, spread to the rest of the housing sector and then finally to the financial sector).  My favorite part is how he takes on Art Laffer (creator of the famous Laffer Curve which absurdly proposes that lower taxes bring in more tax revenue; this idea is actually believed to be true by people you may have heard of such as Sean Hannity.) Laffer is also one of the most well known of the Reagan era supply side economists that act like they are free market but, as demonstrated in this video, are actually just soft keynesians.

 

Here is an explanation of the Austrian Business Cycle from an academic perspective:

Here are some more brief versions:

 

 

1,288 thoughts on “Austrian Business Cycle Theory

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