A History of Economic Booms and Busts

When an economy falls into a recession, we typically observe a cluster of people making similar investment mistakes.  According to historian Stephen Davies, these investment errors occur because governments or central banks manipulate the supply of money. These manipulations place artificial downward pressure on interest rates, creating false signals that entice individuals to invest in what end up being unprofitable ventures. Booms and busts are not a new phenomenon of this century, but rather, have occurred throughout history both in America and around the globe.

16 Comments

  1. Matt Wavle

    Because we don’t have a true free market, we have a mixed market, full of statists who believe that state must intervene instead of letting the market signals work.

  2. Learn Liberty | A History of Economic Booms and...

    […] When an economy falls into a recession, we typically observe a cluster of people making similar investment mistakes. According to historian Stephen Davies, these investment errors occur because governments or central banks manipulate the supply of money  […]

  3. Spencer Long

    The stock market crash is a good example of this. When wealthy people saw it crash, they out all their money into the market thinking that it would bounce back and profit extremely well. However, it crashed again the following day and they lost it all. If something is risky, don’t make a poor mistake.

  4. Caleb Watney

    This is a video that everyone needs to watch.

  5. littledeaths

    It’s interesting to note that indicators of a recession and depression are void in a communist state, not saying everything is fine just that the usual indicators aren’t there.

  6. C Myers

    What signals to the investors that their investments aren’t going to yield the profits that were expected? What sort of event or realization is the tipping point?

  7. C Myers

    Well, sure. "Boom" and "bust" are necessarily relative to the conditions that precede them. If economic conditions are always in the dump, it’s hard to gat so significantly worse that there would be a clear "bust."

  8. taschrant

    I think we need to make major, MAJOR cuts to all government programs and start repealing and/or abolishing laws and departments.

  9. GeF

    Watch the thunder and lighting

  10. Kenny Legge

    Historically this shows we are pretty bad at money management lol

  11. Robert Smith

    In relationship to real estate, I know I have a Price Anchor based on the first house I bought, and personally found it difficult to understand the thought process in which someone would spend to buy a house with the full intention to "flip" it within two years, always assuming it will always be worth more money.  I liked the description here of the bubble: "speculative bubble, in which people buy the product in question, not because they expect to get income from it or to use it, but because they expect simply to be selling it onto another person at a higher price than the one they paid for it."

  12. Noah McNeill

    preach

  13. Piers Echols-Jones

    This reminds me of the Hayek vs Keynes epic rap battle.

  14. asexymind

    I think that government should create a tulip clearance house and regulate the markets for their sale. That will solve the problems.

  15. GreedyCapitalistPig

    Booms and busts are much more common than we care to admit and the Federal Reserve has failed in its prime objectives of smoothing the business cycle, keeping unemployment at an acceptable level, and maintaining a target rate of inflation.

  16. Mike Hines

    Booms and Busts have got to be caused by more than monetary policy. I would have appreciated at least a bit more context…

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