Austrian Business Cycle explained in children's toys

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In the ensuing economic and political
turmoil, investors who are stil in the
Pain of the bust.
black chicken out and dump their
Stagnant economy.
holdings in favor of hard assets like
gold, eliminating any hope for growth.
Rising interest rates.
Shrinking economy.
Eventual y, the excess of paper money causes
inflation of prices in consumer goods. In response,
people shift away from their expensive homes and
office buildings. The real estate market, built on
paper, col apses like a house of cards.
Mistakenly blaming businesses for bad investment
decisions, the government sends forth armies of
bureaucrats to implement new rules.
The national central bank forces a
lowering of the interest rate, al owing
banks to print more paper money.
This "Monopoly money" does not
represent any real increase in wealth,
but it looks like an increase to
investors, who adjust their decisions.
Investors with an influx of new funds are like
kids with new toys. Feeling exuberant, they shift
toward long-term, elaborate projects.
Homes and office
Fal ing interest rates.
Peak of the boom.
buildings become more
Growing economy.
Stagnant economy.
impressive, and more
valuable. This is cal ed a
speculative bubble.

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