What is the theory of the Austrian trade cycle?

The theory of the Austrian business cycle states that the trade cycle can be manipulated and even predicted when the federal bank seeks to control monetary policy by artificial interest rate. While the theory states that such manipulation can cause the economy to light up, it can also cause it to collapse. Thus, the theory of the Austrian business cycle notes that these policies can cause great damage. This is done to stimulate the economy and control the economy so that it does not crush too quickly. It is irony that what the Austrian business cycle theory says that such policies cause, an extreme trade cycle, is what it seeks to prevent. This causes the loan to mitigate. However, because it is an artificial loan release, it usually does not take too long. As soon as the economy begins to heat up, interest rates must increase accordingly to prevent unwanted inflation.

in nThe Austrian business cycle theory may seem an insignificant thing. After all, if the economy should slow down anyway, what is the difference if it slows down as a result of monetary policy or normal cyclic activity? Some believe that an attempt to postpone the inevitable actually makes the decline stricter. In fact, the developer of the Austrian business cycle theory, Ludwig von Mises, wrote: "The alternative is whether the crisis should happen earlier as a result of voluntary leaving further credit expansion or later as the final and overall disaster of the participating currency system."

The reason why the economy decreases hard after an attempt to alleviate the loan through a reduction in interest rates is due to the bubble effect it creates. He does so gradually during the economic cycle, when the decline comes. In the bubble, however, society moves more collectively, up and down. According to the Austrian business cycle theory, this can quickly cause a serious decline. In reality because they have a pokThe forest lasts longer, it's reinforced.

The only way to avoid Misese's theory may be hoped that the economic decline is long enough to allow a natural increase in economic activity. Since bubbles usually mask symptoms, it will be harder to achieve. After all, if the economy looks healthy, there will be fewer attempts to repair it.