Why Capitalists Are Repeatedly "Fooled" By Business Cycles

Why Capitalists Are Repeatedly “Fooled” By Business Cycles by Frank Shostak, Mises Institute According to the Austrian business cycle theory (ABCT) the artificial lowering of interest rates by the central bank leads to a misallocation of resources because businesses undertake various capital projects that — prior to the lowering of interest rates —weren’t considered as viable. This misallocation of resources is commonly described as an economic boom. As a rule, businessmen discover their error once the central bank — which was instrumental in the artificial lowering of interest rates — reverses its stance, which in turn brings to a halt…