Inflation: Watering Down the Punch

“With the recent financial crisis macroeconomic issues are receiving more and more attention. Inflation is one of those issues. Many claim inflation to be the cause of the crisis; which has even given the Austrian business cycle theory attention from the media. The theory states that an increase in the money supply causes a false appearance of savings and thus investment. This leads to mal-investment in certain industries, in the recent crisis it would be the housing market, eventually popping the bubble leading to a recession while the market reallocates resources to their truly valued ends.” Read more.

Related Articles – Central Banking, History, Inflation, Sound Money Project