Mal=bad, Investments=investments

Idea that when a Central Bank keeps interest rates artificially low, inflation and credit expansion (money everywhere, coming out of thin air) result in people going bananas and making investments that eventually lose money.

Yes, shockingly, sometimes people make poor investment decisions.

There is another take on this neologism. If new currency is being introduced into the economy and is responsible for the removal of goods and services from their natural place, then how can this theft be any investment at all? When we say “inflation” and “credit expansion” we are dropping off the object of the action and thus resorting to sophistry. It is the inflation of counterfeit and the expansion of counterfeit that are responsible for the “loss” of money. This was no loss, it was theft by whomever introduced the counterfeit.

No idea why people want to party like it’s 1999 when they could be partying like it’s 2005 and they’re a subprime mortgage lender

Hayek was part of the Austrian school, not a physical school, but a school of economic thought in which the appropriate unit of economic analysis is man and his purposeful choices

Hayek was also born in Austria (-Hungary)

You probably shouldn’t try to pay off debt by taking on more debt.

Hayek thought the corrections made during Boom-Bust cycles would cause fundamental changes and therefore progress in a market economy. Thus, booms and busts were “mechanics of change.”

Like when an alcoholic hits rock bottom and therefore decides to start AA. Being miserable would be the “mechanic of change.”

A liquidity trap is when low interest rates (targeted by the Fed) fail to stop people from being scared and hoarding their money (aka they start saving or buying bonds instead of spending their money).

A deficit happens when spending > income or assets. Like if I have $500 in the bank, but then purchase $1000 on my credit card at Saks, I’m running a deficit (in Prada pumps though so…. worth it??)

The “multiplier effect” is when an increase in spending results in a greater increase in national income and consumption.

FOR EXAMPLE if I spend the money to open a law firm, all the lawyers I hire have to buy Ferragamos, Hermes ties, and Armani suits (strict dress code). They’ll also probably spend a lot of money going out to forget about the long hours I make them bill (2200 hrs/yr minimum). By opening my firm, I therefore create increased demand for fashion, restaurants/clubs, and probably Prozac. These companies will need to produce more and hire more people. The new salesgal/guy at Hermes then maybe wants to spend their shiny new paycheck on an ice cream, and BOOM the ice cream industry has been stimulated as well. And on and on.

In the the “Austrian Business Cycle” Theory: Low interest rates –> increased borrowing from banks –> credit-expansion –> credit-fueled BOOM –> malinvestments –> BUST