The Foundation for Economic Education is out with a new short video. It’s simple and easy to understand and I recommend watching it if you’ve ever wondered why business cycles occur.
This is one of the major reasons I started this blog 2 years ago: to explain business cycle theory.
I’ve made a few attempts at making this as simple as possible:
If you want a slightly more elaborated version of the video, feel free to check out Business Cycles for Dummies. The other two links don’t give as full an explanation of it, but they will help see how the process occurs more clearly. If you have any questions, feel free to ask them as well, I’d be glad to help in any way if I can.
A response to ABCT from the typical person is a “well duh, of course if banks create money out of thin air, creating more claims on their supplies then they actually have, people will realize their insolvency and there’ll eventually be a bank run.”
Or “of course interest rates are a price just like any other price and coordinate market activity, and if you essentially place a price control on interest rates there’ll be unintended consequences.”
ABCT is common sense applied to economics. The reason that business cycles occur is not that complicated.