Comments on: The Panic of 1873 http://www.mentalfloss.com/blogs/archives/19258 Feel Smart Again Sun, 22 Nov 2009 13:43:17 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: V http://www.mentalfloss.com/blogs/archives/19258/comment-page-1#comment-101806 V Wed, 15 Oct 2008 14:30:00 +0000 http://www.mentalfloss.com/blogs/archives/19258#comment-101806 The Panic of 1873 was actually a result of the inflated greenback. It was not backed by a commodity (gold), and the government printed up lots of them to pay for the war. Instead of allowing a return to sound monetary policy, the government kept inflating and paid off debt with more greenbacks which distorted the economy even further. This bubble eventually burst. It is rather absurd to believe that these booms and busts are triggered by lack of money! Loose credit is created by central banks who have no limits on their power to print new money (like you find when a currency can be redeemed in gold or silver). The cheap money leads to malinvestments (the boom) that are eventually reigned in (the bust). Austrian Business Cycle Theory FTW! The Panic of 1873 was actually a result of the inflated greenback. It was not backed by a commodity (gold), and the government printed up lots of them to pay for the war. Instead of allowing a return to sound monetary policy, the government kept inflating and paid off debt with more greenbacks which distorted the economy even further. This bubble eventually burst.

It is rather absurd to believe that these booms and busts are triggered by lack of money! Loose credit is created by central banks who have no limits on their power to print new money (like you find when a currency can be redeemed in gold or silver). The cheap money leads to malinvestments (the boom) that are eventually reigned in (the bust).

Austrian Business Cycle Theory FTW!

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