Who Was Ludwig von Mises

Ludwig von Mises is probably the most important yet least understood economist of the 20th century.

According to Wikipedia, "Ludwig Heinrich Edler von Mises (September 29, 1881 – October 10, 1973) was an famous Austrian Economist [who argued that] significant credit expansion causes business cycles."

According to Mises.org, von Mises' business cycle theory "blamed inflation and depressions on inflationary bank credit encouraged by Central Banks...Credit expansion by the banks, in addition to causing inflation, makes depressions inevitable by causing malinvestment...Mises, and his follower Hayek, developed this cycle theory during the 192Os, on the basis of which Mises was able to warn an unheeding world that the widely trumpeted 'New Era' of permanent prosperity of the 192Os was a sham, and that its inevitable result would be bank panic and depression."

Ludwig von Mises quotes:

“It is not real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later it must become apparent that this economic situation is built on sand.” –

“The sooner the credit expansion policy is brought to a stop, the less harm will have been done by the misdirection of entrepreneurial activity, the milder the crisis and the shorter the following period of economic stagnation.”

“The point of view prevails generally among politicians, business people, the press and public opinion that reducing the interest rates below those developed by market conditions is a worthy goal for economic policy, and that the simplest way to reach this goal is through expanding bank credit. Under the influence of this view, the attempt is undertaken, again and again, to spark an economic upswing through granting additional loans. At first, to be sure, the result of such credit expansion comes up to expectations. Business is revived. An upswing develops. However, the stimulating effect emanating from the credit expansion cannot continue forever. Sooner or later, a business boom created in this way must collapse.”

The current economic system “is rejected unanimously today by all political parties and governments. No similar agreement may be found with respect to what economic system should replace it in the future.”

“All attempts to emerge from the crisis by new interventionist measures are completely misguided. There is only one way out of the crisis: Forego every attempt to prevent the impact of market prices on production. Give up the pursuit of policies which seek to establish interest rates, wage rates and commodity prices different from those the market indicates. This may contradict the prevailing view. It certainly is not popular. Today all governments and political parties have full confidence in interventionism and it is not likely that they will abandon their program. However, it is perhaps not too optimistic to assume that those governments and parties whose policies have led to this crisis will some day disappear from the stage and make way for men whose economic program leads, not to destruction and chaos, but to economic development and progress.”