Particularly
the business cycle theory.
Would you re-evaluate your causal analysis if political money printing contributed to both the calamity and the hyperinflation, as the Mises / Hayek
Business Cycle theory predicts?
One of the major theories of Austrian economics is
its business cycle theory.
Business cycle theory says that as the economy heats up, business profits increase and their stocks rise.
Using the often - ignored Austrian
Business Cycle Theory (ABCT)-- coined by the little - known but brilliant economist Ludwig Von Mises — I am blaming the Fed for all this.
According to Austrian school
business cycle theory these declines in markets are the inevitable consequences of an expanding money supply, sold as the answer to fighting a recession.
Not exact matches
The Austrian
theory of the
business cycle breaks the production process down into four steps.
Exponential growth early in a company's life
cycle should lead to profitability which in
theory is be plowed back into the
business to innovate and drive further growth — a virtuous
cycle.
Readers may recall that we have talked about the
theory espoused by our previous guest speaker Ben Hunt with respect to price inflation in a period of monetary tightening in a series of recent posts entitled «
Business Cycles and Inflation» (see Part 1 and Part 2 for the details).
If you subscribe to the
theory that all
businesses are cyclical, ARMO member companies have entered their first down
cycle.
Economic
theory alone does a pretty poor job at explaining historical
business cycles.
The
theory of a
business cycle says that as an economy heats up:
In other words, traditional portfolio
theory does not account for the dynamism of the
business cycle which results in portfolios that do not properly account for changing risks during the course of the
cycle.
But that
theory of a
business cycle does not always happen as advertised.
I don't quibble with the
theory, but, in practice, the strategy seems to find stocks at the peak of the
business cycle (see my summary of Mauboussin in ROIC and reversion to the mean: Part 1, 2 and 3).
In 1991, Buffett, who noted in an earlier Chairman's letter that Keynes had «began as a market - timer (leaning on
business and credit -
cycle theory) and converted, after much thought, to value investing,» described Keynes's end - point as an investor thus:
With, in
theory, supply no longer controlling the
business cycle, Keynes advocated stimulation of demand via government spending and / or tax cuts as a cure for economic depressions caused by what turned out to be a collapse in demand.