Bills Quote by Ludwig von Mises
“One day, because they realize for some reason or other that they must stop credit expansion, the banks do stop creating new credit to lend. Then the firms that have expanded cannot get credit to pay for the factors of production necessary for the completion of the investment projects which they have already committed themselves. Because they cannot pay their bills, they sell off their inventories cheap. Then comes the panic, the breakdown. And the depression starts.”
About This Quote
Source Book: Human Action, 1949
It describes a credit cycle where banks stop lending, causing firms to default, leading to panic and depression.
In simple terms: Credit contraction triggers economic collapse.
Key Takeaway
Monitor credit expansion to prevent crises.
Themes
economics
finance
business cycles
policy
risk
Mood
analytical
cautious
Type
economic
educational
When to use this quote
- banking regulation
- corporate finance
- government policy
Key Concepts
monetary theory
credit cycles
investment
inflation
Questions to Reflect On
- What safeguards can prevent credit overexpansion?
- How do modern financial instruments affect this cycle?
A Different Perspective
Assumes rational behavior and ignores external shocks.
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