"Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. 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." - Ludwig von Mises, 1931

"To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about." F.A. Hayek, 1931

As we stand ready for the Fed to announce QE infinity, I can hear voices from history warning against this failed policy.

Read more about Hayek's insights from a recent article by Jeff Tucker on Hayek's Ghost Haunts the World

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