Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

6ADDITIONALCONSIDERATIONSON THE THEORY OFTHE BUSINESS CYCLEThis chapter presents some additional considerations toclarify various aspects of the circulation credit theoryof the business cycle. These reflections are intended tofurther our analysis as much as possible and to shed light ondifferent peripheral matters of great theoretical and practicalinterest. The final part of the chapter is devoted to a review ofthe empirical evidence which illustrates and supports the theoryput forward in the previous chapters.1WHY NO CRISIS ERUPTS WHENNEW INVESTMENT IS FINANCED BY REAL SAVING(AND NOT BY CREDIT EXPANSION)No economic crisis and consequent recession hit when thelengthening of the stages in the productive structure, a processwe studied in the last chapter, results from a prior increase involuntary saving, rather than from credit expansion banksbring about without the backing of any growth in real saving.Indeed if a sustained rise in voluntary saving triggers theprocess, this saving prevents all of the six microeconomicphenomena which spontaneously arise in reaction to credit397