The central thesis of Austrian Business Cycle theory is the distortion created by credit expansions (and contractions) to market signals like prices and interest rates. Distorted signals and prices lead individuals and business firms to make faulty decisions. The inevitable correction of the distortions reveals the malinvestment, producing defaults, bankruptcies and other adjustments.

Charles Hugh Williams provides a graphic example of the distortions and corrections during the recent business cycle. It is a vivid example of what the Austrian economists described as the business cycle. From beginning to end, the inflation and destruction of assets and wealth can be seen.

The article below is from Financial Armageddon:

A Graphic Quaternion of Economic Implosion

Whether he is communicating through words or images, Charles Hugh Williams, publisher of the Of Two Minds blog, is an individual who always has something interesting to say (which is one reason why, of course, I regularly read his stuff).

Here is a graphic quaternion from latest post, “Why the World Is Financially Doomed in Four Charts,” which sums up where we’ve been, where we are, and where we’re headed in far better fashion than those many so-called experts who really don’t have a clue about what is going on nowadays.

Click here to read the rest.

Posted by Michael Panzner on January 06, 2011 at 06:34 PM