Genuine entrepreneurial innovation (e.g., the early auto industry or the internet boom) draws resources toward new projects just like a credit-induced boom, but it is healthy when the rising interest rate acts as a 'brake' rationing resources to what savers voluntarily provide; the danger arises only in Hayek's second scenario where the central bank refuses to let rates rise and pumps in credit, encouraging too many such projects.

causalpending

Speaker

Larry White

Evidence Quote

Hayek referred to this as the interest rate break preventing the economy from over committing to these projects

Source

Larry White on Hayek and Money 02/01/2010EconTalk
Created: 6/17/2026, 10:31:20 AM

My Notes

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