Because resources (workers, machinery, raw materials) are finite, cheap credit draws them away from sustainable short-payoff projects into time-consuming roundabout projects, making the economy top-heavy; as resources are continually expended to keep long projects going, they bid up the prices of labor and inputs, raising other businesses' costs until it becomes clear there aren't enough genuine savings to complete all projects, forcing some to be abandoned and causing unemployment in those industries.

causalpending

Speaker

Larry White

Evidence Quote

there aren't enough genuine savings to bring all these projects to fruition and some of them are going to have to be terminated they're not going to make a profit

Source

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

My Notes

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