Every few years — like clockwork — the global economy plunges into another crisis. Collapsed banks, bankrupted companies, mass layoffs, social unrest. Television broadcasts surprised faces of politicians and central bankers: "Nobody could have foreseen this!" they chorus, throwing up their hands. Lies. Austrian economist Ludwig von Mises explained the mechanism of this madness back in the early 20th century, but he's been ignored for a hundred years.
The Mises Cycle isn't some abstract theory from a dusty textbook. It's a precise diagnosis of the disease afflicting the entire modern financial system. Central banks artificially lower interest rates, pump the economy full of cheap credit, create an illusion of prosperity — and then, when the bubble inevitably bursts, they shrug guiltily and... start all over again. And here's the funny part: they tell us it's for our own good!
Credit Expansion — A Drug for the Economy
Imagine a drug addict who promises to quit but instead increases the dose. That's roughly how modern monetary policy works. Central banks manipulate interest rates, artificially lowering them below the natural market level. Why? To stimulate the economy, of course! Sounds noble, right?
When money becomes cheap, businesses start taking loans for projects that would seem unprofitable at normal rates. Construction companies erect skyscrapers nobody needs. Startups with a business model of "first burn billions, then somehow make money" get round after round of financing. Investors buy assets at inflated prices because there's no alternative — keep money in deposits at 0.5% annually? Laughable.
All this creates a sense of economic boom. GDP grows, unemployment falls, stock indices break records. Politicians proudly report successes, while TV economists praise the "wise policy of the central bank." One question: if everything's so wonderful, why can't this continue forever?
Because it's an illusion. Credit expansion doesn't create real wealth — it merely redistributes resources from the future to the present. The economy starts living beyond its means, investing in projects for which there are no real savings. Mises called this "malinvestment." Capital goes not where the free market would direct it, but where artificially lowered rates push it.
The Artificial Boom — A Party You'll Have to Pay For
Remember 2008. Or the dot-com bubble of 2000. Or Japan's asset bubble in 1989. Every time — the same story. A period of artificial prosperity when everyone thinks they've become investment geniuses gives way to brutal sobering. But during the boom, nobody wants to listen to skeptics.
"This time it's different!" — the main mantra of every bubble. No, it's not different. Economic laws aren't canceled by politicians' desire to look successful. The production structure becomes distorted: too many resources go into long-term projects that seemed profitable with cheap money but will prove unprofitable when rates normalize.
Builders erect elite neighborhoods for which there's no real demand. Companies hire thousands of employees for projects doomed to fail. Investors buy stocks at PE 200, convincing themselves that "the market always goes up". Everyone participates in collective madness because while the music plays, nobody wants to leave the dance floor.
The problem is that cheap money doesn't create real savings. It doesn't increase the quantity of machinery, skilled workers, or raw materials. It only creates an illusion of wealth, redistributing resources in favor of those who first get access to freshly printed banknotes — banks, large corporations, speculators. Ordinary people receive this money last, when prices have already risen.
The Inevitable Crash — When Reality Bursts Through the Door
And then the music stops. The central bank realizes inflation has spiraled out of control and starts raising rates. Or simply stops pumping money into the system. And it turns out the emperor has no clothes.
Projects that seemed profitable at 2% rates become unprofitable at 5%. Companies loaded with debt can't service it. Developers freeze construction. Startups living off funding rounds go bankrupt. Unemployment rises because it turns out half the jobs were artificially created.
The stock market collapses. Real estate cheapens. Banks find themselves with balance sheets stuffed with toxic assets. Bankruptcies, defaults, mass layoffs begin. Panicked politicians demand the central bank "do something" — and it turns on the printing press again, launching another cycle.
Mises warned: crisis is inevitable. Not because markets are imperfect, but because artificial rate lowering creates imbalance between savings and investment. The crash isn't the disease, it's the cure. The economy purges itself of malinvestments, reallocates resources to the right sectors. But instead of allowing this process to complete, authorities intervene again.
Central Banks — Architects of Catastrophe
Modern central banks position themselves as saviors of the economy. They supposedly "smooth out cycles," prevent crises, maintain stability. In reality, they do the exact opposite — create these very cycles and exacerbate crises.
The problem is in the very concept of central planning of money supply. Imagine if the government decided to centrally set bread prices. Bakers would receive orders: "This quarter, bread should cost $2 per loaf." What would happen? Shortage or surplus, depending on whether the order is set above or below market price.
Same story with interest rates. It's the price of money over time, the price borrowers pay lenders for forgoing current consumption. When the central bank artificially lowers this price, it sends false signals throughout the economy: "Savings are plentiful! Invest in long-term projects!" But there are no real savings — only freshly printed paper.
The Fed, ECB, Bank of Japan, Bank of England — all play the same game. Lower rates to zero or even negative values. Buy government and corporate bonds by the trillions. Pump banks with liquidity through programs like QE. And every time they're surprised why inequality grows, the middle class gets poorer, and billionaires get richer faster.
The answer is simple: those closest to the printing press win first. Banks borrow from the Fed at 0.1% and buy government bonds at 2% — zero risk, guaranteed profit. Large corporations take cheap loans and buy back their own stocks, enriching shareholders. And ordinary people watch as prices for housing, education, and healthcare rise faster than their wages.
Social Upheaval — The Bill for Monetary Madness
Economic crises don't happen in a vacuum. Behind every GDP decline graph stand millions of destroyed lives. Unemployment, bankruptcies, loss of homes, broken families — the real cost of central banks' games with interest rates.
When the bubble bursts, those who created it don't suffer first. Wall Street bankers get bonuses and government support. Corporations — "too big to fail" — receive trillion-dollar bailouts. And ordinary people lose jobs, savings, homes.
2008 showed this with ultimate clarity. Banks that inflated the mortgage bubble received salvation at taxpayers' expense. Not one top manager went to jail. And millions of families lost their homes. Privatized profits, socialized losses — that's how modern capitalism of central bank friends works.
No wonder populism grows, radical movements gain strength, social tension reaches boiling point. People feel: the system is broken and works against them. They don't always understand the mechanism — the Mises Cycle, credit expansion, distortion of production structure. But they see the result: their lives get worse while elites get richer.
Breaking the Vicious Circle
The Mises Cycle will repeat as long as central banks maintain a monopoly on money. Every time they turn on the printing press, they doom us to another round of boom and bust. Every time they manipulate rates, they distort economic reality and accumulate imbalances that will explode in crisis.
Is there an alternative? Yes. Austrians proposed a return to the gold standard — money that can't be printed at politicians' whim. But in the 21st century, a more elegant solution has emerged — cryptocurrencies with a deflationary model.
DeflationCoin isn't just another token. It's an attempt to implement Mises' ideas in the digital age. Algorithmic deflation, burning of unstaked coins, smooth unlock, lack of correlation with Bitcoin manipulated by central banks — all this creates an asset that doesn't obey the insane logic of credit expansion. It's a hedge against monetary madness, protection from another boom-bust cycle.
Central banks will continue their game. They'll print money, lower rates, create bubbles and crashes. But for the first time in history, ordinary people have an exit — a monetary system that works by the laws of mathematics, not officials' whims. The only question is whether you'll use this exit before the next bubble collapses.