Friedrich Hayek Quotes

If one wants to avoid the recurrence of economic crises, one must avoid the expansion of credit that creates the boom and inevitably leads into the slump.

To combat depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection -- a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end.

The real problem is deflation. That is the opposite of inflation but equally serious to the borrower.

Credit expansion and money printing hasn't filtered much to ordinary people. It's boosted asset markets, real estate and stocks. So well-to-do-people have done very well.

There is a difference between strategic or technical default and default where you really don't have the economy to support the spending. We are not at that point yet. We could be. We could be, like some European nations.

If the program goes off track again due to recession, this should not become a pretext for the imposition of more austerity measures.

The second evil arising from the practice of banking, has its origin, in the system of credit itself; and the shock which, as it is rounded on prevailing opinion, it is liable to receive from whatever shakes public confidence.

I think that this is the most significant financial crisis in the post-War period for the United States, and it has in fact a global reach.... I think it is extraordinarily important to understand that, as we have seen in many previous examples of different countries and different times, choking up of credit is like taking the lifeblood away from the economy.

Austerity: The History of a Dangerous Idea.

It's almost 10 years since the 2008 crisis, but we all still remember the consequences of ignoring threats to the public finances.

Depression is the aftermath of credit expansion.

I think it's been, you know, kind of like a tragic play to this point. But at this point, I think it's clear, and will be clear to the majority of the Congress. I think it's clear to the American people that there is only one countervailing force to a world where financial institutions are trying to sell instruments every day and where credit has dried up, and that's the United States Treasury.

We need economic growth in Europe and we need to find a solution for the excessive interest rates that are making it difficult for many countries to get their own debt under control.

True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.

One thing is certain. At some point global investors will lose confidence in our (U.S.) easy dollars and debt-financed prosperity, and then the chickens will come home to roost.

Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

One day, because they realize for some reason or other that they must stop credit expansion, the banks do stop creating new credit to lend. Then the firms that have expanded cannot get credit to pay for the factors of production necessary for the completion of the investment projects which they have already committed themselves. Because they cannot pay their bills, they sell off their inventories cheap. Then comes the panic, the breakdown. And the depression starts.

At best, in such depression times, monetary policy is a feeble reed on which to lean.

The problem is, if at all, in the different view of the economy, of economic growth. Growth is too low, even for us. That needs to change: More investments, a stronger role by the European Central Bank. Otherwise, there are no tensions between Italy and Germany. But on this point, compromises must be reached and we will reach them.

Financial markets ... resent any kind of government interference but they hold a belief deep down that if conditions get really rough the authorities will step in.

The lower interest rates fueled housing and consumption booms in countries such as Spain and Ireland. At the same time, Germany, struggling with the burdens of reunification, tightened its belt and became more competitive. All this led to a wide divergence in economic performance. Europe became divided into creditor and debtor countries.

What governments call international monetary cooperation is concerted action for the sake of credit expansion.

Of course I'm troubled by huge consumer debt levels - we've pushed consumer credit very hard in the US. Eventually, if it keeps growing, it will stop growing. As Herb Stein said, "If something cannot go on forever, it will stop." When it stops, it may be unpleasant. Other than Herb Stein's quote, I have no comment. But the things that trouble you are troubling me.

Moreover, because we chose to finance the way by borrowing, our deficits and debt has soared, and this means we have less room for maneuver, less money available to stimulate the eocnomy in the way needed.