Please excuse my ignorance – What is a Crack Up Boom, and what are the implications if such a Boom occurs ?
According to Investopedia:
A crack-up boom is the crash of the credit and monetary system due to continual credit expansion and price increases that cannot be sustained long-term.
According to A.I. Grok when prompted:
“according to von mises what is a crack-up boom”
Answer
According to Ludwig von Mises, a “crack-up boom” is an economic phenomenon that occurs during the final stages of a hyperinflation scenario. Here are the key elements of von Mises’s description:
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Loss of Confidence in Money: As hyperinflation progresses, people lose confidence in the currency. They begin to realize that the money they hold will rapidly lose value.
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Flight from Money: Individuals and businesses start to exchange their money for real goods or foreign currencies as quickly as possible to avoid the depreciation of their wealth. This leads to an extreme form of inflation where prices increase exponentially.
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Economic Chaos: The rush to get rid of money leads to a situation where the value of money collapses. Prices would rise so quickly that economic calculations become virtually impossible, leading to a breakdown in the market economy.
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Collapse of the Monetary System: This process culminates in what von Mises called the “crack-up boom”, where the currency becomes worthless, and the monetary system collapses. The economy can no longer function with the old currency, necessitating a new monetary system or a return to barter until a new currency stabilizes.
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End of Hyperinflation: The “boom” part refers to the rapid increase in prices, but it’s not a boom in the traditional sense of economic prosperity; it’s actually the peak of economic disorder leading to the inevitable crash.
Von Mises discussed this concept in his works, particularly in “The Theory of Money and Credit” and “Human Action,” where he elaborated on the catastrophic effects of inflation when it spirals out of control. This scenario is one where the currency fails entirely as a medium of exchange and store of value, leading to a severe economic crisis.
Assuming the Artificial Intelligence has it right, “crack up boom” seems like a cack-handed way of saying “hyperinflation”.
Prices are increasing now – and no human being outside of Washington DC would call it a “boom”.