[Phil153]

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All you have to do is look at the theory to understand that there is something better out there. The Austrian business cycle theory I linked too proves it's better. Contrary to what Ben Bernanke would have you believe, it is not "better to have boomed and busted than never to have boomed at all." The boom represents capital misallocation, and during the bust some of that capital is always abandoned, meaning there is always a net economic loss over the cycle, compared to what would have occurred in the absence of the cycle.

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I find this wanting. You assume that the boom represents capital misallocation, but I don't see proof for that. The very point of the market is experimentation, which is hugely wasteful, so why can't booms lead innovation and capital development in a way that a steady rise wouldn't? Why is a boom *necessarily* a bad thing? And how is it different to the money provided by ill informed punters on the stock market?

The theory underpinning the mis allocation of capital from extra money supply also seems wanting. Businesses can react adequately to all kinds of market conditions, including those that governments helps stabilize by regulation, but suddenly when the government increases the money supply, they start misallocating capital? Doesn't sit right with me.

I'd also be curious if there is any actual quantification of this waste vs the innovation and progress gained from an artificial inflation of the money supply. Without some kind of solid quantification, it seems to be just a theory that could be either unimportant in the scheme of things of overcome by other considerations - or valid. It's a bit premature to claim this as economic truth without scientific testing of these simplistic (compared to the economy) theories.