The following are six of the most prevalent economic myths that appear time and again in the mainstream media. I will give a brief description of each and a brief description of the economic reality, as seen from an Austrian perspective.
Myth 1: Increased money leads to economic prosperity.
This Keynesian myth postulates that increasing aggregate demand through increasing the money supply will lead to more spending, higher employment, increased production, and a higher overall standard of living.
The reality is that an increase in money (when injected into credit markets via bank lending of newly-created reserves) leads to malinvestment. The time structure of production is thrown into disequilibrium by encouraging investment in projects more remotely removed in time from final consumption.
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