Economist Fritz Machlup was an early Misesian who wrote this book as an early study in the workings of the business cycle. In particular, he investigates and explains the relationship between expanding credit, monetary policy, and rising stock prices. The German edition was written in 1929 and published in 1930, and proved prophetic in every way. The English edition came out in 1940, with some revisions. It remains the most thorough analysis of stock-market bubbles from the point of view of the Austrian School. It demonstrates that the business cycle can and does affect stock markets and in unusual ways.
This book was not what I was expecting. Machlup spend almost half of the book debating contemporaries who claim capital gets tied up in stock markets and never makes it to industry. His insights as to what the stock market is and it's functions is enlightening. But I was hoping he would have spent more time discussing the effects of a business cycle on the stock market.
I still believe there is much more room for studies in the stock market and bond market and how they ready to business cycles.
But this book does provide some good insights into terminological issues as well as issues dealing with the function of a stock market.
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