The Dao of Capital: Austrian Investing in a Distorted World

by Mark Spitznagel

Taken to its logical conclusion, a society’s time preference could not be repudiated, and the actual market rate of interest had to correspond to the underlying fundamental “originary” rate of interest. Any vain attempt to do otherwise, as when market interest rates are artificially set through monetary intervention, would mislead production and would result in an imbalance and distortion in the economy. Over time, forces would grow stronger and stronger to eliminate that imbalance, and would inevitably succeed in violently driving the artificial rate back to its natural level, and thus the scheme would come to a necessary end. This inevitable seeking of balance from an artificial imbalance, this reversion of opposites, was, to Mises, the very source of “the cyclical fluctuations of business,” “the trade cycle,” or, more precisely, the boom and bust cycle