If, over a period of years, capital has been misallocated by an accelerating credit expansion, there is no policy that avoids a crisis. In the modern vernacular, there is no possibility of a “soft landing.”7 Decelerating the expansion will cause real interest rates to rise dramatically as credit becomes increasingly scarce; bankruptcies would follow. Further accelerating the expansion will cause hyperinflation and a collapse of the monetary system. Mises is telling us, in effect, that the central bank can print itself into trouble, but it cannot print itself out of trouble.
Banking system can cause inflation but cannot fix it with its tools
