Patrick Donohoe: How Economies Grow and Why They Crash

Jason Hartman and Patrick Donohoe discuss how economies grow and shrink, or expand and crash. How have the rules changed in 2020? Patrick explains that the economy is the measurement of resources that are used for particular purposes. Economic growth indicates an increase in production and value, but our current economy is based on debt and consumption.

Money is created by debt. There are so many layers to understanding economics, but the Austrian School of Business says that the economy always acts in cycles. There’s boom cycles, and crash cycles. As credit expands, things will grow, and as credit contracts, things are going to crash. The main idea is that if you want to create real wealth, you simply have to have capital formation.

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