Decentralized finance has been booming this summer. What is decentralized finance and how does it compare with the legacy financial system?
We are used to money being issued and controlled by the state – but if we look at its history we see that money originates from the free market. Without money, a reasonable division of labor would not be possible.
Ludwig von Mises' theory of business cycles does not only deliver a logical proof of this, he also correctly predicted the economic crisis of 1929. According to his theory, the boom of the “Roaring Twenties” was caused by cheap loans issued through the US Federal Reserve System, which was founded in 1913. When investors discovered that this boom did not correspond to real value being created, it collapsed.
The individual and its actions are at the center of Austrian Economics. Austrians frown upon the habit of economic schools to squeeze human action into abstract mathematical models.