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This video on economic theory basically says that it's credit that causes booms and busts, and it's especially bad when credit is not used for investments because it inevitably creates a situation in the future where millions of people at once will have less money to spend, thus creating a bust:

https://www.youtube.com/watch?v=PHe0bXAIuk0

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>and it's especially bad when credit is not used for investments

It doesn't even have to be "not investments", it can be appropriately risky investments that just don't pan out (perhaps even systemically due to a "black swan").

There's inherent variation, ebbs and flow, in the economy that we won't ever be able to smooth. Booms and busts will occur because those on the credit margins always represent "going too far".

It's obvious that there will always be booms and busts; the important question is why they are synchronized, instead of localized, like the dotcom boom and bust mostly was.

Oh, well, if an Youtube video says so, it must be true.

Does it show any evidence for that theory?

The video is by Ray Dalio, founder of Bridgewater, and it states that it's just his personal mental framework to understanding the economy; not claiming gospel or anything. Either way, he's kind of a big deal.

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