Great read! And yes, the existence of interest is what causes ups and downs in economies.
This is an oversimplification. Credit is the main endogenous source of business cycles. But there are exogenous shocks, too, like droughts.
Taking oil as an example, he illustrated that demand growth is very stable, effectively indexed to continous GDP, but supply is very 'lumpy' & because oil sites (& even oil states) tend to go online/offline in discrete steps.
The same phenomenon applies to metals, agricultural goods and other fuel sources.
Unfortunately I can't find the Youtube clip of this interview
That is an extraordinary claim.
If government set or controlled allowable interest rate or set it to zero there would be no business cycle? The downturn in 2020 was caused by interest?
When money is free, it leads to very destabilizing dynamics such as elevated PE ratios and currency volatility.
You mean like... now?
Banks, non bank financial institutions and individuals are free to choose what interest rates they set, to set interest rates for a sector they thinks is at risk well above market levels or to cease lending activity altogether. The fact they choose to lend at low rates is because market participants are pretty bad at predicting the future and market dynamics encourage cutting credit prices, not because the government forces them to lower rates (it doesn't)
And the reality of banking timescales is that a shortage of capital available at a price isn't a nice little hint to change lending activity, it's a signal that since they can't borrow any more to meet obligations they'd best stop honouring depositors' withdrawals. Which is why we have central banks stepping in to make capital available, and before they did that we didn't have stability, we had a lot more ordinary people losing their savings to bank failures and more volatile business cycles.
Yes, the base interest rate acts a floor on interest rates (individuals and banks are entitled to choose to lend below the Fed funds rate. It just unprofitable to do so. It would be even more and profitable to do, so if the Fed didn't exist). They don't set a ceiling on it, so market participants do choose their own rates, and are entirely free not to get their risk assessments wrong and lend at too low a rate (which Austrians claim to be the primary driver of business cycles). The herd behaviour to lend money at low markups above the base rate is a problem of market dynamics, not a problem of lack of market freedom.
In the absence of central banks, the banking sector still competed to lend at the lowest rate, was not blessed with any more insight into whether a particular industry had too much capital flowing into it or a particular loan was a bad one, business cycles were still a thing and banks went bust more often.
Perhaps a better society would have higher employment, perhaps a better society could afford for one spouse to stay at home and take care of the kids, perhaps a better society would have lower income disparity, perhaps a better society would have more innovation, perhaps it would have more ecological conservation. It's impossible for a single economic lever to square the circle on all of those outcomes for everyone.
Free markets are "one dollar, one vote", as compared to government which is (nominally) "one man, one vote".
The other half of your premise is also completely mistaken. Voting power is not linear in number of votes you get.
But interest aside, the activity of lending itself exacerbates boom/bust because people depending on the money lent out coming back to them are at a higher risk of default, and if they default, they put more people at risk...
If anything the generic austrian stance too generous. Their knee jerk anti state stance leaves some weird window of the state being able to manage things if it were only smart enough.
Centrally planned economies tend to be "simplified" by placing strict restrictions on what types of trade are allowed. Can't have people behaving unpredictably!
The point is, markets should be more independent of the state for other reasons that have nothing to do with any given outcome. (Though I'd claim that some subset of desired outcomes, like income inequality reduction would still come to pass).
Government meddling does make it worse. Governments fighting the business cycle is perverted and should not be the task of government. Paul Volker rediscovered the business cycle and wrote a book about it.
https://archive.org/details/rediscoveryofbus0000volc
Interest rates naturally vary across time, space, lenders, and borrowers. Leave rates to the free market and have government enforce anti-discrimination.
Who would be more efficient at pricing money: the market or the government?
> the existence of interest is what causes ups and downs in economies
You arent even making as extreme of a claim. You’re saying interest rates and business cycles are linked. Not that interest rates are what cause ups and downs in the economy. Think about it: if that were true, and we removed interest rates, the economy couldnt go down? Its an absurd claim.
And it's easy to verify. Look at the business cycle in the US before and after the creation of the Federal Reserve, for example. Under the Fed, we had the Great Depression and 2008, and relatively mild recessions other than that. Compare that with the 19th Century.