e overproduction-type theories. Those theories include consumer goods, capital goods, or investment of money or credit. "They may stress fixed capital against circulating or liquid capital" (Haney, 667). However, the overinvestment theory assigned a crucial role to the acceleration principle, according to which "a mere decline in the rate of increase in business sales could give rise to an absolute decline in the production of investment goods" (Outwaite, 56). Hayek examined the role of money and the banks in causing economic fluctuations. He showed how sudden injection of credit into economy could cause changes in the relative prices between goods and lead to overinvestment that cannot be maintained. "When money and credit vary, it sets up a train of events which draws resources into places where they would not normally go. In particular, an increase in credit stimulates investment" (Butler, 8). Thus, Hayek shows that it is a response to the false signal of new credit being created, and therefore this investment cannot be maintained. Hayek concentrates on the initial disturbance that starts a cycle. It is used to create new bank credit in the shape of unwarranted advances to enterprises. He considers money (credit) as a factor to explain the cycle theory. The elasticity of the money supply (MV) is what allows and facilitates the disequilibria of business cycles. By expanding the currency, malinvestments in capital are generated, which are not productive enough to be maintained (Haney, 681).Having said this, Hayek makes two points here. He talks about "voluntary saving" and enterprisers' anticipation of rising prices. The former is concerned with the changes in capital structure brought about by changes in the volume of money. It is the difference between "voluntary saving" and the creation of new credit currency by banks. In particular, Hayek describes the self-reversing real effects of credit expansion. He states that "all ...
