new capital goods which are created with the help of a credit expansion ("voluntary" savings being constant) will be destroyed during the crisis which necessarily follows the upward phase of the cycle" (Colonna, xi). The new credit currency is considered to be inflation and cannot be maintained whereas voluntary savings are production and can be maintained. In Hayek's words In a free market society newly created money can never take the place of true voluntary savings: money expansions do not have temporary distorting effects on the price system and on the directions of production, but these effects are not in harmony with the free choices of the consumers, money will never be able to change permanently the relative scarcity of capital (Colonna, xi).By saying this, Hayek showed the integration of monetary and capital theory. In his second point, Hayek discusses how important the enterprisers's anticipation of rising prices is. "The entrepriser, anticipating rising prices, and aided by money rates below the equilibrium rate, plunges into overinvestment" (Haney, 682). Now, Hayek developes a third point. He calls it "the vertical structure of production, and the different effects of price rises on the various stages" (Haney, 682). Here, Hayek talks about different goods and their total demand. He mentions production goods, intermediate goods, and consumption goods. Hayek introduces the term "forced savings" which means inability to buy the usual quantity of consumers' goods. As banks having excess reserves encourage businessmen to borrow at below-normal interest rates, an overexpansion of investment develops. The roundabout process of producing by means of capital goods begins, and the spending of the new credit raises expenses and prices before the incomes of consumers can rise (Haney, 682).From this explanation, forced saving results. Hayek states that "this phase will continue as long as the investment feeds on new bank ...
