Mises's theory of the business cycle. In a nutshell: Because of government restrictions on the normal operation of a competitive industry, commercial banks are able to expand their issue of fiduciary media by extending more loans to the community, even though there has been no increase in genuine saving. Because this increase in the quantity of money hits the loan market first, it temporarily depresses the market rate of interest, while other prices in the economy have not yet fully adjusted to the infusion of new money. Guided by the false and artificially low interest rate, entrepreneurs see apparently profitable business ventures and invest accordingly. However, the actual time preference in the community is unchanged. This means that the entrepreneurs are making bad investments - what Mises calls malinvestments - in devoting their capital into a specific configuration of capital goods that is not calibrated to the consumers' desired timing of consumption goods. By effectively trying to employ longer production processes than the consumers are willing to endure, the entrepreneurs end up squandering resources and impoverishing the community, at least relative to the baseline with no interference from the commercial banks.

Bob Murphy