“The problem of the business cycle arises when the loan rate of interest diverges from the natural rate of interest. While this divergence could happen in a free banking system, the major divergence occurs under central bank regimes when large reductions of the interest rate are executed by injecting money into the banking system over a long period of time. A larger volume of loans is thereby made possible. The lower interest rate increases investment and consumption and reduces savings. These changes in the economy provide the conditions for a boom in the economy. If the new funds are funneled into a specific sector of the economy, a bubble could result.”
http://mises.org/daily/6533/Only-Austrian-Theory-Can-Explain-and-Expose-Booms-and-Bubbles
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