How does the business cycle lead to poverty?

Mal-investments in financial markets: Government intervention in financial markets and monetary policy causes asset bubbles. Asset bubbles are created when there is a percieved absence of risk in the marketplace caused by government garuntees - while at the same time access to credit is kept cheap with artificially low-interest rates; This causes excessive speculation.

Capital (wealth) becomes mal-invested (wasted), and excessive credit use causes high levels of debt.

The outcome is a dramatic reduction in future spending as wealth is used to pay down the accumulated debt.