Take a look at Joe Salerno’s recent article on ABCT. I think it will answer your questions:
Hayek’s work on the cycle can be found in his book, Prices and Production and Other Essays:
In brief, credit expansion suppresses the rate of interest below its market level. But the rate of interest is the price spread between the stages of production, i.e., it is the spread between the buying prices of inputs and the selling prices of output. As Rothbard shows in Man, Economy, and State, the lowering of the rate of interest shifts investment toward the higher stages of production and away from the lower stages. The capital structure is lengthened out. This boom is self-reversing because the people’s time preference do not support the lengthening out of the capital structure. People prefer to have resources devoted to the pattern of investment that existed before the boom, i.e., more to lower stages and less to higher stages than is brought about artificially during the boom. The bust corrects the malinvestments made in the boom.