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Frank Shostak

Frank Shostak



Articles by Frank Shostak

Money Supply vs. Liquidity. What’s the Difference?

2 days ago

In a market economy, a major service that money provides is that of the medium of exchange. Producers exchange their goods for money and then exchange money for other goods. As the production of goods and services increases, this results in a greater demand for the services of the medium of exchange (the service that …

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If We Want to Increase Demand in the Market, We Must First Increase Production

13 days ago

An individual’s demand is constrained by his production of goods. The more goods an individual produces, the more of other goods he can secure for himself. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack. Original Article: “If We Want to Increase Demand in the Market, We Must First Increase …

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Why There’s So Much Confusion over What “Inflation” Means

16 days ago

Understood properly,  inflation is not a general increase in prices but is an increase in the money supply “out of thin air” which brings about the impoverishment of wealth generators. When inflation is seen as a general increase in prices, then anything that contributes to price increases is called inflationary. In this framework, not only …

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Should Investors Focus on Risk Rather Than Profit?

27 days ago

The stock market does not have a life of its own. In a relatively free economy, success or failure of investment in stocks depends ultimately on the same factors that determine success or failure of any business. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack. Original Article: “Should Investors …

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Should Investors Focus on Risk Rather Than Profit?

September 25, 2020

According to the modern portfolio theory (MPT), financial asset prices always fully reflect all available and relevant information, and any adjustment to new information is virtually instantaneous. In this way of thinking, asset prices respond only to the unexpected part of any information, since the expected part is already embedded in prices. For instance, if …

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Turning to Keynes in this Crisis Will Only Make Things Worse

September 19, 2020

In the New York Times on September 8, 2020, Paul Krugman wrote that The CARES Act, enacted in March, gave the unemployed an extra $600 a week in benefits. This supplement played a crucial role in limiting extreme hardship; poverty may even have gone down. For Krugman and many economic commentators, it is the duty …

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What the Trade Balance Means for a Currency’s Purchasing Power

September 16, 2020

Since the trade balance has nothing to do as such with either the supply of money or the demand for money, we can conclude that trade balances do not determine the purchasing power of money of respective countries. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “What …

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What the Trade Balance Means for a Currency’s Purchasing Power

September 15, 2020

In July this year the US trade balance stood at a deficit of $63.6 billion against a deficit of $51 billion in July last year. Some commentators regard a widening in the trade deficit as an ominous sign for the exchange rate of the US dollar against major currencies in the times ahead. For most economic …

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Why Economics Cannot Be Understood through Experimentation

September 1, 2020

In the natural sciences, a laboratory experiment can isolate various elements and their movements. There is no equivalent in the discipline of economics. The employment of econometrics and econometric model building is an attempt to create a laboratory where controlled experiments can be conducted. Building an Economic Model The idea of having such a laboratory is …

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Want to Really Cut Taxes? Cut Government Spending.

August 25, 2020

New government spending projects amount to little more than government squandering wealth. The fact that the private sector does not undertake these projects indicates that they are of low priority to individuals. The implementation of these projects will undermine the well-being of individuals, because they are funded at the expense of projects that are of …

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Why “Price Stability” Policies Fail

August 17, 2020

One of the duties that a central bank is expected to fulfill is to keep the general level of prices in the economy stable. The whole idea of price stability originates from the view that volatile changes in the price level prevent individuals from clearly seeing market signals as conveyed by the changes in the …

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The Origins of the Dollar’s Value

August 15, 2020

 The value of a paper dollar originates from its historical link to commodity money—which happens to be gold—and not government decree or social convention. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “The Origins of the Dollar’s Value​​”.

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The Origins of the Dollar’s Value

August 7, 2020

Why does the dollar bill in one’s pocket have value? The value of money is established, according to some experts, because the government in power says so. For some commentators the value of money is on account of social convention. What this implies is that money has value because it is accepted. And why is it …

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Why Keynes Was Wrong about Consumer Spending

August 4, 2020

As a result of the coronavirus pandemic, most experts are of the view that it is the role of the government and central bank to minimize the damage inflicted by the virus—and the policy response to it—on the economy. The logic behind this reasoning is that increases in the demand for goods and services are …

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The Only Long-Term Solution to a Bust Is to Rebuild Savings

July 25, 2020

Once an economy falls into a recession some commentators express concern that as a result there is now nonutilized capital and labor. Resources that can be used are now made unemployed. It is held that the key issue behind this is insufficient demand for goods and services. Once it is accepted that the key factor …

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A Rising Demand for Money Won’t Save Us from Inflation

July 20, 2020

According to popular thinking, not every increase in the supply of money will have an effect on the production of goods. For instance, if an increase in the supply is matched by a corresponding increase in the demand for money, then there will be no effect on the economy. The increase in the supply of …

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How Central Banks Destroy Money’s Purchasing Power

July 17, 2020

Without a monopolist central bank, market forces would restrain the issuance of bank notes. But once central banks monopolize money creation, wealth is systematically transferred to the central bank and the privileged few who are favored by the state. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: …

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How Central Banks Destroy Money’s Purchasing Power

July 9, 2020

Most economists hold that a growing economy requires a growing money stock on grounds that growth gives rise to a greater demand for money that must be accommodated. Failing to do so, it is maintained, will lead to a decline in the prices of goods and services, which in turn will destabilize the economy and lead …

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The Problem with Measuring “Consumer Sentiment”

July 3, 2020

According to the University of Michigan, the US consumer sentiment index rose to 78.1 in June from 72.3 in May. Many experts see the increase in the index as an important indicator regarding the likely course of the US economy in the months ahead. To gain insight into the economic future, many economists follow a …

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Why Central Banks Are a Threat to Our Savings

June 25, 2020

The US personal savings rate jumped to 33 percent in April from 12.7 percent in March and 8 percent in April last year. An increase in savings is regarded by popular economics as less expenditure on consumption. Since consumption expenditure is considered as the main driving force of the economy, obviously a rebound in savings, which implies less …

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Savings Are Critical to a Prosperous Economy

June 20, 2020

The heart of economic growth is the expansion of real savings. Monetary pumping only destroys wealth and savings. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Savings Are Critical to a Prosperous Economy”.

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Savings Are Critical to a Prosperous Economy

June 12, 2020

It is held by most mainstream economists that spending is the heart of economic activity. Economic activity is depicted as a circular flow of money. Spending by one individual becomes part of the earnings of another individual, and vice versa. In contrast saving is viewed negatively as it weakens the potential demand for goods and …

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The Importance of Economic Theory in Understanding Historical Data

June 8, 2020

It is a common belief that sound economics must be based on facts and not on theoretical reasoning as such. Some commentators are dismissive of economic analysis that is not derived from the true data, since it is not describing the facts of reality as depicted by historical data. The use of the free market economy …

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Defining “Inflation” Correctly

June 5, 2020

The real problem with inflation, properly understood is that it is essentially a wealth transfer away from the most productive parts of the economy. This causes bubbles and economic fragility. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Defining “Inflation” Correctly​”

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Defining “Inflation” Correctly

May 30, 2020

Inflation is typically defined as a general increase in the prices of goods and services—described by changes in the Consumer Price Index (CPI) or other price indexes. If inflation is a general rise in measured prices, then why is it regarded as bad news? What kind of damage can it inflict? Mainstream economists maintain that …

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Let’s Hope Deflation Is Headed Our Way

May 21, 2020

Central banks have decided that one of their main missions is to prevent deflation. But this only ends up causing the malinvestments that lead to economic busts.This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Let’s Hope Deflation Is Headed Our Way”

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