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Frank Shostak

Frank Shostak



Articles by Frank Shostak

Fiscal Stimulus vs. Economic Growth

5 days ago

We’re told more government spending will get the economy back on track. But increasing government spending weaken the process of wealth creation.  Original Article: “Fiscal Stimulus vs. Economic Growth” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  

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Why the Corporate Paradox of Thrift Isn’t Really a Problem

7 days ago

Corporate cost cutting sets the stage for future gains in profitability and productivity, and there is no resulting “paradox of thrift” requiring easy money policies to “fix” the problem. Original Article: “Why the Corporate Paradox of Thrift Isn’t Really a Problem” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack. …

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Fiscal Stimulus vs. Economic Growth

8 days ago

For most experts a key factor that policymakers should be watching is the ratio between actual real output and potential real output. The potential output is the maximum output that the economy could attain if all resources are used efficiently. In Q3 2020, the US real GDP–to–potential US real GDP ratio stood at 0.965 against …

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Subjective Value Is Not the Same as Arbitrary Value

14 days ago

Why do individuals pay much higher prices for some goods versus other goods? To provide an answer to this question economists refer to the law of diminishing marginal utility. Mainstream economics explains the law of diminishing marginal utility in terms of the satisfaction that one derives from consuming a particular good. For instance, an individual …

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Why the Corporate Paradox of Thrift Isn’t Really a Problem

21 days ago

According to some commentators, cost cutting by companies in order to protect profits can in fact set in motion an economic slump. It is held that if everyone tries to cut costs and save more, demand for goods and services from retrenched workers weakens, and as a result corporate revenues and profits come under pressure. …

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Quantitative Methods in Economics Can Describe—but Not Explain—Events

December 19, 2020

Most economists regard the use of mathematical and statistical methods as the key to understanding the complexities of economics. They are of the view that in order to be scientific, economics should follow in the footsteps of natural sciences. By means of mathematical and statistical methods, an economist establishes relationships between various variables. For example, …

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Why Government Stimulus Sometimes Looks like It Revives the Economy

December 5, 2020

Even when an economic bust appears, there may still be enough real savings in the economy to quickly put the economy back on track. This is what brings economic recovery, not artificial “stimulus.” Original Article: “Why Government Stimulus Sometimes Looks like It Revives the Economy”. This Audio Mises Wire is generously sponsored by Christopher Condon. …

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Deflation Doesn’t Undo the Problems Caused by Past Inflation

December 5, 2020

By a popular way of thinking, it is the role of the central bank to make sure that economy follows a path of stable economic growth and prices. The economy is perceived to be like a spaceship that occasionally slips from this trajectory. Following this way of thinking when economic activity slows down and strays from the …

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Why Government Stimulus Sometimes Looks like It Revives the Economy

December 1, 2020

Once an economy falls into an economic slump and the level of unemployment begins to rise most commentators are of the view that it is the duty of the government and the central bank to step in to counter the rise in unemployment. Some commentators are of the view that the lowering of unemployment can …

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Why the IMF Is Wrong about Liquidity Traps

November 25, 2020

In the Financial Times from November 2, 2020, the International Monetary Fund chief economist Gita Gopinath suggested that world economies at present are likely to be in a global liquidity trap. Gopinath has reached this conclusion because the yearly growth rate of the price indexes has been trending down despite very low interest rates policies. …

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A Drop in the Money Supply Was Not the Cause of the Great Depression

November 20, 2020

Even if the central bank were to be successful in preventing the fall of the money stock, this would not be able to prevent a depression if the pool of real savings is declining. Original Article: “A Drop in the Money Supply Was Not the Cause of the Great Depression​”. This Audio Mises Wire is …

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A Drop in the Money Supply Was Not the Cause of the Great Depression

November 18, 2020

In his writings, Milton Friedman blamed central bank policies for causing the Great Depression. According to Friedman, the Federal Reserve failed to pump enough reserves into the banking system to prevent a collapse in the money stock.1 The adjusted money supply (AMS), which stood at $26.6 billion in March 1930, had fallen to $20.5 billion by …

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How Easy Money Creates the Boom-Bust Cycle

November 10, 2020

According to the popular way of thinking, various economic data can provide an analyst with the necessary information regarding the state of the economy. It is held that by inspecting various economic indicators such as the gross domestic product or industrial production, an analyst could ascertain the state of the economic business cycle. Following the …

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Why Asset Bubbles Involve So Much More Than Just Rising Prices

November 4, 2020

According to the Financial Times from October 18, 2020, senior Federal Reserve officials are calling for tougher financial regulation to prevent the US central bank’s low interest rate policies from giving rise to excessive risk taking and asset bubbles in the markets. Eric Rosengren, president of the Federal Reserve Bank of Boston, told the Financial Times …

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

October 27, 2020

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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Printing Money at a “Constant” or “Stable” Rate Won’t Prevent Boom-Bust Cycles

October 20, 2020

Money printing—even at a constant rate—is going to generate the same result as any other money printing. The reason lies in the fact that money creation transfers wealth from productive to unproductive enterprises. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Printing Money at a “Constant” or …

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

October 16, 2020

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

October 13, 2020

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?

October 2, 2020

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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