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Frank Shostak

Frank Shostak



Articles by Frank Shostak

Stop Trying to Turn Economics into a Branch of Psychology

8 days ago

Recently, a relatively new economics called behavioral economics (BE) has started to gain popularity. Its practitioners, such as Daniel Kahneman, Vernon Smith, and Richard Thaler, were awarded Nobel Prizes for their contribution in the field of BE. The BE framework emerged because of dissatisfaction with the neoclassical theory regarding consumer choices. In the neoclassical theory, …

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Stop Pretending Price Inflation Is a Result of “Too Much” Profit

13 days ago

Some commentators attribute the latest sharp increase in the Consumer Price Index to businesses pushing prices of goods higher in order to secure higher profits. (See the New York Times article “Democrats Blast Corporate Profits as Inflation Surges,” January 3, 2022). Note that the yearly growth rate of the Consumer Price Index jumped to 6.8 percent in …

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How GDP Stats Create the Illusion of Fed-Fueled Economic Growth

17 days ago

Most experts tend to assess the strength of an economy in terms of real gross domestic product (GDP). The GDP framework looks at the value of final goods and services produced during a particular time interval, usually a quarter or a year. The GDP is formed as the summation of consumer outlays on goods and …

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How to Avoid Depressions? Foster Saving and Investment

24 days ago

Economic depressions are not caused by a strong decline in the money stock, but by a depleted stock of real savings. Original Article: “How to Avoid Depressions? Foster Saving and Investment” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.

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Why Doesn’t Increased Demand Bring More Supply?

29 days ago

By popular thinking, the key driver of economic growth is increases in the total demand for goods and services. It is also held that the overall output increases by a multiple of the increase in expenditure by government, consumers and businesses. Following this way of thinking it is not surprising that most commentators are of …

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How to Avoid Depressions? Foster Saving and Investment

December 29, 2021

In his writings, the leader of the monetarist school of thinking, Milton Friedman, blamed central bank policies for causing the Great Depression of 1930s. According to Friedman, the Federal Reserve failed to pump enough reserves into the banking system to prevent a collapse of the money stock. Because of this, Friedman held, the M1 money stock, …

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Money Supply Growth Is Slowing—That Points to a Slowing Economy

December 20, 2021

Easy money monetary policy only serves to weaken and destroy savings and investment. And that means weaker future economic growth. Original Article: “Money Supply Growth Is Slowing—That Points to a Slowing Economy” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.

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Who Will Inflate Faster? Europe or the Fed?

December 18, 2021

The price of the euro in terms of the US dollar closed at 1.135 in November, against 1.156 in October and 1.193 in November last year. The yearly growth rate of the price of the euro in US dollar terms fell to –4.8 percent in November from –0.7 percent in October. Some commentators are of …

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We’re All Talking about Inflation, but Deflation May Also Be on the Way

December 10, 2021

When prices fall as a result of rising wealth that’s good news. But deflation is also good news when it follows the bursting of a financial bubble caused by money creation. Original Article: “We’re All Talking about Inflation, but Deflation May Also Be on the Way” This Audio Mises Wire is generously sponsored by Christopher …

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Money Supply Growth Is Slowing—That Points to a Slowing Economy

December 8, 2021

According to the popular narrative, the role of the central bank is to navigate the economy along the so-called path of economic stability. By this way of thinking if various shocks cause the economy to deviate from this path, then it is the role of central bank policy makers to offset these shocks. This is done …

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“Going Cashless” Isn’t as Easy as It Seems

December 1, 2021

The fact that various electronic money transfers are taking place does not mean that we do not require cash any longer. On the contrary, the fact that the cash exists enables those transfers to take place. Original Article: “‘Going Cashless’ Isn’t as Easy as It Seems” This Audio Mises Wire is generously sponsored by Christopher Condon. …

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We’re All Talking about Inflation, but Deflation May Also Be on the Way

November 30, 2021

Most recent data continue to show a visible acceleration in “price inflation,” with the yearly growth rate of the US Consumer Price Index (CPI) rising to 6.2 percent in October from 5.4 percent in September and 1.2 percent in October of last year—its highest level since December 1990. Most experts seem to be surprised by the massive …

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Is Price Stability Really a Good Thing?

November 24, 2021

Contrary to popular thinking, there is no such thing as a price level that should be stabilized by the central bank in order to promote economic prosperity. Original Article: “Is Price Stability Really a Good Thing?” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.

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“Going Cashless” Isn’t as Easy as It Seems

November 20, 2021

Many economic commentators are in favor of phasing out cash. They are of the view that cash provides support to the shadow economy and permits tax evasion. It is also held that in times of economic shocks that push the economy into a recession the rising demand for cash exacerbates the downturn—it becomes a factor of …

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The Problem with “Stakeholder Capitalism”

November 6, 2021

Writing in the Investment Monitor on March 18, 2021, Klaus Schwab, the founder of the World Economic Forum, was urging the replacement of the present economic system. According to Schwab, the present system is deficient, since it only benefits a small minority of the population while leaving all the others at a visible disadvantage. Schwab is of …

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What “Inflation” Really Means

November 3, 2021

Most commentators label increases in the prices of goods and services over a period of time as inflation. Ludwig von Mises however, held that the popular definition of inflation is erroneous. He wrote in Economic Freedom and Interventionism (p. 99), Inflation, as this term was always used everywhere and especially in this country, means increasing …

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“Idle Resources” Are Problems Caused by the Central Bank

October 31, 2021

It is not possible to replace productive credit by means of the easy monetary policies of the central bank. If this could have been done, then the world would have already ended poverty. Original Article: “‘Idle Resources’ Are Problems Caused by the Central Bank” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by …

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Why a Bear Market in Bonds Points to a Weakening Economy

October 22, 2021

Years of bubbles and malinvestment have a downside: the destruction of the productive, wealth-building parts of the economy. And that could mean higher interest rates. Original Article: “Why a Bear Market in Bonds Points to a Weakening Economy” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.

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Understanding Money Velocity and Prices

October 22, 2021

The yearly growth rate of US’s “Austrian money supply” jumped by almost 80 percent in February 2021 (see chart). Given such massive increase in money supply, it is tempting to suggest that this lays the foundation for an explosive increase in the annual growth of prices of goods and services sometime in the future. Some experts are …

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“Idle Resources” Are Problems Caused by the Central Bank

October 18, 2021

Resources that are utilized to promote economic prosperity in normal times become underutilized during recessions. Some experts are of the view that what is required are policies which will increase the availability of credit to make greater use of underutilized resources. On this Ludwig von Mises wrote, Here, they say, are plants and farms whose capacity …

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Why Does Money Have Value? Not Because the Government Says It Does.

October 14, 2021

Why do individuals desire to have money, which cannot be consumed and produces nothing? To provide an answer to this one must go back in time to establish how money emerged. Original Article: “Why Does Money Have Value? Not Because the Government Says It Does.” This Audio Mises Wire is generously sponsored by Christopher Condon. …

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Why a Bear Market in Bonds Points to a Weakening Economy

October 14, 2021

After closing at 0.53 percent in July 2020 the yield on the ten-year US T-bond moved relentlessly higher, closing on Tuesday, September 28, 2021, at 1.55 percent. There is a growing likelihood that the July 2020 figure of 0.53 percent might have been the lowest point. How should we view this in the context of …

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What the New Nobel Winners Get Wrong about Economics

October 12, 2021

This year’s Nobel Prize in economics was awarded to David Card of the University of California, Berkeley, Joshua Angrist of Massachusetts Institute of Technology, and Guido Imbens of Stanford University. The laureates, according to the Nobel Committee have made an important contribution as to how to ascertain cause and effect from observational data. For instance, …

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Why Does Money Have Value? Not Because the Government Says It Does.

October 6, 2021

Why does the dollar bill in our pockets have value? According to some commentators, money has value because the government in power says so. For other 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 accepted? … …

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It’s Not Good Enough to “Look at the Data”

September 30, 2021

According to popular thinking, it is held that by means of statistical and mathematical methods one can organize historical data into a useful body of information. This in turn can serve as the basis for the assessments of the state of the economy. It is also held that the reality is elusive. Hence, it is …

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Before a Bust, There Is Always a Boom (and Malinvestment)

September 27, 2021

An economic depression is not caused by a decline in the money supply per se, but results from a shrinking pool of savings made possible by a previous bout of monetary inflation. Original Article: “Before a Bust, There Is Always a Boom (and Malinvestment)” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated …

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Before a Bust, There Is Always a Boom (and Malinvestment)

September 22, 2021

For most commentators lending is associated with money. However, is this the case? When a saver lends money, what he/she in fact lends to a borrower is final consumer goods that he/she did not consume. Therefore, what a lender lends to a borrower is savings and not money as such.  Take farmer Joe, who produced two kilograms of …

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Can Economic Data Explain the Timing and Causes of Recessions?

September 19, 2021

Without establishing the underlying causes of boom-bust cycles, employing policies in response to changes in economic indicators to counter economic cycles is likely to destabilize the economy. Original Article: “Can Economic Data Explain the Timing and Causes of Recessions?” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.

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Can Economic Data Explain the Timing and Causes of Recessions?

September 15, 2021

Most economists are of the view that through the inspection of economic data it is possible to identify early warning signs regarding boom bust cycles. What is the rationale behind this way of thinking? During the 1930s the National Bureau of Economic Research (NBER) introduced the economic indicators approach to ascertain business cycles. A research …

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