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Frank Shostak

Frank Shostak



Articles by Frank Shostak

The Problem with Measuring “Consumer Sentiment”

2 days ago

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

10 days ago

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

15 days ago

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

23 days ago

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

27 days ago

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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Let’s Hope Deflation Is Headed Our Way

May 20, 2020

The yearly growth rate of the US consumer price index (CPI) fell to 0.4 percent in April from 2 percent in April last year while the annual growth of the producer price index (PPI) plunged to –1.2 percent last month against 2.4 percent in April 2019. Furthermore, the yearly growth rate of the import price …

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How Central Banks and Lockdowns Are Making the Crisis Worse

May 16, 2020

What typifies the phenomenon of the boom-bust cycle is that it is recurrent. What is the reason for this?  Loose monetary policies set the platform for various activities that would not emerge without the easy monetary stance. What loose monetary policy does here is to engineer the transfer of real savings from wealth generating activities …

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Money Velocity and Prices

May 9, 2020

Listen to the Audio Mises Wire version of this article. The yearly growth rate of US AMS jumped to 26.5 percent in April—a record high figure since 1960 (see chart). Now, during the period from January 1960 to April 2020 the average time lag between changes in the money supply and changes in the Consumer Price Index …

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Money Velocity and Prices

May 9, 2020

Prices and purchasing power are determined by how individual consumers value goods and services. The “velocity of money” won’t help us understand prices or the money supply. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Money Velocity and Prices”

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Money Pumping Won’t Fix What’s Wrong with the Economy

May 2, 2020

To counter the likely severe side effects of the lockdowns on the economy—introduced to prevent the spread of the coronavirus—the Federal Reserve has embarked on massive expansion of its balance sheet. The size of the Fed’s assets jumped to $6.2 trillion in April this year from $3.9 trillion in April last year—an increase of 58.9 …

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Government Regulation against “Monopolies” Only Lowers Our Standard of Living

April 29, 2020

The whole idea of government regulating so-called monopolies in order to promote competition is based on fallacies. If anything, such intervention only stifles market competition and lowers living standards. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Government Regulation against “Monopolies” Only Lowers Our Standard of Living”

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Bureaucrats Can’t Fix This

April 21, 2020

Bureaucrats cannot conjure wealth from nothing. They only have what they extract from the private sector. Unfortunately, the bureaucrats are now starving the private sector of funding while making government budgets ever larger. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Bureaucrats Can’t Fix This”

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We Can’t Just “Restart” the Economy Where We Left Off

April 18, 2020

The imposition of lockdowns to counter the spread of the infection from the coronavirus is likely to severely damage the real economy. As a result of these lockdowns, economies have ground to a total halt. The production of goods and services has stopped while at the same time the enhancement and improvement of productive infrastructure has …

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Even If the Fed Keeps Pumping Money, We May Still See Deflation

April 11, 2020

So far in March, the data indicates that the yearly growth rate of our measure for US money supply (as measured by the AMS metric) stood at 10.5 percent against 6.6 percent in February and 1.7 percent in March last year. Given that the Fed is busy throwing money at the economy as if there were no tomorrow, it …

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Creating More Money Won’t Revive the Economy

April 6, 2020

In response to the coronavirus, central banks worldwide are currently pumping massive amounts of money. This pumping, it is held, is going to arrest the negative economic side effects that the virus-related panic inflicts on economies. As appealing as it sounds we suggest that this view is erroneous. The view that more money can revive …

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Bureaucrats Can’t Fix This

April 2, 2020

In the midst of the emerging economic chaos triggered by the COVID-19 coronavirus, individuals are seeking answers from governments as to how to prevent the emerging economic disaster. Most economic experts are sympathetic to this and are urging the authorities to push massive injections of money. Thus in the US the central bank has embarked …

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“Cost Cutting” Is Necessary to Expand Real Investment

March 28, 2020

Some commentators regard cost cutting by companies in order to secure profits as a major threat to the economy. They hold that if everyone tries to cut costs and save more, demand for goods and services from retrenched workers will fall, which in turn will hurt corporate revenues and thus profits. This allegedly sets in motion new …

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Diversification versus Risk

March 26, 2020

It is widely held that financial asset prices fully reflect all available and relevant information, and that adjustments to new information is virtually instantaneous. This way of thinking which is known as the Efficient Market Hypothesis (EMH) is closely linked with the modern portfolio theory (MPT), which postulates that market participants are at least as …

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Fail: Quantitative Methods Presume That Human Action Is Reflexive

March 21, 2020

Most economists consider the use of sophisticated mathematical and statistical methods key to understanding the complexities of economics. By means of mathematical and statistical methods, an economist establishes relationships between variables. For example, personal consumer outlays are related to personal disposable income and interest rates. Most economists would present this relation as a mathematical function: …

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No, Technology Shocks Aren’t Behind Recurring Business Cycles

March 19, 2020

Economic fluctuations, also known as business cycles, are seen as being driven by mysterious forces that are difficult to identify. Finn Kydland and Edward C. Prescott (KP), the 2004 Nobel laureates in economics, decided to attempt to find out what these forces were.1 They hypothesized that technology shocks are a major factor behind economic fluctuations and …

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Will More Easy Money Strengthen the Ailing Economy?

March 11, 2020

In the Wall Street Journal article from February 21, 2020 “The Central Bank Advised to Use Tool Kits Aggressively during Trouble,” it is suggested that a group of top Wall Street economists recommend that central banks consider a more aggressive monetary stance to counter future economic slumps. Because of the very low level of interest rates in countries …

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Why Sweden’s Negative Interest Rate Experiment Is a Failure

March 9, 2020

According to the Financial Times’s February 20 article “Why Sweden Ditched Its Negative Rate Experiment,” economists are pondering whether Sweden’s central bank experiment with negative interest rate was a success. Sweden’s Riksbank, the world’s oldest central bank, introduced negative interest rates in early 2015. The reason given by central bank policymakers for the introduction of …

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How Government Spending Destroys Wealth

March 2, 2020

The US budget had a deficit of $32.6 billion in January compared with a deficit of $13.3 billion in December and a surplus of $8.7 billion in January 2019. The yearly growth rate of government outlays rose by 22.2 percent in January from 7 percent in the month before and 6.7 percent in January of last year. The …

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How Fractional Reserve Lending Makes Money Disappear

February 24, 2020

According to the popular way of thinking, it is held that banks are responsible for the expansion of lending also known as credit, and given that economic prosperity is associated with an increase in credit, they are seen as crucial to the economic well-being. But are banks the true source of credit? Real Credit Is …

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Some Problems with Worker Productivity Stats

February 18, 2020

According to the US Labor Department, worker productivity in the non-farm sector increased at an annual rate of 1.4 percent in the fourth quarter of 2019 after declining by 0.2 percent in the previous quarter. For the year, productivity increased 1.7 percent, up from 1.3 percent in both 2017 and 2018. It was the best …

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