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Frank Shostak

Frank Shostak



Articles by Frank Shostak

Fed Transparency Won’t Get Us out of the Mess the Fed Created

7 days ago

In an interview with National Public Radio’s “Morning Edition” program on Thursday, March 25, 2021, Fed chair Jerome Powell said that even with the economy rebounding faster than expected, any change in monetary policy would happen “very, very gradually over time and with great transparency. Rate increases would only be considered when the economy is …

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Real Savings Are at the Heart of Lending

14 days ago

After climbing to 12.2 percent in April last year, the yearly growth rate of combined commercial bank real estate and consumer and business loans plunged to –2.6 percent in early March. For most commentators an important factor in setting economic prosperity in motion is bank lending. Hence, this sharp decline in the yearly growth rate in bank loans …

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The Destructive Power of Keynesian Spending Plans

27 days ago

According to John Maynard Keynes, The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some …

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What Does GDP Really Tell Us?

March 10, 2021

To gain insight into the state of an economy, most financial experts and commentators rely on a statistic called the 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. This statistic is constructed in accordance with …

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No, Drops in Money Velocity Don’t Offset Money Printing

February 23, 2021

At the end of January, the yearly growth rate of our measure of US money supply (AMS) closed at 76.7 percent, against 4.8 percent in January 2020. It is tempting to suggest that this massive increase in the growth rate of money supply is likely to result in massive price inflation in the months ahead. …

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Technology Alone Won’t End Poverty. We Need Savings First.

February 16, 2021

According to some commentators such as economics Nobel Laureate Paul Romer, technical knowledge is key to economic growth. But if this is the case, why do third world economies continue to experience poverty? After all, individuals in these economies have access to the same technical knowledge as the developed world. Careful examination, however, shows that a key …

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Understanding Minimum Wage Mandates: Empirical Studies Aren’t Enough

February 12, 2021

It is only through the increase in capital goods, i.e., through the enhancement and the expansion of the infrastructure, that labor can become more productive and earn a higher hourly wage.  Original Article: “Understanding Minimum Wage Mandates: Empirical Studies Aren’t Enough” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack. …

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Understanding Minimum Wage Mandates: Empirical Studies Aren’t Enough

February 9, 2021

President Joe Biden has promised to raise the minimum wage from $7.25 to $15 per hour.  Some economists are of the view that the increase in the minimum wage could cause an increase in unemployment. Other economists think that the increase is unlikely to harm the labor market. Hence, they are of the view that …

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What to Expect from Bidenomics

February 2, 2021

In order to prevent the economy sinking into a lasting state of stagnation, what is required is to reduce both government spending and government regulation, and to rein in the Fed. Original Article: “What to Expect from Bidenomics” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  

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There Is No “Optimum” Growth Rate for the Money Supply

February 1, 2021

Most economists hold that a growing economy requires a growing money stock on the 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 …

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What to Expect from Bidenomics

January 27, 2021

On Tuesday, January 19, 2021, the Treasury secretary designate Janet Yellen outlined before the Senate Finance Committee the likely course of President Joe Biden’s economic policies in the months ahead. Given the fragile state of the US economy as a result of covid-19, Yellen favors Biden’s $1.9 trillion spending plan to provide support to the economy. …

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Time Preference, Interest Rates, and Stagflation

January 24, 2021

As a result of past reckless fiscal and monetary policies the pool of real wealth could be declining. If so, stagflation will result. Original Article: “Time Preference, Interest Rates, and Stagflation” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  

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Time Preference, Interest Rates, and Stagflation

January 20, 2021

A common conception is that the central bank is a key factor in the determination of interest rates. In this way of thinking, the key role of the central bank is to make sure that the so-called economy is placed on a trajectory of stable economic growth and stable inflation. If for whatever reason the …

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Fiscal Stimulus vs. Economic Growth

January 14, 2021

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

January 12, 2021

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

January 11, 2021

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

January 5, 2021

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

December 29, 2020

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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