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Glen
Tenney's Online Resources |
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CommodityPrices and Inflation: What’s the
Connection? By Frank Shostak |
5
pages, 2008 |
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The
Financial Apocalyptics Are Back By Robert Blumen |
4
pages, 2007 |
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Zimbabwe:
Best Performing Stock Market in 2007? By John Paul Koning |
Koning argues that the
1,729% rate of growth in the Zimbabwe Stock Exchange—happening at the
same time that the economy is falling apart in terms of GDP—is the
result of huge increases in money supply. (3 pages, 2007) |
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Money and
Inflation: The Tendency to Deny Reality By Frank Shostak |
If
the rate of growth in the money supply and the rate of growth in production
of goods and services are the same, do we have inflation? Shostak
suggests that, if inflation is correctly defined as an increase in the money
supply, then yes, there is inflation, even if the price indexes do not
recognize this as an increase in the price level. Thus, the popular Fed
preoccupation with price stability, by keeping the rate increases in the CPI
at a particular acceptable range, is misguided because it can generate nasty
side effects that emanate from the monetary expansion itself. In short,
“The exchange of
nothing for something that the expansion of money sets in motion cannot be
undone by the increase in the production of goods.” (4 pages, 2007) |
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By Frank Shostak |
Shostak
here suggests that the ordinary definition of recession as two quarters of
decline in real GDP is not an adequate measure of economic downturns because
GDP numbers lag tight monetary policy. Shostak
recommends keeping an eye on the rate of growth in the money supply as the
best indicator of the state of the economy. An increase in the growth
momentum of money means that the pace of wealth destruction is intensifying,
and a fall in the growth momentum of money means that the pace of wealth
destruction is weakening. Thus recessions are about the liquidations of malinvestments that sprang up on the back of previous
loose monetary policies. And so-called real economic growth, as depicted by
real GDP, mirrors fluctuations in the rate of growth in the money supply. (7
pages, 2006) |
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Did Phelps
Really Explain Stagflation? By Frank Shostak |
In yet another great article from Frank Shostak, he shows how creation of money out of “thin
air” sets in motion an exchange of nothing for
something, which amounts to a diversion of real wealth from wealth generators
to the holders of newly created money. In the process genuine wealth
generators are left with fewer resources at their disposal, which in turn
weakens the wealth generators’ ability to grow the economy. Thus
inflation and unemployment are positively related rather than inversely
related as the Phillips curve suggests. Stagflation, which includes both
inflation and unemployment, is the natural result of the creation of money
out of “thin air.” (7
pages, 2006) |
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Bernanke’s
Yield Curve Confusions By Frank Shostak |
7 pages, 2006 |
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The Ascension
of Bernanke Into the Clouds By Frank Shostak |
In this article, Shostak points out how
money is not neutral in the economy. He notes that in a developed market
economy, the relative prices of goods and services across the time structure
of production cannot be established independently of money. Thus inflation
hampers the wealth creation process of the market by tampering with the price
mechanism, which causes the misallocation of resources that ultimately
hampers the economy in visible ways. (3 pages, 2005) |
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What Does Inflation Targeting Mean? By
Roger Garrison |
Upon the announcement of Ben Bernanke as
the new Fed Chief, Garrison notes that Bernanke, unlike Greenspan, supports
the idea of targeting inflation at some positive level in an attempt to avoid
deflation at all costs. (1 page, 2005) |
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Is the Fed an Inflation
Fighter or Creator? By Frank Shoshtak |
According to Shostak,
inflation is all about the diversion of real wealth from wealth generators
to non-wealth generators by means of increases in the money supply. It
amounts to a policy for impoverishment of wealth producers, which is set in
motion by inflating the stock of money. In this article he also points out
why inflation cannot be set in motion by simple “inflationary
expectations, a decrease in demand for money, or an increase in gas prices.
And he further suggests that the popular idea of “transparency”
on the part of the Fed is overstated. (3 pages, 2005) |
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