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On June 30, the Fed lifted its Federal Funds rate target by 0.25% to 1.25%. The catalyst that brought about the reversal in the trend towards lower rates was a series of rising economic indicators, including GDP growth, job creation, and the fear of price inflation. Only a few months ago, the prospect of inflation wasn’t even discussed by Fed’s

What typifies the modern economy,  writes Mises, is complex production that is a “continuous, never-ending pursuit split up into an immense variety of partial processes.”   This complex structure of production generates a seemingly endless amount and variety of goods which not only maintains our life, but also makes life more pleasant. It would

This year the  Nobel Prize in economics  was awarded to Finn Kydland and Edward Prescott (KP) for their contributions in the design of macroeconomic policy and for the identification of the main causes of business cycle fluctuations. Here I discuss their theory of the business cycle and how it stacks up against the Austrian understanding. Since

Rumors that China’s central bank has reduced its holdings of US Treasuries in favor of European assets is putting more pressure on the already battered US dollar. After closing at US $1.274 in October, the price of the Euro in US dollar terms shot up to around US $1.33 on Friday November 26. According to the Shanghai-based China Business News,

It is widely accepted that by means of suitable monetary policies the US central bank can navigate the economy towards a growth path of economic stability and prosperity. The key ingredient in achieving this is price stability. Most experts are of the view that what prevents the attainment of price stability are the fluctuations of the federal

According to official data last year the personal saving rate stood at around 1%. Some commentators have questioned the validity of this figure. It is argued that there is in fact plenty of savings in the US. For instance, it is held that if the 2004 appreciation in the value of homes and equities are counted in the calculation of disposable

Most experts hold that China’s reluctance to allow its currency the Yuan to appreciate against the US dollar is the key factor behind the low interest rate structure in the US. This is incorrect, for reasons I explain below. It is important to understand the causal factors now, before the US falls back into recession and China, rather than the

In his testimony on June 9, 2005, before the Joint Economic Committee of the US Congress, Fed Chairman Alan Greenspan has again raised the issue of the divergence between the federal funds rate and long-term rates.  Alan Greenspan views this divergence as a puzzle. At the end of May the yield on the 10-year Treasury-Note stood at 4%—well below the

Following Ben Bernanke, the chairman of the Council of Economic Advisers, in his testimony to the Congress on July 20,2005, Fed Chairman Alan Greenspan said that it is quite likely that we are currently experiencing a global savings glut. Agreeing with Bernanke, the Fed chairman views this glut as one of the factors behind the so-called interest

The August 8, 2005, headline in the Wall Street Journal has declared “If Savings Rate Rises, Retailers May Take a Hit”: Last Tuesday the Commerce Department reported that the personal savings rate—the amount of household’s income left over after spending as a percentage of total income—fell to zero in June. Other than the negative 0.2% it hit the