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Budget deficits are often in the media spotlight. The budget deficit is defined as the difference between what the government spends and what the government collects. When the government spends more than it collects, a budget deficit exists. When the government collects more than it spends, a budget surplus emerges. The conventional view is that

According to traditional economics textbooks, the current monetary system amplifies the initial monetary injections of money. The popular story goes as follows: if the central bank injects $1 billion into the economy and banks have to hold 10% in reserve against their deposits, this will cause the first bank to lend 90% of this $1 billion. The

After climbing to $1.315 trillion by July 2011, China’s holdings of US Treasuries have been in a downtrend closing at $1.058 trillion by December last year — a fall of 19.5%. As a percentage of total foreign holdings of US Treasuries, China’s holdings fell from 28.2% in July 2011 to 17.6% by December 2016. There is a strong consensus view that a

A fall in the US unemployment rate to 4.6% in November from 4.9% in the month before, and 5% in November last year, has prompted some commentators to suggest that we are almost at the so-called natural rate, which is believed to be at around 4.5%. It is held that once the unemployment rate falls below an “optimal” rate — called the

Why are the dollar bills in people’s pockets worth anything? According to some experts, the dollar bills carry value because the government in power says so. Other experts are of the view it is because people are willing to accept it as payment. To say that the value of money is on account of the government or on account of social convention is to

According to the writings of Carl Menger and Ludwig von Mises, the driving force of interest rate determination is individual’s time preferences. What is this all about? As a rule, people assign a higher valuation to present goods versus future goods. This means that present goods are valued at a premium to future goods. This stems from the fact

Historically most recessions in the US are preceded by significant declines in the differential or interest rate spread between the 10-year T-bond and the 3-month Treasury security. Typically, this narrowing in the spread occurs many months before the onset of the recession. Conversely, the widening in the spread occurs many months before the

[ Editor’s note: Shostak employs a different measure of the money supply than the Rothbard-Salerno money supply measure used here. For a more full explanation, see here. ] On October 2016, the US Money Market Fund (MMF) industry underwent a reform with new requirements for US institutional prime and municipal MMFs becoming effective. Under the new

It is common for commentators and economists in their discussions to continuously refer to something called the “economy” — which sometimes performs well and at other times poorly. This “economy” is presented as a living entity apart from individuals. For example, various experts report that the “economy” grew by such and such percentage, or the

The world has come a long way since the heady days before the Great Depression of the 1930s. Technology, for one thing, has meant vast changes to our way of life and indeed to significant improvements in our economic productivity. Indeed, it is sometimes argued that these technological advances now make us depression-proof. Of course, the same