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The European Central Bank (ECB) is planning to pump 1.1 trillion euros into the banking system to fend off price deflation and revive economic activity. The ECB president and his executive board are planning to spend 60 billion euros per month from March 2015 to September 2016. Most experts hold that the ECB must start acting aggressively against

Savings has nothing to do with money. For instance, if a baker produces ten loaves of bread and consumes one loaf, his savings is nine loaves of bread. In other words, the “savings” in this case is the baker’s real income (his production of bread) minus the amount of bread that the baker consumed. The baker’s savings now permits him to secure

There are two kinds of credit: that which would be offered in a market economy with sound money and banking (true credit), and that which is made possible only through a system of central banking, artificially low interest rates, and fractional reserves (false credit). Banks cannot expand true credit as such. All that they can do in reality is to

Economists at the Federal Reserve have devised a new indicator, which they hold will enable US central bank policymakers to get better information regarding the state of the labor market. The metric is labeled as the Labor Market Conditions Index (LMCI). Note that one of the key data points Fed policymakers are paying attention to is the labor

For the head of the Federal Reserve Board Janet Yellen — and most economists — the key to economic growth is a strengthening in the labor market. The strength of the labor market is the key behind the strength of the economy. Or so it is held. If this is the case then it is valid to conclude that changes in unemployment are an important causative

According to the Austrian business cycle theory (ABCT) the artificial lowering of interest rates by the central bank leads to a misallocation of resources because businesses undertake various capital projects that — prior to the lowering of interest rates —weren’t considered as viable. This misallocation of resources is commonly described as an

On Wednesday December 16, 2015, Federal Reserve Bank policymakers raised the federal funds rate target by 0.25 percent to 0.5 percent for the first time since December 2008. There is the possibility that the target could be lifted gradually to 1.25 percent by December next year. Fed policymakers have justified this increase with the view that the

The yearly growth rate of real gross domestic product eased to 1.9 percent during the fourth quarter of 2015, compared to 2 percent during the previous quarter. It appears that the yearly growth rate of GDP could fall to 1.7 percent by Q3 before bouncing to 2.4 percent by Q4. Other recent data portrays a mixed picture of economic activity. The

On January 21, 2016 European Central Bank (ECB) President Mario Draghi signaled that the governing council may provide more stimulus at its next meeting in March . “There are no limits to how far we’re willing to deploy our instruments,” Draghi predicted. The ECB president is of the view that the monetary stimulus undertaken by the central bank

Most economists hold that a growing economy requires a growing money stock , on grounds that an economic growth gives rise to a greater demand for money which 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 and lead to an economic