Most economists concur with the view that what keeps the economy going is consumption expenditure. Furthermore, it is generally held that spending, rather than individual saving, is the essential condition for production and prosperity. Savings is seen to be detrimental to economic activity as it weakens the potential demand for goods and
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
In his writings, Professor 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. In response to this failure, Friedman argued the money stock M1, which stood at $28.264 billion in
For most economists there is the need to keep the so-called economy along the path of stable economic growth and stable price inflation. One of the reasons for the possible deviation of the economy from the stable growth path is a change in the demand for money. If the authorities fail to make sure that an increase in the demand for money is
Some commentators are of the view that when the velocity of money rises, all other thing being equal, the buying power of money declines, (i.e., the prices of goods and services rise). The opposite occurs when velocity declines. If, for example, it was found that the quantity of money had increased by 10% in a given year, while the price level as
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 production of goods and services increases, this results in a greater demand for the services of the medium of exchange (the service that money provides). Conversely, as
According to popular thinking, a key factor in the foreign currency exchange rate determination is the state of the balance of payments. Following this logic, an increase in imports gives rise to an increase in the demand for foreign currency. To obtain the foreign currency importers sell the domestic currency for it. As a result, this causes a
According to modern economics, various ideas that we have established about the world of economics emanates from historical data. By inspecting the data, an economist forms a view regarding its behavior. As long as the theory seems to explain the data, it continues to be regarded as valid. Once it fails to adequately explain the data it is
On Monday October 15 2018, the US Treasury Department released figures showing that the federal budget deficit had widened by 17% in the 2018 fiscal year, to $779 billion. Most experts see this widening in the deficit as the result of the tax cuts, which went into effect in January this year. Note that the corporate tax rate was lowered from 35
The annual rate for US non-military capital goods orders excluding aircraft fell to 1.9% in September from 7.8% in August to stand at $69.6 billion. Observe that after closing at $60.2 billion in December 2015 capital goods orders have been trending up. Most commentators regard a strengthening in capital goods orders as evidence that companies are
What is the Mises Institute?
The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.
Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.