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Frank Shostak blockbuster

Austrian economist Frank Shostak predicts further “paralysis” ahead and thinks all the stimulus spending will just make things worse.  And he backs up his predictions with a detailed, superb analysis of savings and money flows.

Great in-depth analysis of the current economic environment for anyone interested in the Austrian School.

I prefer to keep in mind the Five Golden Rules of the “Ponzi-economy”: 

(1) The more stimulus spending by govt (funded from coercive taxes), the more malinvestments. 

(2) The lower the actual reserve ratios for banks, the more likely a liquidity crisis is imminent when the ratio has to increase.

(3) The more govts and banks try to maintain unrealistic asset prices NOW, the more stagnation in the economy. 

(4) High CURRENT asset prices mean lower FUTURE profits for investors and therefore lower CURRENT borrowing, investment and economic opportunity.  Conversely, low CURRENT asset prices mean higher FUTURE profits for investors and therefore higher CURRENT borrowing, investment and economic opportunity.

Therefore, govts that delay foreclosures, bail out banks, “save” employment in certain hand-picked industries are simply incubating zombies.

(5) There is no solution at the end of a major economic bubble other than letting deflation occur and some banks go bust.  The “false” “bubble activities” should never have existed.  Keeping them alive only delays and exacerbates the inevitable corrections that must occur anyway.

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