By Jeff Harding
SANTA BARBARA, Calif. (MarketWatch) — Dr. Frank Shostak, an Austrian theory economist who works for MF Global, and who writes for Mises.org on economics, came out with an article this week on what will happen when the Fed freezes its balance sheet in June, as they have said they will do.
I very much enjoy Shostak’s writing and have followed his ideas for years.
In this article he says:
“We suggest that once Fed policy makers freeze the balance sheet of the US central bank it will slow down the growth momentum of the Fed’s balance sheet. Consequently, this is going to exert downward pressure on the growth momentum of the money supply. Note that ultimately it is fluctuations in the growth momentum of the money supply that set in motion fluctuations in the pace of formations of bubble activities. As a result, various bubble activities that emerged on the back of the rising growth momentum of the money supply will come under pressure — an economic bust will be set into motion…”