 continue testing with yields up to one kiloton to TNT after Sept 1996. Permitting such testing after the imposition of the ban and the continual testing till 1996 has implications on the nuclear policies of France, Russia, UK, China and India.
The US should first exhaust all diplomatic courses of actions prior to making any drastic moves against Iraq. US Pres Bill Clinton's move to support UN Secretary-General Kofi Annan's efforts to get Iraq's commitment to allow UNSCOM inspectors to inspect eight large 'presidential sites' is commendable. Annan's initiatives have spared the US from commencing attacks agains Iraq and its resulting repercussions on major US policy objectives.Most experts tend to assess the strength of an economy in terms of real gross domestic product (GDP). The GDP framework examines the value of final goods and services produced during a particular time interval, typically a quarter or a year. GDP is formed as the sum of consumer spending on goods and services; business expenses for factories, machinery and inventory; government spending; and exports less imports.
An increase in consumer spending, business investment and government spending strengthens the economy, as depicted in the GDP statistic. Moreover, whenever the export-import differential shows a strengthening, the GDP statistic follows suit.
In this way of thinking, an increase in the components of GDP leads to an increase in the economy’s aggregate demand for goods and services. As a result, it is required, this causes an increase in the supply of goods and services. The increase in demand leads to an increase in the aggregate supply.
It is also believed that through central bank money pumping, the GDP growth rate can be pushed higher. By this reasoning, in response to the increase in the money supply, consumers will try to get rid of the excess money in their pockets. Therefore, they are likely to increase their spending on goods and services.
Also, aggregate demand for goods and services will strengthen with the increase in the differential between exports and imports. An increase in the differential implies a strengthening of foreign demand for goods and services produced locally in relation to the domestic demand for goods and services from overseas.
It seems that by influencing the components of GDP, the government and the central bank can exercise control over the rate of growth of the economy. However, is this the case?
Real GDP statistics are constructed in accordance with the idea that what drives an economy is not the production of wealth but rather its consumption. What matters here is the demand for final goods and services. Since consumer spending accounts for the largest part of aggregate demand as part of GDP, it is widely accepted that consumer demand is the main driver of economic growth. All that matters from this perspective is the demand for goods, which in turn will almost immediately give rise to their supply.
Note that the scarcity of demand constrains economic growth in this way of thinking. But demand is never scarce. On the contrary, without the expansion and improvement of the production structure, it will be difficult to increase the supply of goods and services due to the increase in total demand.
The expansion and improvement of infrastructure depend on the expansion of the savings pool. (This pool includes final consumer goods.) The savings pool is needed to support various people who are employed in improving and expanding the infrastructure.
Observe that saving is the determining factor as far as future economic growth is concerned. If enhanced economic growth requires special infrastructure when there are not enough economies to build such infrastructure, the desired enhancement of economic growth is not going to emerge. The GDP framework is hostile to saving, however, since in this framework more saving weakens consumption.
In addition, increased public spending leads to the diversion of savings from the wealth-generating private sector to government, thereby compromising the process of wealth creation. Likewise, money pumping triggers the diversion of wealth from the generators of wealth to the consumers of wealth by establishing an exchange of nothing for something. Note that since government activities do not generate wealth, these activities lead to consumption without prior production of wealth.
Likewise, the increase in the money supply sets in motion a consumption without prior production, that is to say an exchange of nothing for something. Therefore, increased public spending and increased cash pumping lead to consumption without the support of production.
Therefore, increases in total demand caused by government spending and central bank money pumping are bad news for economic growth. Note that consumption not backed by production weakens the flow of savings. This in turn weakens the process of capital formation, thus compromising the prospects for economic growth.
To calculate a total, you have to add several things. To add things up, they must have a unity in common. However, it is not possible to add refrigerators to cars and shirts to get the total amount of goods.
Since total real output cannot be defined meaningfully, it obviously cannot be quantified. To overcome this problem, economists use the total monetary expenditure on goods, which they divide by an average price of the goods. However, is it possible to calculate an average price?
Since GDP is expressed in dollars, which are deflated by a questionable price deflator, it is obvious that fluctuations in so-called real GDP are in response to fluctuations in the amount of dollars injected into the economy.
Now, once the economy is valued in terms of real GDP, it’s no surprise that the central bank appears to be able to navigate the economy. For example, by increasing the rate of growth of the money supply, actions of the central bank are supposed to strengthen the economy. Note that after a certain lag, the real GDP growth rate will react positively to this pumping. Likewise, if the central bank reduces the growth rate of the money supply, it will slow down economic growth in terms of real GDP statistics.
A lax monetary policy of the central bank, which results in an expansion of the currency from “thin air”, triggers an exchange of nothing for something, which amounts to a diversion of wealth from money-generating activities. wealth towards activities that do not generate wealth.
These activities are bubbles. They emerged because of the lax monetary position of the central bank and not because of the free market. In the process, this diversion weakens the wealth generators, which in turn weakens their ability to increase the overall wealth pool.
Note that an increase in money pumping caused by the accommodating monetary policy of the central bank increases money turnover and therefore GDP. Note also that the increase in GDP here reflects the increase in bubble activity.
Once money turnover is deflated by what is known as the average price index, this will likely manifest itself as a strengthening of real GDP. This reinforcement labeled as the economic boom. Most pundits and commentators see this strengthening as factual proof that the central bank’s accommodative monetary policies have been successful in growing the economy.
However, once the central bank tightens monetary policy in response to expectations of sharp increases in various price indices in the coming months, it slows the diversion of wealth from wealth producers into bubble activity. These activities are now less supported by the money supply, leading to an economic crisis or recession.
Note that these activities were never economically viable – they could not support themselves without the diversion of wealth to them through an expansion of the money supply. Therefore, most of these activities are likely to perish or barely survive. From this we could conclude that recessions concern the liquidation of economic activities that have emerged on the back of the lax monetary policy of the central bank. This process of recession is triggered when the central bank reverts to its previous accommodative stance.
The current policies of central banks, aimed at mitigating the consequences of their previous attempts to stabilize the so-called economy, i.e. real GDP, are key factors behind boom-bust cycles. repetitive.
Due to the varying time lags between changes in the currency and changes in prices and real GDP, Fed policymakers are faced with economic data that could conflict with the Fed’s goals. This forces central bank officials to react to the effects of their own past monetary policies. These responses to the effects of past policies give rise to fluctuations in the rate of growth of the money supply and in turn to recurrent boom-bust cycles.
Some commentators have argued that well-run businesses can escape an economic crisis. But it won’t. For example, due to the lax monetary position of the Fed, various activities are emerging to meet the demand for goods and services from the first recipients of the newly injected money.
Now, even if bubble activity is handled well and managers maintain very effective inventory control, this fact is unlikely to help them once the central bank reverses its lax monetary policy. Bubble activity is the product of the central bank’s lax monetary stance – it has never been “approved” by the market as such. They emerged due to the increase in the money supply, which gave rise to the production of goods and services produced by the bubble activities.
Once the central bank’s monetary stance is reversed, however bubble activity is handled, these activities are likely to come under pressure and run the risk of being liquidated. Since consumers have not allocated their savings to bubble activity, once the rate of money supply growth slows, these activities are under pressure. Bubble activity cannot be sustained without the support of the central bank’s money pumping.
*About the Author: Frank shostakThe consultancy firm of, Applied Austrian School Economics, provides in-depth assessments of global financial markets and economies. Contact email.Stephen Gundle, of Film and Television Studies, has received funding of £970,000 from the Arts and Humanities Research Council for a three-year research project on the place of women in the Italian film industry in the decades after World War Two. The project builds on work undertaken by Stephen and Karl Schoonover between 2016 and 2019 on a previous AHRC project about producers and production practices in Italian cinema. The other investigators on the new project – which begins in February 2023 - will be Daniela Treveri Gennari and Sil