Frank Shostak is an economist in the Austrian School of Ludwig von Mises and Murray Rothbard. Mark “Moose” McGrath and I asked him where bubbles come from. His answer starts with money that nobody earned through prior production.
Frank walks through the whole chain. Warehouse receipts became fiat money, and the suspension of redemption became what we now call monetary policy. When a central bank lowers interest rates without prior savings, he argues, it fakes a signal that society has become more future-oriented.
The fake signal
That fake signal lengthens the structure of production. Businesses start projects that real savings cannot support. Over time the economy eats through the subsistence fund, and the structure collapses under its own weight.
One question
Many analysts cheer when earnings beat expectations. Frank asks one question: can this activity last without continued money printing? If the answer is no, he calls it a bubble, however efficient the company looks. He applies that test to the current boom in technology and AI, and he connects it to tulips, the dot-com era and housing.
Orientation sits at the center of John Boyd’s real OODA loop, and prices are part of what a market orients on. Frank’s argument is that a false price signal shapes everyone’s orientation at once.
This episode is not investment advice.
What signal in your world might be false?
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