I track an estimation of consumption by capital income through the NIPA numbers and labor’s income share. Changes in this estimation give insights into how well capital income is doing. What do I find? The percentage of capital’s income used for consumption surged in the 2nd quarter 2015.
To me, this is crazy. The dynamics of the economy are making the rich feel even richer.
One problem is that the economy is becoming more unstable, more top heavy. We see this because capital income’s consumption sagged before the previous recessions. This isn’t happening yet though. But we need to watch for it. Measures around the world from loose monetary policy are propping up capital income. But the situation is just becoming more unstable as time goes on.
The balanced economy of the past is a thing of the past.
Labor needs more income.
If you wonder how capital income could be so strong, here is a video to watch.