Adair Turner was interviewed by INET about his new book which I have to buy and read. The book came out this week. It is called, Between Debt and the Devil. Here is the interview. (link) He lays out an exquisite analysis of economics on many layers. How the crisis was not expected due to […]
When one hears talk about the Wicksellian natural rate of interest, one hears that a real rate below the natural rate will cause inflation and economic heating. Then a a real rate above the natural rate will lead to disinflation and economic cooling. “Wicksellian analysis is an older tradition; it argues that there is at […]
My previous post talked about how profits peaked 12 months ago coinciding with the economy hitting the effective demand limit. The idea is that profit margins will peak at the effective demand limit. Keynes stated this… “Thus the volume of employment is given by the point of intersection between the aggregate demand function and the […]
By way of a video from Boom Bust (the best show for economics news), Barclays says that the 60 basis point drop in corporate profit margins in the S&P500 over the last 12 months is a sign that we are heading toward a recession. (see 22:30 minute point of video.) The Barclays’ message coincides exactly […]
One hears that the Federal Reserve would like to normalize the Fed rate. What does that mean? How can we conceptualize that? Well, there are many ways to conceptualize it, but here is a simple way using measures of the growth of nominal GDP (NGDP). In normalization, the Fed rate will rise to the growth […]
There is a post by Dietz Vollrath, Labor’s Share, Profits, and the Productivity Slowdown. D. Vollrath has some math there for how a decline in labor share along with a rise in aggregate mark-ups can show that productivity growth is slowing. Mark-ups are the price over marginal cost. Normally in perfect competition, price is equal to […]
A new paper came out this month from the Board of Governors of the Federal Reserve System talking about how Potential Output is lowered after recessions. (link) They make a case that potential output is lower than people think and that the economy adjusts too slowly to that reality. At the end of the paper, […]
Stocks continue downward.. China is struggling… Commodity exporting countries are in trouble… industrial production is projected to be weak in September as it was in August… Could the US economy be forming a recession? First, I have had the opinion that there are hidden weaknesses in the economy partly due to the strange monetary policy […]
So the Fed has kept interest rates at their rock bottom. Will they ever be able to raise them? Let me take a closer look… Tim Taylor writes about the impact of low long-term interest rates. He ends his post with this quote… “The BIS report raises the uncomfortable question of whether we are riding […]
Should the Fed raise the base interest rate? They really shouldn’t at this point. Will they? They probably will because they still see years of growth. I do not see years of growth ahead… Let me explain. Almost one year ago I wrote that capacity utilization would start falling. (link) It has fallen since that […]