Here is a link to an article at Vox which includes insights and wisdom into the effect of falling labor share globally. Monetary Policy and Long-term Trends Excerpts… “There has been a long-term downward trend in the share and strength of labour in national income, which is depressing both demand and inflation.” “… So, the […]
In the 1970’s, real interest rates went negative, as they are today. Is there any logic as to why they went negative way back when? Yes, there is… In the course of a recovery from recession to boom, monetary policy will raise the real rate. The following graph plots the real rate (effective Fed rate […]
Paul Krugman writes about QE and easy money as being beneficial for the bulk of Americans. But he gives reasons that could justify using easy money all the time, even in healthy business cycles. He says… “The bottom three-quarters of the wealth distribution basically has no investment income.” This fact applies all the time in […]
Brad DeLong responds to Paul Krugman’s post on The Profits-Investment Disconnect. Why are profits high, but investment low? Brad DeLong says… “Profits are not high now because demand is high, throughput is high, and capacity is being fully used. Profits are high now because the labor share is unusually low. Firms almost surely, given the […]
Noah Smith provoked a conversation here at Angry Bear by wondering what causes recessions. Recessions are not such a mystery when you see the interaction between effective demand and such things as productivity. The conversation took place in the comments section of a previous post on Productivity’s role as a cause of recession. The issue […]
This is the average inflation rate expected over the next 5 years… Last data point is for October 21, 2014.
The Fed is an accomplice to the increase in inequality. An accomplice is an entity that helps another entity commit a crime. The real change that led to increased inequality is the conspicuous drop in labor share after the crisis. Record profits by firms were not being transmitted to labor. That was not the fault […]
Noah Smith made a thought-provoking statement on twitter, “Sometimes I wonder what actually causes recessions.” He received a slew of responses. While one could point to many causes, including tight money and the beats of butterfly wings, I look primarily to the dynamics of productivity. Here is a graph of year-over-year productivity growth… You will […]
By way of the show Boom-Bust, we have an interview with Jim Bruce on the future of Fed Policy. (interview starts at 14:40) He does not see the Fed rate lifting off next year. He does not see easy Fed policy avoiding an economic downturn. He says Fed has been unable to generate inflation at […]
John Cochrane is developing a model for the Fisher Effect to explain that raising the nominal central bank rate could lead to higher inflation, not lower inflation as many say. Nick Rowe complements the model with a simpler “model”. And Steve Williamson has been an ever-present force for the Fisher Effect. I too have written […]