When Keynes wrote about Effective Demand in Chapter 3 of General Theory… he tied the limit of effective demand to the maximization of profits. Currently I see the economy reaching the effective demand limit by the end of 2014. Is there a sign that profits are maximizing? Here is Gina Martin Adams of Wells Fargo […]
Mark Cook is an investor who uses his own proprietary indicator to assess the stock market. He saw the crashes of 1987, 2000 and 2007. (article from WSJ Market Watch) He is seeing the stock market going into strange territory at the moment. “It’s like being in the Twilight Zone, he says. “Imagine going outside […]
Here is a video from the IMF… At the 4 minute point, the representative talks about youth unemployment in Europe and recommends two things… training to appropriate skills which would make someone more valuable. bringing down costs of employment. Oh, how wonderful!… Make your skills more valuable only to meet wage suppression. They just do […]
¯\_(ツ)_/¯ The Economist online magazine has an article called, Jobs are not Enough, where they show a poor understanding of effective demand. “Economic growth over the business cycle is driven mostly by swings in demand, and in recent years demand has been held back: households have been repaying their debts; the government has restrained its […]
John Bluedorn and Shengzu Wang wrote a post on the IMF blog called, Euro Area: An Unbalanced Rebalancing? They talk about the unbalanced Current Account trade balances within Europe where creditor nations continue with large surpluses, even though debtor nations are moving toward surpluses themselves. They give reasons of competitiveness, increased saving and low investment. […]
I read an article by Gavyn Davies, Another False Alarm on US Inflation?. He states that projections of rising inflation are not warranted due to lack of wage-growth pressures. I agree with him, but I want to go one step further and say that the uptick in inflation is understandable. I have written before about […]
Guest post by Bruce Carman. He first comments on an article from Jeremy Grantham who says that a coming bubble is likely. “. . . There are massive reserves of labor in the official unemployment plus room for perhaps a 2% increase in labor participation rates as discouraged workers potentially get drawn into the workforce […]
Simon Wren-Lewis writes about the difference between how the neofiscalists and market monetarists view the solution to the world’s economic woes. Basically, neofiscalists are ready to use whatever is necessary. Market monetarists limit themselves to creative monetary policy. He uses a car analogy. “To understand why I do get annoyed with MM, let me use […]
More on the labor-market model using labor share. I want to look at productivity to make the case that the labor supply curve is actually the effective demand limit in the model. (link to previous article) Start with the equation… labor share = real wage/productivity We have all seen that over the years, real wages […]
I have had a series of posts (one, two) in response to Simon Wren-Lewis‘ post on an aggregate demand constraint. My posts give another version of his model which puts real wages on the y-axis and Qty labor employed on the x-axis. I put labor share on the y-axis and employment rate on the x-axis. […]