Relevant and even prescient commentary on news, politics and the economy.

Velocities of M2 & MZM

I wrote a post about the velocity of M2 money supply. There were comments that the M2 money supply is a dying indicator. Well, let’s look… There are 3 indicators for the money supply, M1, M2 and MZM. M1 is the narrowest. MZM is the broadest. M2 is in the middle. “M1 is the money […]

Estimated Path of the Fed Rate

Using my model of core inflation, nominal rates, profit rates, labor share & capacity utilization, here is a graph of the present situation. The estimated natural real rate for this graph is 1.7%. The vertical dashed green line shows where capacity utilization is now at 75.2%. The solid red line shows the path of the […]

Model of Japan’s low inflation & need for higher labor share

I have been presenting a new model to explain the forces around inflation. (link1, link2) Antonio Fatas poses a very good question. You can lower interest rates, but can you raise inflation? “But if monetary policy is being successful we expect inflation expectations and growth expectations to increase. Both of these forces should push long-term […]

Could an Inflation Target depend on Labor Share?

I continue to explore the model that I posted this morning extending a relationship between inflation and capacity utilization. The model shows that labor share would determine the most balanced inflation target… and the inflation target then becomes variable depending upon the how labor share changes in the economy. Remember, it was once thought that […]

Extended model for capacity utilization & inflation

I have been in the workshop building a model for inflation and other things. It builds upon the model for forecasting the profit rate cycle. And also upon the model for the relationship between inflation and net profit rates. The model was provoked by a video from Khan Academy on youtube. This model has many […]

Quote to better understand Productivity

“Stressing output is the key to improving productivity, while looking to increase activity can result in just the opposite.” Paul Gauguin Policy seeks to increase activity in spite of weak effective demand for output. So is it any surprise that zero-lower-bound monetary policy has not normalized the economy? If only economists would understand Effective Demand […]