Nick Rowe brings up an important issue and sends a warning. He says that New Keynesian economists are assuming full-employment. And it is foolish. Nick Rowe is correct. Keynes himself talked about how effective demand could stop output before full-employment is reached. The cause is deficient effective demand. And through the research that I do, […]
As I showed over the weekend, the jumps in inflation during the 1970’s were due to real GDP reaching the Long-run aggregate supply curve (LRAS). But underlying the inflation of the 1970’s were dynamics of growth, optimism, speculation, small business development, union bargaining power and a surging labor force from desirous baby-boomers coming of age […]
Some posts lately about the inflation of the 1970’s… Steve Randy Waldman, Steve Roth, Scott Sumner and me. Here is a graph of the inflation during the 1970’s… Link to graph #1.
In light of the recent discussions of inflation in the 1970’s (Steve Roth and Steve Randy Waldman), I ask… how well has the Federal Reserve done in setting a Fed rate to balance inflation over the years? Including the 1970’s… Actually very well, except for Volcker in the 1980’s. First, let me state that there […]
It is good to look back at the 1980 recession and analyze what happened. First, the recession officially started in July of 1980. Be that as it may, the business cycle had already topped off in the 3rd quarter of 1978 when the economy hit the effective demand limit. Capacity utilization started falling the same […]
During the posts about the percentage rate of capital income used for consumption, it seemed readers were not sure how I calculated the number. Well, I want to show here how I calculate the percent of capital income used for consumption. The number is currently rising from quarter to quarter. When it begins to fall, […]
Nick Rowe from the blog Worthwhile Canadian Initiative asked a very good question on August 30th… “How can you get an economy INTO a liquidity trap?” He goes through some scenarios that would put an economy in a liquidity trap … and then shows that a reversal in monetary policy could pull the economy out […]
Is the current aggressive monetary policy effective? Do the risks outweigh the benefits? Mark Thoma wrote on August 31st… “It’s just that some members of the Fed do not believe the Fed has much influence over the economy beyond stabilizing the financial system. Once that is done, the Fed’s powers are very limited (when at […]
What caused the recession of 1960? Here is an answer given at timerime.com. “The recession of 1960-1961 was mainly due to the high inflation, high unemployment rates, and a bad gross national product rating. This recession lasted for 10 months and resulted in the second longest economic expansion in U.S. history. During Kennedy’s 1960 presidential […]
How much of their income do labor and capital use for consumption of finished goods and services? Now, if labor and capital do not spend their money on consumption, they either save it or pay taxes. In the case of labor, whose rate of consumption is very high, they have less and less income available […]