An Effective Demand look at the inflation of the 1970’s
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.
Has the Fed rate done a good job to balance inflation over the years?
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 […]
Did the Baby Boom Labor Force Surge Cause The Great Inflation?
Steve Randy Waldman delivers another Aha! post (and a followup reply to Scott Sumner) pointing out a huge driver of the 1970s Great Inflation — the rise in the labor force: Between the mid 60s and the mid 70s, the labor force grew by 30%.*
An Effective Demand look at the 1980 recession to envision the next recession
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 […]
Sumner: Has CPI Been Wildly Overstating Inflation?
Scott Sumner makes a very good point (though my interest here is somewhat peripheral to the main thrust of his post): Government price indices don’t measure the prices that are of macroeconomic interest. For instance in the 6 years after the housing bubble peaked the US, BLS data shows housing prices rising by about 10%, while Case-Shiller […]
How to calculate capital income’s consumption rate for recession forecasting
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, […]
Regular coastal towns and cities and sea level rising
Seeing this piece by Andrew Revkin Can cities adjust to a retreating coastline? reminded me to also look closer to home. We all too readily forget that NYC is not a typical problem of a coastal communitiy…so what do planners in smaller towns face? How do they choose responses, for instance, if an engineering report […]
Capital flows
Put all this together, and you have a classic recipe for vulnerability. Capital inflows (borrowing overseas plus foreigners coming into the local stock market) tend to keep the exchange rate more appreciated than it would be otherwise. This encourages imports and discourages exports, so it is easy to develop a current account deficit (meaning that […]
Specifying “Demand”: Nick Rowe Meets Steve Keen on His Own Ground
You might well ask: “Whaddaya mean by ‘his,’ buster?” Nick does a full-faith effort here (including the comments) to characterize Steve Keen’s position (aggregate demand = GDP + change in debt), using Nick’s preferred language and mental modeling. It’s a darned good effort, but I think it’s crippled (as is Steve’s construct) by a conceptual failing […]
Nick Rowe says it is hard for an economy to get stuck in a Liquidity trap, but it is actually easy.
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 […]