Follow-up post here to John Cochrane’s clarification of the Fisher Effect. In his post, Mr. Cochrane pointed out the different ways (with stability or instability) that inflation could change to changes in nominal rates. His post includes a graph that since the Fed rate hit the ZLB, inflation has been stabilizing… something which supports the […]

John Cochrane responded to recent blogs about the Fisher Effect instigated by Noah Smith. The best thing that John Cochrane showed in his post is that there are short-run effects and long-run effects of policy rate changes upon inflation. The Fisher Effect represents the long-run effects. There are nice comments under his post. “…this is […]

This was published yesterday morning, but I just saw it now.  I agree with almost everything it says.  The one exception concerns Bruce Braley, who despite the silly controversies about chickens and Iowa Farmer Grassley, is someone I hope remains involved in Dem politics. The spot-on-ist part of this really spot-on analysis?  The last two paragraphs: […]

3rd quarter Non-farm Business Sector Labor Share data came out today… 97.34 (2009 = 100) Think of labor share as real unit labor costs, since unit labor costs = labor share * inflation. (link) Labor share is much lower than it was in 2009. The basic measure that I use for the effective demand limit […]

So who won the 2014 midterm elections? The easy answer is the Republican Party. On election night, the party managed to seize control of the Senate by picking up at least seven seats previously held by Democrats, a goal that has eluded Republicans since 2006. The GOP also captured at least 14 House races, expanding […]

by Sandwichman (reposted from Econospeak) Public Works, Economic Stabilization and Cost-Benefit Sophistry I. Public Works and Economic Stabilization This is where it all began. The National Resources Board’s 1934 Report on National Planning and Public Works contained a radically different vision of the methods and purposes of conducting a cost benefit analysis than what has subsequently […]

Yesterday, I wrote here in response to a statement by Greg Sargent that “McConnell’s only way to re-litigate Obama’s policies will remain budgetary guerrilla warfare that will only work if Obama allows it to work, which he won’t, which he won’t.”: McConnell’s only way to re-litigate Obama’s policies will remain budgetary guerrilla warfare that will only work […]

Real rates are currently negative. (0.2% Fed rate minus 1.6% core inflation) Yet the natural real rate is estimated to be around +1.6% due to positive population growth and positive productivity growth. Normally the real rate  returns to its natural level. Will the real rate rise to its natural level in this business cycle? Real […]

Noah Smith opened the debate again on the Neo-Fisherite movement… What is the movement of which I partake as a Neo-Fisherite? When nominal rates are stuck, then changes in inflation will be compensated for by an equal and opposite change in the real rate. The equation is simple… constant nominal rate = real rate + […]

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 […]