Paul Krugman asked today… “Are we getting close enough to “full employment” that it’s time to let up on the gas? How much slack is there in the economy, really?” By letting up on the gas, he is referring to tapering by the Federal Reserve. Tapering would signal tightening as he ends his post with […]
INET has a great interview with Robert Skidelsky. It is well worth watching. Here is the link… He talks about political power in determining which economic theories get applied. He talks about fiscal policy. He mentions that trying to re-work supply side reforms while the markets are weakening in demand can be unproductive. Many other […]
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 […]