Part 1 – Spending as a fraction of Net Worth Tim Duy weighed in on the output gap debate – not my topic, but he presented this chart of net worth as a percentage of GDP. Graph 1 Net worth as a Percentage of GDP That got me thinking again about the issue of whether […]
This is another look at the idea I put forth here, that – contra the standard economic idea that consumption depends on wealth – I believe that consumption depends on income. It’s worth stressing that wealth and income are not independent variables. Wealth is the accumulation of unspent income plus returns generated on that wealth […]
Part I showed the money going to corporate profits, not to the salaries of working people. Part II showed that the finance sector has captured an increasing slice of the profit pie. Here is a different look at where the money hasn’t gone. The first graph shows Real GDP/capita and Real Disposable Income/Cap since 1950 […]
In this post, earlier today, I forgot to link to this article over at Naked Capitalism. The salient point is, that specifically for investors, spending is related exclusively to income, never to wealth. It goes on to posit that QE and monetary policy are killing demand. As Steve would say, “Go read it.”
Usually my articles present facts and data and try to drive down to a conclusion. This time, I’m going to drive down to a couple of questions. Recently, Noah Smith had a post on the subject of economic models titled Filling a hole or priming the pump? It did quite a bit to restore my […]
INTRODUCTION 1) Rethug Speaker of the House John Boehner says that as a nation, “we’re broke“; Rethug presidential candidate Ron Paul claims America “should declare bankruptcy.” I say these two are liars, and at least one of them is crazy. 2) Tyler Cowan says “we are poorer than we think we are,” due to mis-measurement […]
Anyone who was in the MBS market and not working for a primary originator can tell you that the MBS securitization market ended around Halloween 2006. (Those of us who were at places with origination go a few more months, but had no flow by February.) Only economists were fooled by what I’ve been calling […]
There are two measures of income: the spending side (Gross Domestic Product, or GDP) and the income side (Gross Domestic Income, GDI). I’d like to see what GDI is telling us about the Y/Y recovery, since it’s a better predictor of turning points, according to FRB economist Jeremy J. Nalewaik. The chart illustrates the contribution […]
…Corporations. Since earnings season is now well underway, I decided to look at the breakdown of aggregate domestic income (gross domestic income). Corporate profits are up 44.7% since the outset of the US recovery, while wages and salary accruals are up just 0.9%. The chart above illustrates the peak-trough losses (total loss), trough-Q2 2010 gains […]
The Federal Reserve, the Bank of England, and the Bank of Japan are considering further quantitative easing. It’s an explicit statement, as with the Federal Reserve and the Bank of England, or implied by the fact that the foreign exchange intervention will eventually be sterilized if the policy rule is not changed, as with the […]