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Dalio's rules for growth are good , but I'd add one more. He says :

1)Debt doesn't rise faster than incomes , i.e. , over the long haul , consolidated debt/gdp is stable. Since , IMO , debt loads are too high currently , ideally our debt/gdp should gradually decline to a less-burdensome level.

2)Income doesn't grow faster than productivity , i.e. economic growth should be non-inflationary.

3)Productivity should grow at a decent rate , i.e. innovation is a good thing and we should encourage it. If there are negative externalities to innovation , like job losses , we should correct them - for example by reducing work hours or through gov't jobs programs - rather than stifle such innovation.

The extra rule I'd add is this one :

4)Long-term , incomes should grow with productivity across the income distribution , i.e. minimum wages and median wages should rise at roughly the same rate as productivity , not just wages/incomes at the top. You still have incentives , as people can still move up and down the income distribution , and some will still get very rich , but you will maintain the purchasing power of consumers without relying on debt if this rule is followed.

Any economic program for growth should adhere to these rules. Since the crisis , we've failed to do so , with the possible exception of the debt/gdp rule. During the postwar "Golden Decades" we did a much better job.

Agreed... income should rise with productivity. The problem is productivity is demand constrained and won't rise under this condition. Effective demand has to start rising first.

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Data as of 4thQ-2015
Effective Demand = $17.067 trillion
Real GDP = $16.455 trillion
UT index = +3.0%
Effective demand limit upon TFUR = 76.2%
TFUR = 73.2%
ED Fed rate = 2.6%
Estimated Natural Real Interest rate = 2.0%

There is no recession for 4thQ-2015. None expected thru 1stQ-2016.

(UT index close to 0.0% shows that real GDP is hitting the effective demand limit. UT index rose through 2015 after hitting the limit in 2014.)

Click on Graphs below to see new data by updating at FRED.

UT Index (measure of slack):

The UT Index

Recession Alert (developed at recessionalert.com):

recession alert

ED Output Gap:

ED Output gap

Regressed Output Gap:

Output gap

Speed of consuming slack: yoy monthly:

Speed of consuming slack

Speed of consuming slack: quarterly:

Speed of consuming slack quarterly

Real consumption per Employee:

real consumption per employee 2

Will real wages ever rise faster than productivity?:

Productivity & Real Wages

Real Wage Index:

real wage index



Productivity against Effective Demand limit:

Prod & ED limit

Bottom of Initial Claims?:

Initial claims

Tracking inflation expectations:

Fisher effect?

Measures of Inflation:

Measures of Inflation

M2 velocity still falling:

Measures of Inflation

Double checking labor share with unit labor costs & inflation:

My Photo
Edward Lambert: Independent Researcher on Effective Demand.
Some links for economic analysis
Fed Views - San Francisco Fed, around 10th of each month.
Well's Fargo monthly - around 10th of each month
Well's Fargo weekly
Well's Fargo Interest rate report
Well's Fargo Economic indicators
T. Rowe Price weekly market wrap-up
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