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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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Graphs are automatically updated.

UT Index (measure of slack):

The UT Index

Recession Alert (developed at recessionalert.com):

recession alert

Effective Demand Limit:

Effective demand Y and PY recent

Effective Demand Fed rate rule (uses PCE):

ED Fed rate

Output Gap (big difference):

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

Real Wage Index:

real wage index



Bottom of Initial Claims?:

Initial claims

Measures of Inflation:

Measures of Inflation
Data as of 2Q-2014
Effective Demand = $16.145 trillion
Real GDP = $15.994 trillion
UT index = 0.7%
Effective labor share = 74.8%
TFUR = 74.1%
ED Fed rate = 2.7% (would be Fed rate in normal business cycle. Potential GDP is lower than CBO says.)

Projected Effective Demand limit upon real GDP is $16.250 trillion.

Projected data for 3Q-2014

Capacity utilization = 79.2%
Unemployment = 6.2%

There is no recession for 2ndQ-2014. None expected through 4thQ.

(UT index close to 0.0% would show that real GDP is hitting the effective demand limit. Utilization rates of capital and labor would slow down at that point. If UT index begins to rise, the economy is contracting.)
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Edward Lambert: Independent Researcher on Effective Demand.
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