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03/14/2014

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Thought you might be interested in this lecture dated Dec 2013:
http://piketty.pse.ens.fr/files/Piketty2013Cologne.pdf

------------------ Start extract -------------------
Conclusions
• The history of income and wealth inequality is always political, chaotic and unpredictable; it involves national identities and sharp reversals; nobody can predict the reversals of the future
• Marx: with g=0, β↑∞, r→0 : revolution, war • My conclusions are less apocalyptic: with g>0, at least we have a
steady-state β=s/g
• But with g>0 & small, this steady-state can be rather gloomy: it can involve a very large capital-income ratio β and capital share α, as well as extreme wealth concentration due to high r-g
• This has nothing to do with a market imperfection: the more perfect the capital market, the higher r-g
• The ideal solution: progressive wealth tax at the global scale, based upon automatic exchange of bank information
• Other solutions involve political & capital controls (China, Russia..) or perpetual population growth (US) or some mixture of all
------------------ End extract -------------------

He seems to be saying that income inequality is not a flaw, it is the norm in capitalism. (I would hazard the guess that most American economists are not going to accept this premise any time soon.)

And that if you want to lower income inequality then you either raise growth or put higher taxes on the wealthy income earners.

We had high taxes on the 1% and they were removed by the Republican politicians who promised economic improvements which never materialized. Then with the increased wealth the 1% set out to reduce labor share by Global Free Trade. (Those trade treaties had to be approved by the Senate and campaign contributions had to be made.) Global Free Trade acted to reduce labor share since less labor was needed in the US. (Less labor needed, equated to more competition for jobs, and thus lower pay.

The 'powers that be' have not been able to increase growth using their various methods. So if we accept his prescriptions, then taxes have to be increased back to 70%. (Rate before President Reagan's tax cuts began.)

Or we could reverse our path on Global Free Trade and start to bring manufacturing back to the United States.

Jim
The drum beat on this is getting stronger with the work of Piketty. He is bringing labor share into the forefront.
I will be reading your attached file later today.

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Data as of 1stQ-2017
Effective Demand = $17.613 trillion
Real GDP = $16.842 trillion
Productive Capacity is rising to next business cycle = $23.285 trillion
UT index is rising = +3.9%
Effective demand limit = 76.2%
TFUR = 72.3%
ED Fed rate rule (down from a peak of 3.8% in 2014) = 1.4%
Estimated Natural Real Interest rate = 2.0%
Short-term real interest rate (fallen from 2.8% peak in 2014) = -0.3%

There is no recession for 1stQ-2017. I am expecting a recession by end of 2017.




Click on Graphs below to see updated data at FRED.

UT Index (measure of slack):

The UT Index

z-vertical:

z-vertical

z derivatives in terms of labor & capital:

z derivatives in terms of labor & capital

Effective Demand, real GDP & Potential GDP:

ED, real GDP & pot rGDP

ED Output Gap:

ED Output gap

Corporate profit rate over real cost of money:

Corp profit rate over real cost of money

Exponential decay of Inflation:

Corporate profits impact Inflation

Measures of Inflation:

Measures of Inflation

YoY Employment change:

YoY employment change

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:

Productivity

Productivity against Effective Demand limit:

Prod & ED limit

Bottom of Initial Claims?:

Initial claims

Tracking inflation expectations:

Fisher effect?

M2 velocity still falling:

Measures of Inflation

All in one:

All in one

Double checking labor share with unit labor costs & inflation:

ULC LS CPI
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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