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Well said Mr. Lambert. It is frustrating to hear the concern over inflation when labor share is at depressed levels. I suppose one of the biggest follies of economists has been a fixation on how things should be, rather than examining what is.

Your work is always appreciated.

Best Regards.

"Mr. Krugman would have you think that loose monetary policy works in favor of labor. Yet, a stronger capital income base and increased financial instability do not work in favor of labor thank you very much."

Mr. Krugman is lost in all the old economic theories and models. Investors must be encouraged, but consumers are assumed to be ever present and well funded. These assumptions are based on a 'flaw' similar to the one that Alan Greenspan discovered after the economy tanked. Let's call it Catch-23, capital can not be depended on to act in their own long term best interest, if that gets in the way of a short term profit!

It has been 6 years since the Great Recession began. I expect it to take at least another decade before there will actually be some movement to a more neutral system. Patches are not good enough.

At the present, we are not even discussing what that system would look like.

Perhaps a beginning point would be a tax on goods imported by any company operating in the US. Let's take the Value Added Tax (VAT) and make our own version.

And somehow, the 1% need to be reminded of how vulnerable they could become if inequality continues or gets worse. The Russians sure know how to send a subtle message:

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Data as of 4thQ-2016
Effective Demand = $17.587 trillion
Real GDP = $16.805 trillion
Productive Capacity is rising to next business cycle =
UT index is rising = +3.9%
Effective demand limit = 75.9%
TFUR = 72.0%
ED Fed rate rule (down from a peak of 3.8% in 2014) = 1.6%
Estimated Natural Real Interest rate = 2.2%
Short-term real interest rate (fallen from 2.8% peak in 2014) = -0.5%

There is no recession for 4thQ-2016. I am expecting a recession by the middle of 2017.

(UT index is rising which implies a recession is on the way.

Click on Graphs below to see updated data at FRED.

UT Index (measure of slack):

The UT Index



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 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:

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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