Net Worth and Personal Consumption vs Effective Demand

Some of us are talking in the comments section of Angrybearblog.com about my post on Productivity & Effective Demand. JzB brought up a graph that was posted on angrybearblog.com back in 2012 with personal consumption (y-axis) plotted against net worth (x-axis). The shape of the curve is similar to the shape of the curve for productivity plotted against effective demand.

Here is the updated graph that JzB brought up.

Here is the graph of productivity against effective demand.

Recently net worth is rising at a faster rate than personal consumption. Is this another definition of a bubble with rising asset values, while consumption lags behind?

The effective demand graph has the same shape for the curve but at different times. During the housing bubble, effective demand was constant while net worth grew. Then during the crisis, effective demand grew while net worth fell. But in the end they ended up with similarly shaped curves.
Currently effective demand is NOT increasing, while the graph you bring up shows net worth increasing. In the past they moved together, supposedly in balance. The current difference is troubling for me because it is the same scenario before the crisis of 2008.

- See more at: http://angrybearblog.com/2013/07/productivity-effective-demand-an-intriguing-and-disturbing-story.html#comment-175452

We can see a similarity between the shapes of the curves, but they are not synchronized in time. During the housing bubble, effective demand was constant while net worth grew. Then during the crisis, effective demand grew while net worth fell. But in the end they ended up with similarly shaped curves.

The graphs have two things in common.

1. Slow steady balanced growth before 1997.
2. Both effective demand and net worth grew during dotcom bubble. (but not during housing bubble.)

The two graphs de-synchronized during the 2001 recession, when effective demand continued to grow, but net worth stayed constant. Net worth and effective demand have been moving very differently ever since. They were in balance for decades, but not now.

Recently net worth is rising at a faster rate than personal consumption. Is this another bubble with rising asset values, while consumption lags behind?

Also, effective demand is NOT increasing, while net worth is increasing. In the past they moved together, supposedly in balance. This current difference is troubling because it is the same scenario before the crisis of 2008.

By comparing these two graphs, we can see the same dynamic from before the 2008 crisis is happening again now. Net worth is growing, but effective demand is not. The two graphs together imply that a bubble is growing again. We may not know the true size of this bubble in global terms.

Recently net worth is rising at a faster rate than personal consumption. Is this another definition of a bubble with rising asset values, while consumption lags behind?

The effective demand graph has the same shape for the curve but at different times. During the housing bubble, effective demand was constant while net worth grew. Then during the crisis, effective demand grew while net worth fell. But in the end they ended up with similarly shaped curves.
Currently effective demand is NOT increasing, while the graph you bring up shows net worth increasing. In the past they moved together, supposedly in balance. The current difference is troubling for me because it is the same scenario before the crisis of 2008.

- See more at: http://angrybearblog.com/2013/07/productivity-effective-demand-an-intriguing-and-disturbing-story.html#comment-175452

Recently net worth is rising at a faster rate than personal consumption. Is this another definition of a bubble with rising asset values, while consumption lags behind?

The effective demand graph has the same shape for the curve but at different times. During the housing bubble, effective demand was constant while net worth grew. Then during the crisis, effective demand grew while net worth fell. But in the end they ended up with similarly shaped curves.
Currently effective demand is NOT increasing, while the graph you bring up shows net worth increasing. In the past they moved together, supposedly in balance. The current difference is troubling for me because it is the same scenario before the crisis of 2008.

- See more at: http://angrybearblog.com/2013/07/productivity-effective-demand-an-intriguing-and-disturbing-story.html#comment-175452

Recently net worth is rising at a faster rate than personal consumption. Is this another definition of a bubble with rising asset values, while consumption lags behind?

The effective demand graph has the same shape for the curve but at different times. During the housing bubble, effective demand was constant while net worth grew. Then during the crisis, effective demand grew while net worth fell. But in the end they ended up with similarly shaped curves.
Currently effective demand is NOT increasing, while the graph you bring up shows net worth increasing. In the past they moved together, supposedly in balance. The current difference is troubling for me because it is the same scenario before the crisis of 2008.

- See more at: http://angrybearblog.com/2013/07/productivity-effective-demand-an-intriguing-and-disturbing-story.html#comment-175452

Comments

[Steve Roth]

GDP is only reported quarterly. Any monthly series you could predict on? Time specific predictions… Setting you up to wow people…

[Edward Lambert]

There is a way to use unemployment capacity utilization and a range for effective labor share 73.8% and hold effective labor share steady at $14.1 trillion.