Be back soon

Basic Effective Demand Limit, L = labor share index * 0.76

Effective demand on real GDP = rGDPeT/L (1 -(1 - 1/e)T/L)

Effective Demand Monetary rule with NGDP targeting = z(T² + L²) - (1 - z)(T + L) + (1+a)current core inflation + acore inflation average - 2acore inflation target

z = (2L + Natural real rate)/(2L² + 2L) ............................ T = capacity utilization*(1 - unemployment rate)
UT index = L - T ... (UT index goes to zero at limit of business cycle.)

New economic thinking... effective demand limit upon the utilization of labor and capital

« Fall in Capacity Utilization reflects the Effective Demand Limit | Main | Former Fed Analyst says Fed should have raised rates a long time ago »

06/09/2015

Be back soon

I have been on a break from posting to my blog here. I will be back soon.

Much of the important data will be out within a month. One thing that I am focused on is how much capital income has reduced their consumption. I sense that the much of the slowdown in consumption is related to capital income starting to protect their cash flows. I have not seen this up until 1st quarter 2015. But I suspect that 2nd quarter will show something.

Posted by Edward Lambert on 06/09/2015 | Permalink

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"I have been on a break from posting to my blog here. I will be back soon."

Glad to hear that. I was starting to wonder.

None of my life experience has prepared me for what I am seeing. It is a slow motion economic wreck. After each quarter there is a delay then some not so bad numbers, then after another delay we see all the other data and the overall result is still negative.

The latest wrinkle is the latest attempt to 'dress up' the 1st quarter data with a change in the seasonal adjustments. Of course this has not been necessary in the past so what has changed? This is going to make it difficult to compare current seasonally adjusted data with the older data. And if we ever get a real recovery then they will have to go back to the older seasonal adjustments.

Posted by: JimH | 06/10/2015 at 06:01 AM

Jim,
Your analogy of slow motion economic wreck is really good.

Posted by: Edward Lambert | 06/10/2015 at 11:02 AM

Hi Edward. A couple of weeks ago Naked Capitalism was kind enough to publish my post: "The Standard Definition of Money is in Error. "

http://www.nakedcapitalism.com/2015/06/the-standard-definition-of-money-is-in-error.html

You may be interested, as my claim is that money is neither a measure or store of value, but instead a measure and store of demand.

greg

Posted by: greg | 07/08/2015 at 07:32 PM

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Synopsis of Effective Demand

Data as of 3rdQ-2018
Effective Demand = $18.433 trillion
Real GDP = $18.671 trillion
Productive Capacity = $24.872 trillion
UT index is at effective demand limit = -0.92%
Effective demand limit = 74.1%
TFUR = 75.1%
ED Fed rate rule = 4.0%
Estimated Natural Real Interest rate = 2.3%
Short-term real interest rate = 2.8%

There is no recession for 3rdQ-2018. Chance of recession is growing as economy has now reached 2nd effective demand limit in this business cycle. I am forecasting that economic conditions will begin to contract in the second half of 2018.

Click on Graphs below to see updated data at FRED.

UT Index (measure of slack):