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Text of the page (random words):
ween notional demand and latent demand effective demand is a reflection of the extent to which buyers income perceptions and needs combine to result in an actual purchase rather than a mere desire to purchase in recent comments at angry bear i said to ed lambert i would suggest again that what you are measuring is potential demand not effective demand lambert replied the term effective implies a limit so it is better than potential but the terms are very close potential output has been surpassed many times but not effective demand effective implies the top limit i refer you to the definitions above from google and ronald kimmons i still think potential demand is the better name for the work lambert is doing but of course i might misunderstand him here s my problem if i can t get clear on what he s looking at i can t even begin to understand what he s saying he s definitely not looking at effective demand as defined by google and ronald kimmons a year back at angry bear i wrote i m thinking lambert s effective demand is really a kind of potential demand after all lambert says the best way to think about effective demand is the unused capacity of demand in the economy what he is describing is demand in an economist s perfect world just as potential output is a measure of real output in that perfect world though even that perfect world is far from perfect lambert your explanations help but your use of the words effective demand troubles me because i think it differs from keynes use of those same words and from adam smith s words effectual demand both of which refer to the amount of money people actually spend back then lambert himself wrote if unused supply of labor and capital is high potential demand is going unfilled think of effective demand as potential demand yet potential demand is constrained by labor share of income effective demand is demand backed by purchasing power i think potential demand is a measure of the most that effective demand could be i think lambert is doing potential demand and i think it might be real genius but effective demand is something different posted by the arthurian at 4 00 am 6 comments monday august 18 2014 bad debt expense corporate bad debt expense graph 1 corporate bad debt expense it just goes up more and more and more but look at it on a log scale there is a straight line increase from the 1940s to 1990 graph 2 corporate bad debt expense on a log scale after 1990 the increase of bad debt slowed i find it most interesting that this graph shows no acceleration in bad debt the graph shows no upcurving trend anywhere between the late 1940s and 1990 it shows a constant rate of increase despite the growth of debt posted by the arthurian at 4 01 am 0 comments sunday august 17 2014 the net worth of the financial sector from wikipedia the net worth of the united states and its economic sectors has remained relatively consistent over time the total net worth of the united states remained between 4 5 and 6 times gdp from 1960 until the 2000s the net worth of american households and non profits constitutes three quarters of total united states net worth in 2008 355 of gdp since 1960 us households have consistently held this position followed by nonfinancial business 137 of gdp in 2008 and state and local governments 50 of gdp in 2008 the financial sector has hovered around zero net worth since 1960 that last sentence there this is the complete thought the financial sector has hovered around zero net worth since 1960 reflecting its leverage but the article has already defined net worth as assets less liabilities so do we need the explanation embodied in those three extra words eh for me the key bit of information is that the financial sector has approximately zero net worth next from the dallas fed working paper 161 from 2013 is the net worth of financial intermediaries more important than that of non financial firms oh that s funny at the dallas fed the working papers are in a documents folder which is in an assets folder http www dallasfed org assets documents institute wpapers 2013 0161 pdf one can see the central banker s mind at work but i wonder do they also have a liabilities folder by naohisa hirakata and nao sudo of the bank of japan and kozo ueda of waseda university from the abstract our model which is calibrated to the u s economy highlights two features of the fis financial intermediaries net worth first the relative size of fis net worth as compared to entrepreneurial net worth namely the net worth distribution in the economy is important for the financial accelerator effect second a shock to the fis net worth has greater aggregate impact than that to entrepreneurial net worth the key reason for these findings is the low net worth of fis in the united states in other words the low net worth of the financial sector magnifies the effect of a shock and a shock to the financial sector has a greater impact than a shock to the productive sector from the conclusion of that paper our results have policy implications regarding the intensified basel bank regulations that have progressed after the financial crisis in those regulatory frameworks the fis net worth is expected to play the pivotal role in achieving the financial stability along this line our results suggest that the regulatory framework that protects banks net worth from irrational exuberance or that fosters accumulation of banks net worth may be beneficial from the macroeconomic stability purpose mmm i don t like this basel is bis the bank for international settlements it s a friend of the bank sort of thing but why would we trust bankers to solve this problem did we learn nothing from the crisis look what bankers want to do they want to protect banks net worth and foster its accumulation i would rather solve the problem by having governments provide more money and have each dollar of that money turned into fewer dollars of credit than is the case today i want to reduce the reliance on credit and increase reliance on the dollar i want to reduce the demand for credit and in so doing reduce the demand for a financial sector if we do this then boosting banks net worth might help solve the problem if we do not then boosting banks net worth only hastens the day when banks own everything and we are no longer fremen but coloni and slaves posted by the arthurian at 4 00 am 1 comments saturday august 16 2014 oh this is precious i was looking for goldilocks economy dated 22 november 2007 from lawrence kudlow at real clear politics november 22 2007 three more years of goldilocks by lawrence kudlow there was some revealing information in the three year forecast published by the federal reserve this week it looks like ben bernanke co are dissing high oil and gold prices and the sagging dollar as influences on future inflation instead they basically see 2 percent inflation both headline and core in 2008 2009 and 2010 the fed also sees goldilocks type economic growth not too hot not too cold for the next three years for 2008 an election year the fed is looking at 2 1 percent growth their lowest estimate this rises to 2 5 percent in 2009 and 2010 so how did the fed s gdp growth prediction work out one out of three but it gets better kudlow offers his own predictions and analysis i think the election year economy will be stronger than the fed s estimate closer to 3 percent too much is being made of both the sub prime credit problem and the housing downturn a recent bank of england study shows that residential mortgage backed securities in the u s total 5 8 trillion of that only 700 billion or 12 percent are sub prime even when you add in 600 billion of so called alt a mortgage paper most of which will not default the total of these home loans is still less than 20 percent of all mortgage backed paper what s more the entire market in sub prime debt is just 1 4 percent of the global equity markets on any given day a 1 4 percent drop in world stocks would erase the same amount of value as the collective markdown of all sub prime backed bonds to 0 it s just not that big a deal it s just not that big a deal kudlow says you never know posted by the arthurian at 4 00 am 3 comments friday august 15 2014 because people don t spend money at night yesterday i wrote that s a favor policymakers did for banks not counting the sweeps but it makes m1sl an unrealistic number i don t like to say anything so unequivocal without backing it up unless i ve already backed it up several times see i can t even be unequivocal about that sweeps jim said the way i understand it in 1994 the banks were allowed to change the way they figured the data that goes into computing m1 banks were allowed to shift the money from accounts that were less active from checking to savings for reporting purposes doing this lowered their reserve requirements lowering their reserve requirements is the favor that policymakers did for banks as for making m1sl an unrealistic number i turn to the link jim provided sweep programs sweep programs create distortions between reported data on the monetary aggregates and accurate measures of the money stock i would love to quote that whole page it is so good but the whole thing is only three paragraphs so taking one sentence is taking a lot they also provide this reference cynamon barry z donald h dutkowsky and barry e jones redefining the monetary aggregates a clean sweep eastern economic journal 2006 vol 32 issue 4 pages 661 673 barry cynamon s name is one i recognize the site is sweep adjusted monetary aggregates for the united states and i for one don t go there often enough posted by the arthurian at 4 00 am 4 comments thursday august 14 2014 that s what made the economy good in those years interest rates you know rates worked their way uphill from the late 1940s to 1981 and have tended downhill since graph 1 interest rates trended upward from the late 1940s to about 1981 and downward since here s a bit from my second look post take a look at the rate of debt growth since the 1950s graph 2 percent change in the non federal portion of tcmdo blue if i did it right the red line is a hodrick prescott trend of the debt data the first thing that happened after the early 1980s was a slowdown in debt growth a slowdown beginning in the mid 1980s immediately after the early 1980s there was a major downtrend in the growth of debt but by the late 1990s the growth rate of debt was back to normal back to 10 annual give or take back where it was before the neoliberals took over back where it was in the keynesian years what s different is that in the keynesian years excessive debt growth led to inflation in the neoliberal years excessive debt growth led to unemployment that s the main difference the problem is the excessive debt growth the excessive reliance on credit the excessive cost of circulating money it s a cost push problem key concept the excessive cost of circulating money even though interest rates have been declining since 1981 the source of troubles in our economy is the excessive cost of circulating money the cost of interest no not only the cost of interest but also the level of debt if you want to borrow a dollar the cost depends on the rate of interest but at any effective rate of interest the cost of existing debt depends on how much debt exists and we we have lots and lots of debt and that has made all the difference i want to look at the cost of circulating money total cost of interest in the economy divided by the number of dollars of spending money graph 3 interest paid per dollar of m1 money see how it s low there at the start less than 0 5 it is the 0 5 means 0 50 it means 50 cents of interest paid for every dollar of spending money in the u s a the cost of circulating money in 1960 was just about 33 cents for every dollar in circulation that was low it s been up in the neighborhood of 2 on average since 1980 two dollars of interest paid for every dollar we have just to be clear on that every dollar we have refers to the money we have that we expect to spend not the money we have in savings the money we have in savings is the recipient of that interest of course oh and since there is far more money in savings than what we have for spending the interest paid is far less than 2 per dollar in savings you can look at this in terms of income inequality if you like to see who s paying what to whom there is a problem with graph 3 it uses m1sl for the money measure it doesn t count sweeps that s a favor policymakers did for banks not counting the sweeps but it makes m1sl an unrealistic number the more realistic number is m1adj which does count sweeps m1adj is bigger than m1sl so the ratio is lower as graph 4 shows graph 4 interest paid per dollar of m1 money adjusted for sweeps now there is a general downward trend from the early 1980s not sharply down but down but here s what i want you to see the latter 1990s the best years since the 1960s the macroeconomic miracle years on graph 4 the sustained high in the mid to late 1990s is lower than the sustained high of the 1980s and lower than the brief high of the 2000s the cost of money not the rate of interest but the cost of interest per dollar of spending money was lower during the boom years of the 1990s we were paying less to have money to spend in the 1990s so we could spend more on the things we wanted spending money for that s what made the economy good in those years that s what made it a boom posted by the arthurian at 4 00 am 8 comments wednesday august 13 2014 farther back in time ed lambert recently showed this graph at angry bear graph 1 ed lambert s graph goes back to the late 1960s i still don t have a feel for what this graph shows but i notice that the calculation uses capacity utilization i can use the version of cap ut that goes back to 1948 to show more years for lambert s graph it won t be exactly the same because i ll be using cap ut for manufacturing not for total industry but it ll be close graph 2 same calculation different capacity utilization earlier start date the last couple lows on lambert s graph 1 hug the zero line on 2 those lows are a little higher that s because u s manufacturing is dropping off relative to total industry it s a different capacity utilization that s okay at angry bear lambert writes the ut index wants to stay above 0 firms in the aggregate do not increase profits when slack goes negative because firms will pay the increased cost of employing more labor and capital instead of consumers paying that cost as i said i don t have a feel for this calculation but the graph that goes back to 1948 shows lambert s ut index going below 0 a little bit in the 1950s and more in the 1960s the absolute lowest low on the graph occurs in the first quarter of 1966 according to steve keen minsky said 1966 was the end of the golden age economy lambert says things are better for consumers when the line is low like that those things fit together posted by the arthu...