of coase ..not

another way to see the recovery

fun graph view the path of the hi fi stress index

ben ..mission accomplished

PK's fantasy reovery deficit increment ...1 trillion dollars..." But how bad is that?"

"Start with the CBO estimates of potential GDP subtracted from actual GDP
to estimate the output gap."

" Start the clock at the beginning of 2009, and the output gap — measured quarterly,
but at an annual rate — looks like this:"

 

ecce

The NAIRU output gap !!!!!!

 

" If you add it up, the cumulative output gap since start-2009 comes to $2.29 trillion"

 

" $2.29 trillion worth of goods and services we could and should have produced"

 

" but didn’t."

 

 

"How much government spending would have been required to close that gap?"


" at the zero lower bound the multiplier is greater than one"


"  take a multiplier of 1.3"

  " $1.76 trillion in spending over the past 4 1/2 years to close the output gap."


" is that an extra $1.76 trillion in debt? "


"No "


"the economy would have been stronger, leading both to
 higher revenue and to lower spending on means-tested programs. "

" each dollar of extra GDP would have saved 1/3 of a dollar
 in the form of higher revenue and lower spending"

" 2.29/3 = $0.76 trillion."


" the net extra debt we would have run up with my fantasy stimulus
 turns out to be a round $1 trillion"

". OMG: ONE TRILLION DOLLARS!"


"ut how bad is that?"

" about 6 percent of GDP"


"we would have had federal debt at 76 percent of GDP"


"can  anyone seriously claim that this difference would have caused a fiscal crisis?"


" in return  millions of American families would have been spared
 the hardship and humiliation of mass unemployment, lost houses and savings, and more."


 " We can further argue that future revenue would be higher "

" improved, not worsened, our fundamental fiscal position."

fun facts : real profits per employee nearly triple since 'oo little bush coup

Real After-Tax Corporate Profits Per Employee, 1980-2000

1980 ( 7,198) *
1981 ( 6,330) Reagan
1982 ( 5,239)
1983 ( 5,569)
1984 ( 5,539)
1985 ( 4,910)
1986 ( 3,881) (Low)
1987 ( 4,669)
1988 ( 5,340)
1989 ( 4,899) Bush
1990 ( 4,885)
1991 ( 5,342)
1992 ( 5,591)
1993 ( 5,671) Clinton
1994 ( 6,520)
1995 ( 7,043)
1996 ( 7,255)
1997 ( 7,485)
1998 ( 6,234)
1999 ( 6,294)
2000 ( 5,664)


since  December '00 coup 


2001 ( 5,584) Bush
2002 ( 6,845)
2003 ( 8,170)
2004 ( 10,273)
2005 ( 12,763)
2006 ( 13,464)
2007 ( 12,239)
2008 ( 9,803)

2009 ( 11,596) Obama
2010 ( 14,052)
2011 ( 13,456)
2012 ( 15,369)

* 1982 - 1984 dollars

Labor Share of Nonfarm Business Income, 1980-2000

1980 ( 108.94) *
1981 ( 107.39) Reagan
1982 ( 109.45) (High)
1983 ( 106.16)
1984 ( 105.35)
1985 ( 105.25)
1986 ( 106.54)
1987 ( 107.89)
1988 ( 108.30)
1989 ( 106.59) Bush
1990 ( 107.44)
1991 ( 107.44)
1992 ( 107.42)
1993 ( 106.13) Clinton
1994 ( 104.50)
1995 ( 104.02)
1996 ( 104.02)
1997 ( 104.12)
1998 ( 106.26)
1999 ( 106.15)
2000 ( 108.25)


since December '00 coup

 2001 ( 108.19) Bush
2002 ( 105.27)
2003 ( 103.98)
2004 ( 103.23)
2005 ( 101.42)
2006 ( 101.56)
2007 ( 102.20)
2008 ( 102.62)
2009 ( 100.00) Obama
2010 ( 97.88)
2011 ( 98.16)
2012 ( 97.48) (Low)

seasonally adjusted, 2005 = 100

PK takes us on a " level target fantasia tour "

" the central bank has very little direct traction when safe short-term rates are at the zero lower bound; maybe it can achieve something by buying lots of unconventional assets (“quantitative easing”), but its main hope of achieving anything is through “expectations management” — convincing both financial markets and players in the real economy that it will hold off much longer on tightening once the economy improves than they currently expect, which will lead to higher expected inflation and demand, and hence higher spending now."

any sort of nominal  level target gets you that eh ?

more adventures beyond the RDB (the real debt barrier) chaper 51"what if only UNCLE paid a money tax "

regard the CB and its limitless money mine the LMM

now consider the  State guaranteed and enforced  zero riskless  real rate regime  the RRRR

put them together  LMM-RRRR
and the STATE pays the money tax

product price inflation becomes' a big

SO  WHAT !!!!!

if there's also a  universally mandated
  value added or mark up warrant exchange