I favor some opportunistic disinflation from the Great Recession, shifting to a new, 3 percent target growth path for money expenditures, starting at the end of the Great Moderation, which I take to be the third quarter of 2008. The target for the second quarter 2010 would be $15.8 trillion, so the current value is 8.8 percent below target. The target for second quarter 2011 will be $16.3 trillion, so returning to target would require 13.4 percent growth in money expenditures over the next year. (That includes the already completed part of the year.) Of course, the targeted growth path of money expenditures would afterwards grow at 3 percent into the indefinite future.
Sunday, August 29, 2010
The revised figures for money expenditures in the second quarter of 2010 as measured by Final Sales of Domestic Product was $14.5 trillion. The level consistent with the growth path of the Great Moderation is 16.5 trillion. The gap continues to grow, having reach 13 percent. In order to return the growth path of the Great Moderation by the second quarter of 2011, which will be $17.4 trillion, money expenditures would need to grow 20 percent over the year. The targeted growth rate would then be 5 percent in the future.
Saturday, August 28, 2010
But still too slow.
Final Sales of Domestic Product grew at a 2.9 percent annual rate in the second quarter according to the revised figures. I favor a 3% target and so this figure is nearly there. Unfortunately, the level of Final Sales of Domestic Product remains way too low, and it will never catch up at this rate.
Interestingly, the inflation rate estimated Final Sales of Domestic Product grew at a 1.9% annual rate. This is close to the Fed's target for inflation (thought the core CPI is their favorite measure of the price level.) Note that this implies that real Final Sales of Domestic Product is growing approximately 1 percent. While the productive capacity of the economy is supposedly growing slowly, this growth rate of real expenditures will result in a growing output gap.
It is interesting that there was deflation for both durable and nondurable consumer goods, and a 1.8 percent inflation rate for consumer services. Deflation continued to impact equipment and software and residences. Oddly enough, nonresidential structures had a 2.6% annual inflation rate.
The most significant inflation rate was exports--4.8%
Friday, August 6, 2010
I won the race for Mayor of James Island. It was a five way race, with no run off.
I received just under 40 percent of the vote. The incumbent received 20 percent and
the others less.
I spoke to voters at about 750 homes. The registered voters in the town live in about
7000 homes. I personally knocked on 1500 doors. I haven't checked all the figures,
but we probably left literature at 35 percent of the homes. I raised and spent about
Unemployment unchanged. Final sales continue to grow very slowly and is way below
any reasonable target for its growth path.
But right now I need to worry about the budget for James Island and road and drainage
ditch maintenance. :)
P.S. When I turn on my computer, this is what shows up now http://www.nhc.noaa.gov/