Statistical Analysis 04 Per capita GDP and GNP O35 4 02 4 O14 .O0 Log per capita measures (Ch.O5¢4, ZO08Q4=0 Mh P GNP Col (50P - 01 - - 02 4 -.03 VAY ECO 1 fo Yee FCO 2012 Another source GDPCi/POP 0.0440 -— 0.0435 + - “4 0.0430 o < r—="" +t="" 9="" 0.0425="" |="" qa="" ™="GS" 0.0420="" +="" ‘'s="" mo="" —="" 9.0415="" f0.0410="" 1="" 1="" l="" l="" l="" j="" 2007="" 2008="" 2009="" 2010="" 2011="" 2012="" 2013="" shaded="" areas="" indicate="" us="" recessions.="" fred="" att="" 2012="" research.stlouisfed.org="" 08="" o68="" o44="" 4="" o32="" 4="" .o0="" -="" of="" 4="" -="" o44="" 4="" -.06="" consumption="" and="" household="" net="" worth="" (per="" capita)="" log="" real="" per="" capita,="" zoorr4="0" household="" net="" worth="" ax="" consumption="" conn="" ro="" yee="" foo="" t="" y="" y="" y="" t="" y="" 2009="" 2010="" r="" t="" 2011="" r="" 1="" ,="" 2012="" ratio="" of="" household="" liabilities="" to="" gdp:="" if="" you="" believe="" that="" excessive="" household="" debt="" was="" the="" main="" problem,="" then="" the="" economy="" is="" on="" the="" mend="" tlbshno/gdp="" 1.05;-="" 0.95="" f0.90="" ff="" 0.85="" 0.80="" (bil.="" of="" $/bil.="" of="" $)="" 0.75="" 0.70="" 0.65="" 0.60="" 1="" i="" i="" i="" j="" 1992="" 1997="" 2002="" 2007="" 2012="" 2017="" :="" shaded="" areas="" indicate="" us="" recessions.="" fred="" ee="" 2012="" research.stlouisfed.org="" productivity="" and="" compensation="" 10="" log="" real="" values,="" os="" nonfarm="" business="" sector,="" 2008@4="0" mutput="" 06="" -="" per="" hour="" 4="" 4="" compensation="" o02="" 4="" oo="" ayy,="" boo="" te="" fo="" yer="" co="" ith="" -.02="" t="" t="" t="" t="" t="" t="" t="" t="" t="" t="" 2009="" 2o10="" 2011="" 2o12="" cbo="" assessment="" with="" and="" without="" the="" american="" recovery="" and="" reinvestment="" act="" (arra)="" —="" i.e.="" the="" “stimulus”="" 14,400="" wsj="" 14,000="" 4="" mean="" actual="" 13,600="" 4="" 14,200="" 4="" mo="" a="" rra="" hi="" impact="" 12,800="" 4="" chuinepact)="" 12,400="" 4="" stet="" coi="" ee="" eye="" f.c="" et="" 12,000="" .="" r="" .="" t="" .="" '="" t="" '="" .="" t="" t="" t="" r="" t="" t="" .="" r="" .="" t="" .="" r="" r="" t="" r="" .="" '="" 2007="" 2008="" 2009="" 2010="" 2011="" 2012="" 20194="" bailout="" of="" the="" automobile="" industry="" o="" |="" wa="" eco="" pd="" ow="" ese="" cot="" log="" real="" motor="" 45)="" vehicle="" production="" and="" consumption,="" production="" 5="" |="" 2008q4="0" 2="" 14="" consumptian="" of="" a="" new="" vehicles="" -.14="" -2="" 4="" romney,="" "let="" detroit="" go="" bankrupt",="" 3="" myt="" 2009="" mov.="" 12,="" 20083="" 2010="" l="" 2011="" !="" 2012!="" more="" austerity="" in="" the="100" u.k.="" real="" gdp,="" pre-crisis="" peak="" '="" zoztoz="" .="" tozroz="" '="" pottoz="" .="" edttoz="" '="" zottoz="" -="" totroz="" y="" yootoz="" *="" ed0toz="" .="" zdotoz="" '="" tootez="" ~="" po600z="" -="" €d600z="" .="" z0600z="" .="" t6002="" ’="" pos00z="" -="" €0800z="" r="" zd800z="" ’="" tos00z="" ~="" pol00z="" r="" €0l002="" .="" 204002="" .="" tos00z="" the="" difference="" 104="" 102="" i00="" -="" $8="" -="" 96="" 94="" 92="" so="" co="" bs="" 8]="" no="" inflation="" here!="" us="" private="" wages,="" production="" and="" nonsupervisory="" employees="" io="" %="" change="" y-0-¥="" 4.0="" 3.5="" 3.0="" 25="" 2.0="" 1.5="" 1.0="" 1984="" 1986="" 1988="" 1999="" 1992="" 1994="" 1996="" 1998="" 2000="" 2002="" 2004="" 2006="" 2008="" 2010="" 2012="" wp="" etonoritimew="" tyeened="" comm="" au/="" theory:="" liquidity="" trap:="" there="" is="" not="" enough="" demand="" (s=""> 1) when the real interest rate is zero Due to the roa c lack of demand, printing money (Quantitative Easing) has not been omnia inflationary of interest The graph shows that the “natural” real rate of interest (r) consistent with full employment is negative. Since r = i — 1m and the nominal interest rate cannot be negative, the only way for r to be negative is for expected inflation, mn, to rise. QE3 has been designed to increase expectations of inflation to reduce r. U.S.: Swing of private sector into financial surplus necessitated large public deficits to avoid a deeper slump Gross Government Saving (GGSAVE) GPSAVE-GPDI 1,200 — 800 + Private ==. surplus - Ss 400 = Ss or Ny — ee = -400 + mee Government -_ - = s deficit S -soo} aoe -1,200 i Li L 1 i L i i L i 5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20i2 Shaded areas indicate US recessions. — GGSAVE FRED 2012 resear ch. stiouisfed.org — GPSAVE-GPO!I THE JOB MARKET Employment barely keeps up with population Civilian Employment-Population Ratio C(EMRATIO) 63 r61 59 fF ss i 1 1 1 I J 2007 2008 2009 2010 2011 2012 2013 - Shaded areas indicate US recessions. FRED oft 2012 research.stlouisfed.org Employment Population Ratio EP ratio, 25-54 ~ TO-O°CT02 ~ TO-60-TT02 . T0°Z0-TT0Z . TO-L£0°0T02 ~ TO-eT6002 - T0-S0°6002 - 10°0T 8002 - W°E0- 8002 ~ 1080-2002 - TO-T0-£002 . T0-90°9002 ~ TOT T-S002 - TO-0-S002 . T0°60°H002 ~ TOZ0°w00z ~ TO-£0-€002 . T0*7 T2002 . TO*S0°C002 ~ TO-0T-1002 . TO-E0-T002 . WO°T0-0002 1080-0002 84 82 - 8O0 78 76 74 72 oO Ss A plunge and a stabilization at a depressed level, which has now gone on for almost three years. Everything else is just noise. August 2012 employment report: 96k gain Monthly average gain of 139,000 this year US Nonfarm Payrolls Monthly Change 300 / FMAM 3 | A S$ O WN DOD J FM AM YF ) A iy Monthly Change —————= &MonthMoving Average = [2 fMonth Moving Average mp //econanates typepad com/Nrgyy Private Employment in two administrations Changes in private employment since inauguration —— Obama -5000 Month Public employment in two administrations Note: the spike in 2010 is the census! Changes in public employment since inauguration Bush — Obama Month Government employment shrank under Obama: If government employment had grown as fast under Obama as it did under Bush, we’d have a million and a half more people employed today! All Employees: Government (USGOVT) Source: U.S. Department of Labor: Bureau of Labor Statistics 23,200 7 22,800 } 22,400 T Fs ; : =~ 22,000 { 21,600 | pee 21,200 (Thousands of Persons) 20,800 +} >. a 20,400 I i L i l i ; 2000 2002 2004 2006 2008 2010 2012 2014 Shaded areas indicate US recessions. FRED 2012 research.stiquisfed.org Government employment divided by population: Government employment (think school teachers) does not even keep up with population! USGOVT/POP 0.075 0.074 - Ng “4 0.073 F o = Ee uw S oo7v2- = & o 0.071 Fw =a o