Wednesday, June 15, 2016

Reading Phillip Inman

At The Guardian, Five threats to American prosperity tie the hands of its banker-in-chief by Phillip Inman:

In the seven years of what, in many economics textbooks, would be considered a strong recovery, the Fed has raised rates just once – by a quarter-percentage point to 0.5%, in December last year.

A strong recovery?

Graph #1: Growth Rate of Real GDP, with Averages for Different Periods
Click Graph to Enlarge
That blue line on the right -- the average since 2010 -- that's the "strong" recovery.

Average RGDP growth before 1980 was just below 4% annual. Average growth since 2000 is half that: just below 2%.  And the so-called strong recovery since 2010 is higher than the "since 2000" average, by the thickness of a line.

Phillip Inman ends the "Five Threats" article by saying he hopes the Fed does not raise interest rates, not yet. So it seems he doesn't accept the textbook analysis that says we've had a "strong recovery" since 2010. Well that's good. But really, why even include such a ridiculous view? And why let it stand till the end of the article? Somebody could quote it and try to create the meme that the economy is better than we thought.

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