I came across this in comments, from October 2014:
I think Edward Lambert has it right. The business cycle is close to it's end point and profits will decline because there is nowhere for demand to come from. See his recent posts at AB.
I always have trouble with Lambert's stuff. It is like I missed page one of the story, and can't make sense of what he says by starting on page two. As I recall, though, Jazz is right: Lambert was saying the business cycle is close to its end point.
That was a couple years back. Is Lambert still expecting recession? Yes, about a 70% chance.
|Household Debt Service Payments|
Financial costs are down. That is where the increased demand will come from.
Just off the top of my head: If consumer spending is two thirds of GDP ... and if consumers have 3% more of DPI to spend ... and if human nature leads people to spend the money, then just off the top of my head GDP growth should be 2% higher. Because two thirds of 3% is 2%.
That's 2% on top of the two or two and a half percent growth economists envision.
I don't know what's going to happen. I don't like to make predictions because I'm always wrong. But the money has to go somewhere.
I think that if people have 3% of their disposable income lying around, accumulating, consumer confidence is going to improve. Between that and the spending, the economy will pick up. Then people will notice things are getting better. It will become a meme. Then it will become a trend.
By then, of course, we'll be spending that 3% of disposable income, and more. Household borrowing will accelerate, and yadda yadda yadda. Before you know it, we'll be in trouble again. Which is why I keep saying we need policy to stop encouraging the accumulation of debt, and we need policy to start encouraging the repayment of debt.
And we need that policy change in place now.