Thursday, March 30, 2017

"Trumped-up expectations"

Mosler's words.

"Seriously trumped up consumer expectations continue," he says. But if Mosler was going for the pun the "T" should have been capitalized, unless he was trying to show disrespect.

Mosler shows a graph to go along with his words. I eyeballed-in some trend lines:

Graph #1 Source: The Center of the Universe
The trend shows an upward drift (straight line) to January 2015, a downward drift until May 2016, and an upward acceleration (curved line) since May. We have acceleration now, not drift.

The "retail sales" (gray bars) show sharp increase since August 2016.

The election was in November. By Mosler's graph, the improvement takes hold three to six months before the election. A year or two from now, everyone will be saying Trump is making things better. Everyone will be wrong.

A year ago, in We are at the bottom now, ready to go up, I wrote:

This is not going to be your typical anemic recovery. This is going to be the full tilt, rapid output growth, rapid productivity growth, high performance boom. I can't promise you it'll last long, because the level of debt is already very high. But it'll be a good one while it lasts.

Mosler's graph is early evidence that the prediction was right.

I do think that the bold, persistent experimentation of the Trump Administration will generate a measure of economic improvement, even if the policies are dead wrong, because expectations count for something. Look what happened under Reagan:

Let us not forget that real GDP growth in 1984 was 7.3 percent; the next-highest value since was just 4.7 percent in 1999.

One year of healthy growth. That's what Reagan got us. One good year. So don't expect much from expectations.

Expect much from improved monetary balances.

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