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Fake Inflation Expectations Meet Good and Bad Inflation

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This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/fake-inflation-expectations-meet-good-and-bad-inflation?post=119521&uid=4798

You have to ask yourselves if inflation expectation increases amount to fake news. Here is a recent FRED chart of inflation expectations:



We know that this inflation expectation increase has failed in the past. It failed in 2013/14 with the bond tantrum. It failed in early 2016. It failed in 2012, and in 2011, and in 2010, and in December, 2007. That was a big, big fail. This is the most failed economic indicator ever devised! But people continue to push it as if it is truth. Maybe eventually it will be true, kind of like those who predict recessions every year will get it right now and then.

Here is the longer chart showing just how this indicator is always bullish, with results that are, well, just the opposite:

Dr.Lambert's Effective Demand Recession Indicator

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This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/dr-lamberts-effective-demand-recession-indicator?post=119438&uid=4798

There is a simple explanation of Edward Lambert's concept of Effective Demand. It is provided by Angry Bear blogger, Steve Roth.  This is just an explanation that we all can understand. Applying this guide to the real economy may change your thinking, and certainly will add an economic indicator to your arsenal.

Here are 5 points of the model:

1.Real GDP: During the business cycle, when real GDP goes up, so does Effective Demand.

2. Labor Share: When labor share rises, effective demand increases due to more relative power for household consumption demand. 

3.Capacity Utilization: When capacity is heavily utilized, then it costs more to produce goods.

4. Unemployment Rate: When unemployment declines, effective demand declines. At the full employment limit, it is difficult for the economy to produce more. Full unemploy…