The Actually Important Chart

Throughout the blogosphere, you are no doubt going to see this chart from Janet Yellen’s lauded speech on what is holding back the recovery.

Ignore it.

The actually useful and important chart from Yellen’s speech is this one:

Though it is accompanied by a head-scratching bit of astrology, stable nominal income expectations are extremely important to a stable macroeconomic environment. What you see from the chart above is exactly what you see in the famous NGDP chart; a central bank that let actual and expected nominal income crater, and then resume growth from the new, lower level. No catch-up at all. There is no great mystery to the slow nominal growth post-Great Recession. We need to stop pretending that there is.


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