"Powerful evidence that the big problem is demand, not structural -It’s easy to find a correlation between two macro variables, as the same sort of factors (inflation, output growth, interest rates) tend to affect all sorts of financial and macro variables." Sumner says.
“…Regressions between 2003 and 2010 of the daily percentage change in the S&P 500 on the TIPS spread measuring inflation expectations show little correlation between asset prices and expected inflation from 2003 until early 2008. However, since early 2008 the correlation between changes in stock prices and in inflation expectations has been strongly positive and statistically significant.” Glasner says
“…stock prices have had a positive correlation with expected inflation since 2008, strongly suggesting that aggregate demand is at the heart of our problems." Krugman says.
The below picture is the time-varying correlations S&P Index 500 v DGS10-DFII10 as:
All of them are sing their beloved Kenyan aggregate demand as to their Parrot mantra! So what we see in here Oh-God- we’re –all-gonna -live Oh-God- we’re –all-gonna -live. I say.
YSK-W
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