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Professor Phil Powell19 September 2014

The Alliance

UN

EMPL

OYM

ENT

4.5%

5.5%

INFLATION2.0% 4.0%

SUPPLY SHOCKLess Oil Output

Product ShortagesJob Furloughs

Reverse Bottlenecks

UNDEREMPLOYEDExpenditures DownReduced Confidence

Market Fear

Stimulus Policies

OVEREMPLOYEDExpenditures Up

Irrational ExuberanceLabor Shortages

Retrenchment Policies

EXPANDING CAPACITYPlentiful Inputs

Productivity GrowthExpanding Labor Force

Run Surpluses

NORMALECONOMICACTIVITY

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 NowGDP Growth Rate 3.8 3.3 2.7 1.8 -0.3 -2.8 2.5 1.6 2.3 2.2 4.2Unemployment Rate 5.5 5.1 4.6 4.6 5.8 9.3 9.6 8.9 8.1 7.4 6.1Inflation Rate 2.7 3.4 3.2 2.8 3.8 -0.4 1.6 3.2 2.1 1.5 1.7Interest Rate 1.4 3.2 4.7 4.4 1.4 0.2 0.1 0.1 0.1 0.1 0.0Public Spending Growth Rate 1.6 0.6 1.5 1.6 2.8 3.2 0.1 -3.0 -1.4 -2.0 1.4Labor Productivity Growth 3.2 2.1 1.0 1.5 0.8 3.3 3.3 0.0 0.9 1.2 -1.4Corporate Profit / GDP 8.7 11.0 11.7 9.7 6.6 7.7 9.8 9.0 10.8 11.0 10.6S&P 500 Annual Return 9.0 3.0 13.6 3.5 -38.5 23.5 1.5 0.0 13.4 29.6 11.1

CorporateProfit

StockMarket

EconomicActivity

JobMarket

Leading Indicator Lagging Indicator

FUTURE EXPECTATIONSCorporate Cash

BusinessInvestment

EXUBERANCECYCLE

PersonalIncome

ExpectedInflation

Rate

MarketInterest

Rate

Real Interest

Rate

Deficit Spending

Private Savings

$

$

Business Investment

(+)Cash Supply

(-)

Money Supply

Bankslend cash

(0) if trust(+) if no trust

The Haves

The Have Nots

ACCESS TOOpportunity

EducationTechnology

Falling WagesGlobal Irrelevance

Democratic Majority

Rising WagesExcess Global DemandDemocratic Minority

Institutional Stability Economic Innovation