Profits are Maximizing at the Effective Demand Limit

When Keynes wrote about Effective Demand in Chapter 3 of General Theory… he tied the limit of effective demand to the maximization of profits. Currently I see the economy reaching the effective demand limit by the end of 2014. Is there a sign that profits are maximizing?


Here is Gina Martin Adams of Wells Fargo & Co. from an article at Bloomberg Businessweek.


“The decline in non-financial EBITDA margins is “sending something of an ominous signal” that may be followed by a peak in net-income margins, she wrote in today’s report. “Peak margins were a good indicator of impending recession in each of the last cycles,” she wrote. Sales growth will have to pick up considerably in order to ease concern about margins, she said.”


Time is running out on the bull market.


 

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