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tional expectations theory2life prac spoiler tips vin s read more faq s image host a very nice menu www w3 schools bloogger help image test and t2 blogger sentral html color codes google translate link within a page supreme court jester dave ross 1 dave ross 2 organize your stuff interesting jim kardi teknomo numerical ignorance mental workout g scaled data g normalized data tufte data analysis arthurian website about me contact labels real is a calculation 1 2 3 4 5 6 7 1966 1970s growth 1986 2000 2013 revision 400k smoothing a call for better argument a little r n r accelerated repayment of debt accidental discoveries adjusting debt for inflation artish b is greater than a b h finte behavioral ec best put downs bullard s earthquake c d of wealth calculating labor share civ civilization coinage coping cost and productivity cost push cost push inflation credit efficiency crisis chronicles cycle of civilization debasement debt debt and context debt and inflation debt and recovery debt bulge debt good and bad debt is not credit debt productivity debt to gdp debt to gdp in comments def credit def debt def economic activity def financial cost def gdp def general equilibrium def inflation def inside money def investment def issue and reissue def laffer limit def outside money deflation demand pull inflation disarray dpd echoes economic forces economics v the economy eroc erosion of debt evolution of the excuse expectations factors failure s embrace fallacy of composition fcm fed policy federal spending feedback loops final spending financial cost financialization five words five digit years forget about debt fpi fred free banking era full disclosure fun with the mpc gang8 gds gold shortage gresham s law gross domestic spending growth rate calc growth phase growth historical revisionism hoarding hodrick prescott household debt hover craft how to pay for it humor because you might not know if i didn t say i couldn t sleep iceberg inflation introduction is it ego captain jerry says krugman laffer curve limits long and variable loops malaise matched set fekete math problems medium of account military spending milton friedman mmt money multiplier more debt than money is policy motives moving average new tools of policy non linear not only household debt oil parameters for debt pfi policy predicting recession price controls printing vs spending problem x productivity questions r reading and writing red and green reduction reviews scott sumner sequence 2 serfdom simulacron simulated evidence slack special report spreadsheeting stagflation standard deviation star trek stimulus sumner symmetry in deception taxes taylor rule the difference between debt and credit the economy is transaction the k r shift the long decline the supply side the tint knob they don t know timeline tongue in cheek tot ulc umic unsustainable urgency verdoorn waste fraud abuse withering shoots zoho the new arthurian economics copyright 2010 2018 arthur shipman tuesday may 31 2011 quick and dirty tcmdo per gdp 1960 1975 following up on unfinished thoughts total debt relative to nominal gdp a general uptrend from 1960 to 1965 while the cpi increased 9 percent a general downtrend from 1965 to 1969 while the cpi increased 16 percent a general uptrend from 1969 to 1975 while the cpi increased 46 percent can that be right a general uptrend overall while the cpi increased 82 percent inflation as a solution to the debt problem is at best unreliable posted by the arthurian at 6 21 am 0 comments the limbo cfpy it occurs to me that if i take the limbo graph eliminate the early years where there s no data something i have only started to think about in the past few days and take a look at percent change from year ago values i ll get a look at the varying slope of the graph this could be useful because the slope is related to economic performance graph 1 there ya go ah but what do the tea leaves say that is the question first thing i notice is a trend of peaks starting with the first peak after 1960 running to the highest peak in 1983 there are four peak points that lie on a straight line five if you count the low high point of 1971 this rising trend indicates some kind of increasing severity perhaps next thing i notice is the peaks seem to be associated with recessions almost without fail at the right end we have the spike associated with the paulson crisis tallest thing on the graph probably the height of a point indicates not so much severity as the strength of the federal response to recession on the other hand note that before 1974 the entire trend line is below zero this means that the federal debt was growing more slowly than everybody else s debt generally 5 to 10 percent more slowly until 1974 the private economy s strength gave out with that 1974 recession i also observe a peak in 1991 followed by a long and atypical decline lasting until 1998 or so in the middle of that decline there are two breaks at perhaps 1993 and 1996 which make the decline something of a zig zag i think something happened in there to make this decline atypical i think if this part of the trend was typical the 1993 1996 downtrend would have been an uptrend and maybe the 1998 low would not have been as low as it turned out to be graph 2 come to think of it the 1993 1996 period was when the federal budget was moving toward balance graph 3 and just before that there was an unusual increase in the growth of m1 money in the early 1990s graph 4 which followed on the heels of a significant decline in the growth of debt that began in the mid 1980s graph 5 all in all creating a noticeable swoop in the debt per dollar graph from 1990 to 1994 just before the good years just paving the way for the good years that began in 1995 good years that permitted the federal budget to be briefly balanced before things went bad again yeah the slope of the limbo is related to economic performance posted by the arthurian at 4 00 am 0 comments monday may 30 2011 unfinished thoughts deflation in a time of excessive debt is the worst possible solution because debt does not deflate with income inflation in a time of excessive debt reduces the debt problem because debt does not inflate with income the notion that inflation can be used to solve our debt problem is a tempting one but it depends on our ability to increase the quantity of money without increasing the accumulation of debt if debt grows as fast as money or faster the debt problem is not resolved capiche our most significant inflation occurred between 1965 and the early 1980s as the blue line shows the red line shows that total debt increased continuously relative to money during that period in other words debt grew so fast in those years that the debt per dollar ratio was not reduced despite the printing of money enough to cause all that inflation the imbalance between money and debt was not corrected despite all that inflation suppose we look at it another way the existing accumulation of debt becomes easier to bear after a period of inflation that is paul krugman s argument right here s my argument the accumulation of debt becomes easier to bear after inflation if and only if the accumulation of debt does not grow faster than prices go up the increase of prices is given by the consumer price index if i divide total debt by the cpi and the trend line goes down then debt grew more slowly than prices went up and inflation solved the problem but if the trend line goes up then debt grew more rapidly than prices went up and inflation did not solve the problem even during the inflation of the 1970s total debt increased more quickly than prices went up inflation did not solve the debt problem krugman s solution was tried and failed in the 1970s oh but i have forgotten to allow for the increase of real output very well then let us look at total debt relative to nominal gdp so that we allow for both real growth and price inflation at the same time if the trend line continues to increase during the inflationary period then again we must say that krugman s solution has failed the rate of increase was noticeable slow in the 1965 1980 period but the trend line continues upward debt increased faster that real output and the price level combined in other words the inflation of those years did not reduce the burden of debt in our economy but we didn t really need to look at another graph to know it we knew it already because the 1970s were sluggish not golden and the 1980s were not much better posted by the arthurian at 5 04 pm 2 comments islamic finance prompted by an article on islamic finance in the financial times the us moves are under way to lower barriers changes in tax law are being considered says aline van duyn many years ago i learned that the church in europe forbade charging interest on loans in the middle ages and that islamic law forbids it still to this day my reaction then as now is that these two religious institutions agreed on the trouble interest and debt can bring upon society and agreed in their reaction against it in europe or so i have read somewhere the church s rule opened the door for jews to become europe s bankers and then it seems to me the troubles that arise from excessive interest became in the practical but small minds of christian europeans of the time troubles arising from jews i m not making this up i m just putting fragments together whether any of them are true i cannot say but lacking any other story i take it for history it was longshanks king of england in the braveheart movie who expelled the jews from england because nobody liked them because of the banking thing centuries before hitler little fragments i know nothing of islamic law but islam arose after the fall of rome and i can imagine that concentrations of wealth and income were far greater then than now and interest was just that much more of a burden and two religions had the same reaction to it posted by the arthurian at 4 00 am 2 comments sunday may 29 2011 krugman s graph from paul krugman s inflation and debt wonkish may 28 2011 10 44 am household debt as of personal disposable income the rapid increase of household debt between 1950 and 1965 created the demand that drove the golden age economy the lack of increase between 1965 and 1985 brought the golden age to an end and produced a listless economy the large deficits and optimistic expectations of the reagan era gave consumer spending a boost in the mid 80s consumer debt growth slowed then in the late 80s and continued at a slower pace for a decade probably because the tax deduction for interest expense was eliminated rapid debt growth resumed after 2000 perhaps in part because of pent up demand from the previous decade and then the inevitable crisis changed everything posted by the arthurian at 9 38 pm 1 comments labels 1966 severity the text following graph 3 of the earlier post today boldly presumes that the 1974 recession was substantially more severe than the 1970 and 1980 recessions following a link from jzb s gdp revisited part 1 to calculated risk turns up this graph the container article introduces gdi as the income measurement version of gdp gdp is the output measurement version income equals output but measurements are imperfect the graph shows both gdi and gdp and there are discrepancies the graph is constructed as a percent of the previous peak in both gdp and gdi this shows when the indicator has bottomed and when the indicator has returned to the level of the previous peak if the indicator is at a new peak the value is 100 for my purpose here i m looking at the bottoms the low points the graph shows clearly that going back to 1959 the 1974 recession was substantially worse than any but the recent great recession at least when measured by the gdi the 1982 83 recession comes in a distant third the 1970 recession was among the mildest the graph presents information in an unusual way but i think it is a great way to show the severity of recessions posted by the arthurian at 12 00 pm 2 comments the limbo before 1980 graph 1 this is graph 9 from mine of 22 may this is graph 9 from mine of 22 may if you follow the fast dropping trend line from the start the fall slows down gradually before ending after a few wiggles in 1980 or 81 after that there were new policies in place and the trend line looks different so let s just look at the first part of the thing graph 2 the first half of graph 1 boring let s zoom in closer to 1965 1981 graph 3 the last half of graph 2 oh okay the falling trend line is interrupted by the near recession of 1967 and again but less by the actual recession of 1970 and again pretty severely by the pretty severe recession of 1974 but then the 1980 recession seems to have no effect but no that s not true a response to the 1980 recession is visible in the change that occurs between 1979 and 1980 on the graph so that s three recessions out of three in the 1965 1981 period plus one near recession i think we can say with confidence that recessions have some effect on the trend line of this graph and that only makes sense because the trend line goes down when non federal debt private debt say is growing faster than the federal debt and that doesn t happen during recessions private debt grows faster when the economy is growing federal debt grows faster when the economy ain t growing so the trend line of these graphs is in a sense an indicator of economic growth the greater the down slope the better the economy the greater the up slope the worse the limbo after 1980 graph 4 the last half of graph 1 now here is a roller coaster it doesn t even look like the same data there is a general and quite severe uptrend from 1980 to 1995 this would indicate that economic growth was not particularly good but that doesn t seem quite right growth was certainly better then than in the 2007 2010 period where again there is a severe uptrend so let me take another look there is a severe uptick associated with the 1982 recession okay this fits the rule that the greater the up slope the worse the growth then there is a flat spot 1983 1989 people generally say the economy was quite good in those years note that the fiscal policy of the time called for abnormally large federal deficits by the standard of that time in other words there was a conscious policy effort that drove the trend line up and the fact that the trend line goes up so gradually in those years says that private debt grew very nearly as fast as the federal debt well there ya go that rapid increase in private debt was the source of the economic growth of the period next on the graph from 1989 to 1994 there is a long and dramatic uptrend in federal debt relative to non federal but not much of a recession this up trend is due in part to continued federal deficits but i think it is also due in part to reduced growth of private sector debt a result of tax law changes that i have noted in previous posts in any event by 1995 we reach a high point in th...
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