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ion 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 sunday october 30 2016 bruegel and the the maximum acceptable level of private debt via reddit private sector debt matters and better data means better policy by alexander lehmann 27 october 2016 at bruegel the opening sentence private debt is emerging as a central concern in eu policy this is october 2016 more than eight years since lehman brothers hit the skids now they re getting concerned about private debt now in my third post on this blog 22 march 2009 i was talking about a solution to the problem of too much debt in the private sector and just about continuously since that time so bruegel says the eu is starting to get concerned about private debt why private debt can quickly morph into public debt so really what is their concern are they concerned that private debt is a problem for the economy or are they only worried that private debt may ultimately become public debt if the latter their focus is surely wrong for by the time there is a threat that private debt may quickly morph into public debt the problem is no longer newborn no longer a baby no longer a child the problem is maturing there is no easy way to deal with it at that point despite that and in the same paragraph with the words quickly morph we read the debt overhang has far reaching consequences lower household spending and weaker corporate investment and hiring this leads to a vicious circle where low growth and price deflation aggravate debt distress further that s extremely well said then they go back the other way again thrashing and flailing about and hitting all the wrong points private debt is one of the 14 indicators examined annually in the eu s macroeconomic imbalances procedure this process flags risks where a country s consolidated non financial corporate and household debt relative to gdp rises into what has been the top quartile of the historical eu wide distribution based on 2014 data the latest commission reports found the threshold of 133 per cent of gdp was breached by 13 member states okay so they see private debt as a problem and they re doing something about it they define a limit for acceptable debt the limit they define is based on the historical eu wide distribution in other words based on recent pre crisis experience to define a limit they look at how much debt they had just before they got in trouble and they say if you re over 75 of that much debt it s no good where does this arbitrary nonsense come from why do they think the level of debt they had in 2006 was okay and 75 of it is good it s the blind leading the blind and it s not only the eu according to the imf back in 2013 much of the empirical work on debt overhangs seeks to identify the overhang threshold beyond which the correlation between debt and growth becomes negative the results are broadly similar above a threshold of about 95 percent of g d p a 10 percent increase in the ratio of debt to g d p is identified with a decline in annual growth of about 0 15 to 0 20 percent per year no as i asked at the time do we really want to wait till things are that bad the focus of state of the art economics is to find the point where adding one more dollar of debt stops making gdp go up and starts making gdp go down what possible advantage could there be in that it can only be so that we might manage to come as close as possible to the threshold without crossing it that may be state of the art but it s not the state of the arthurian debt productivity has been declining for a long time the increase in gdp we get for each new dollar of debt has been declining for a long time increasing debt makes economic performance decline if this is true then why would we want to get close to the limit where the correlation between debt and growth becomes negative this is actually saying adding more debt is not okay if it takes away even a tiny bit of gdp but it is okay as long as it adds to gdp no matter how little it adds well it s not okay with me we need to stop debt accumulation when it starts to hinder growth this is how to define the maximum acceptable level of finance for our economy even banks and bankers these days call for limits on finance beware the limits must be placed not at the point where the financial sector starts to be hurt by finance but at the much lower point where the non financial sector starts to be hurt by it posted by the arthurian at 4 00 am 1 comments saturday october 29 2016 premonitions of recession employment growth declines before a recession posted by the arthurian at 4 00 am 0 comments labels predicting recession friday october 28 2016 not a pretty picture unemployment red at bottom black recession pretty reliable but posted by the arthurian at 4 00 am 0 comments thursday october 27 2016 donald trump makes me laugh and shake my head hillary just makes me shake my head posted by the arthurian at 4 00 am 0 comments wednesday october 26 2016 taylor s laundry john b taylor because the economy has grown from the start of this recovery at a pace no greater than the prerecession trend it has left a vulnerable gap of unrealized potential that can and should be closed with faster economic growth in several key ways the us economy resembles an economy at the bottom of a recession ready for a restart even though the unemployment rate has reached 5 percent the us economy resembles an economy at the bottom of a recession taylor says pretty much yeah i don t know if it s in my notes or on the blog here it is i wrote our last recession ended in mid 2009 according to nber dates at fred seven years ago and i ve read articles written by people apparently hungering for recession suggesting that after seven years of growth we are already due for another recession but the claim that we ve just finished up seven years of growth and now a recession is due it seems to me that s the ridiculous claim growth was what half what it should have been so don t call it seven years call it three and a half john taylor is calling it zero years he s a little bolder than i am note taylor s phrase even though the unemployment rate has reached 5 percent he is pointing out the evidence people have for saying we re well along in the recovery taylor of course is saying we are really not well along in the recovery the title of his pdf is can we restart the recovery all over again one could undermine the 5 unemployment argument by pointing out the decline in the labor force participation rate as taylor does correcting for that decline would increase the labor force by five percent he says i m thinking that would raise the unemployment number to 10 that s no recovery i agree with taylor s observation of our lack of recovery but i don t agree with his prescription my argument is always the same the problem is excessive reliance on credit in the private sector taylor does not have that kind of focus he is all wack a mole with tax reform and regulatory reform and entitlement reform and monetary reform and free trade agreements taylor doesn t have the cause of the problem he has a laundry list posted by the arthurian at 4 00 am 0 comments tuesday october 25 2016 here s a question answered search fred for ophnfb output per hour non farm business a measure of labor productivity three series turn up ophnfb prs85006092 and prs85006091 but only sometimes sometimes you get a list with only one item on it ophnfb for some reason they design software these days to give inconsistent responses maybe the reason is some kind of corner cutting to save money but it seems to me the reason is just pure stupidity well that s out of the way i hope it s not my stupidity it took me fifteen minutes to duplicate the list with three results so i could write this post when you re old as i am 15 minutes is a big chunk of time remaining the three series offer the data as an index 2009 100 as percent change at annual rate and as percent change from quarter one year ago if i start with the index i can get percent change from quarter one year ago easily i can also get percent change though not at an annual rate usually i just use the index in whatever form i need without a thought today for some reason there was a thought i can compare the percent change at annual rate series to the index in its percent change form and i can see whether they just multiply by four or if they do something more complicated to get the at annual rate thing so i divided the percent change at annual rate series by the percent change form of the index graph 1 nope not just multiplied by four they do something more complicated of course it s close to four it would have to be and maybe you could multiply by four and no one would ever know the difference but it wouldn t be right okay the dallas fed has a page that shows the calculation annualizing data i printed the dallas fed page as a pdf file two pages and made it available for download posted by the arthurian at 4 00 am 2 comments monday october 24 2016 some gossip about alan greenspan from thoughts on teaching economics after the crash at medium com by karl whelan professor of economics at university college dublin greenspan s model alan greenspan was not an academic he was a consultant who leveraged his substantial washington connections into an appointment as fed chairman and his positions on economics were very far from the mainstream i worked for alan greenspan from 1996 to 2002 and met him quite a few times he is a man of many talents but it s an understatement to say that his approach to economics was idiosyncratic it was an interesting combination of obsessive analysis of high frequency economic data and extreme right wing views picked up from his time as part of ayn rand s inner circle hard to believe as it may be the most powerful economist in the world held views that were very far from those taught in mainstream economics degrees from is yellen starting a civil war at the fed by monetary watch greenspan more or less ruled the fomc with an iron fist as recounted by frederick sheehan in his book panderer to power greenspan himself controlled everything about the fomc s messaging and he drafted the fomc statements that were to be issued after the meeting without any input from the committee even yellen herself who had served on the committee in the 1990s said being a fed governor was a great job if you like to travel around the country reading speeches written by staff posted by the arthurian at 4 00 am 0 comments sunday october 23 2016 change in debt and change in gdp if you take the ratio of two change in values the change in this divided by the change in that usually you get a graph with a few very large spikes and everything else too small to see i try to avoid graphs like that but sometimes you have to look here is the change in tcmdo debt relative to the change in gdp from fred graph 1 change in debt relative to change in gdp doesn t show me anything but one tall spike i ve been thinking about using the hodrick prescott filter to soften the changes in two change in series so i can look at the ratio of filtered values can t do hodrick prescotts at fred i brought the numbers into excel it s quarterly data but for extra smoothing i used the bigger smoothing constant that s a default for monthly data here s what i got graph 2 i still have that tall spike but instead of being a momentary phenomenon it looks like it lasted 20 years that s a little silly what s interesting though apart from the spike is that there seems to be a persistent upward trend from the 1950s to the present day apart from the spike and some possible wiggles i reduced the smoothing to a low number and took another look graph 3 the spike is still there now spread over only a few years and there are lots of little ups and downs probably related to recessions look how small the wiggle is between 2006 and 2009 that s the crisis that tall spike of 2001 is really something of an anomaly looks like there was a particularly small increase in gdp and a good size increase in debt at the same time in the source data i have the value 2 53 for the second quarter of 2001 665 07 for the third quarter and 9 25 for the fourth quarter that third quarter number is a fluke i deleted the third quarter value and left the cell blank in the spreadsheet the hp function reads it as zero and i changed the smoothing factor back to the number i started with here s how the graph came out this time graph 4 now we re getting somewhere there is a definite up trend with some wiggle to it for the whole period shown there are exceptional low...
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