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h 3 from november 2010 removing gdp from the debt to gdp calculation does not eliminate the tendency for federal deficits to rise during times of recession removing gdp from the calculation does not remove the effects of changes in gdp from the federal budget balance subtracting the primary deficit from the total deficit eliminated most of those effects that s what the smoothness of graph 2 tells me oh and by the way graph 2 shows a big increase in deficits in the 1980s an increase that began i m tempted to say in the 1950s posted by the arthurian at 4 00 am 2 comments wednesday june 17 2015 gentlemen start your deficits in the recent post jw mason writes here first are the overall and primary budget balances for the federal government since 1960 the primary budget balance is simply the balance excluding interest payments that is current revenue minus non interest expenditure the balances are shown in percent of gdp with surpluses as positive values and deficits as negative the vertical black lines are drawn at calendar years 1981 and 1990 marking the last pre reagan and first post reagan budgets the black line shows the familiar story the federal government ran small budget deficits through the 1960s and 1970s averaging a bit more than 0 5 percent of gdp then during the 1980s the deficits ballooned to close to 5 percent of gdp during reagan s eight years mason doesn t focus on reagan i stopped the quote there and it sounds like he does but he doesn t also he doesn t buy the familiar story but you probably know that here s what i see in mason s graph using a technique i got from jazzbumpa drawing trend channel lines if there s a proper technique for doing it i don t know i m just connecting low points for one channel line and connecting high points for the other graph 2 the familiar story describes the deficit trend as a flat stable trend at 0 5 percent of gdp in the 1960s and 1970s i don t see that i see a well defined downtrend an expansion of deficits that begins in the 1960s mason does not seem to dispute the familiar story he only says a different story is more important his story is about the red line rather than the black the primary balance rather than the overall balance i won t look at that today today i m just looking at the black line the overall balance and trying to figure out how anyone can claim to see small budget deficits through the 1960s and 1970s averaging a bit more than 0 5 percent of gdp let me add two more lines to the graph to represent that viewpoint graph 3 this is a much smaller channel it starts earlier but it is forced to end sooner in the early 1970s and it is already pierced in the 1960s by an expanding deficit mason argues that the increase in federal borrowing during the 1980s was mostly due to higher interest rate not tax and spending decisions i argue that the increase started well before the 1980s posted by the arthurian at 4 00 am 2 comments tuesday june 16 2015 inflation was still high from idiosyncratic whisk and look at what happened when the reagan era supply side policies replaced the demand side policies of the 1970s i think most people would be surprised to learn that nonfinancial corporate profits didn t top the 1979 level until 1992 after 12 years of the reagan and bush presidencies during a decade when democrats sponsored tax cuts and the new york times was against the minimum wage and these are nominal figures while inflation was still high during this period inflation was still high during the 1979 1992 period that s not the point of kevin erdman s post it s more like deep background but i focus on those words because this is the second time i ve seen that thought expressed in less than a week jw mason writes inflation was still quite high in the early 80s quite high is not a quantitative statement or maybe it is but you cannot divide something by quite high so it s tough to argue with mason it s a little easier to argue with erdman who says inflation was still high to me inflation was still high before the 1982 recession but not after graph 1 three measures of inflation the big drop is obvious maybe erdman is thinking over three percent is high inflation and under three percent is not then i guess maybe he could argue inflation was high until 1992 i guess inflation was way lower after 1983 than before 1983 using annual numbers figuring price level changes for 20 year periods for all three series and averaging the three prices rose 204 during the 1963 1983 period compared to 71 during the 1983 2003 period 71 is too much yeah but it is way less than 204 figuring 10 year periods prices rose 112 during the 1973 1983 period versus 40 during the 1983 1993 period again way less after 1983 prices rose less after 1983 than before a lot less if you want to say inflation was still high or even quite high after 1983 fine whatever but inflation was way less after 1983 than before oh and inflation came down a lot quicker than the federal funds rate graph 2 three measures of inflation again and the federal funds rate black well i thought i was done revising this post but then i found a bonus quote jw mason commented on the myth of reagan s debt at his old blog if we are comparing the 1980s to the 1960s and 1970s the denominator does not make much difference nominal gdp growth was roughly equal in all these decades for more recent periods the denominator has a bigger effect that s phrased in a way that i can check the numbers that s what i like nominal gdp annual percent change from ten years earlier year percent change 1960 81 1970 98 1980 166 1990 109 2000 72 2010 46 well ngdp growth in the 1980s 109 was more than it was in the 1960s 98 roughly equal is a crude approximation but i take mason s point okay and yes growth drops off in recent years so i have to accept this quote from jw mason but i don t have to like it the breakdown of data by decade is convenient but it smothers key facts for example it combines the low inflation of the early 1960s with the high inflation of the late 1960s it combines the falling from peak inflation of the early 1980s with the already having fallen inflation of the mid and later 1980s these facts are key because high inflation is at times a huge part of nominal gdp growth and mason is evaluating the growth of nominal gdp talking about data in terms of decades rather than in terms of trend paths lets generalizations arise that are more tidy than precise all of this matters to me because i have focused on inflation and i think i have a good feel for how inflation affects the debt to growth ratio but i have not considered the level of interest rates mason considers both and finds the level of interest rates the more significant factor it s interesting to me because if mason is right then maybe i m wrong that s always an interesting thing to find out posted by the arthurian at 4 00 am 1 comments monday june 15 2015 technology from technology in the medieval age agricultural tools the way the crops were grown changed in medieval europe when farmers changed from a two field crop rotation to a three field crop rotation beginning in the 8th century according to white 1962 charlemagne himself thought of this agricultural innovation under a two field rotation half the land was planted in a year while the other half lay fallow then in the next year the two fields were reversed under three field rotation the land was divided into three parts one section was planted in the fall with winter wheat or rye the next spring the second field was planted with other crops such as peas lentils or beans and the third field was left fallow the three fields were rotated in this manner so that every three years a field would rest and be unplanted under the two field system if one has a total of 600 fertile acres of land one would only plant 300 acres under the new three field rotation system one would plant and thereby harvest 400 acres but the additional crops had a more significant effect than mere productivity since the spring crops were mostly legumes they increased the overall nutrition of the people of northern europe this too the plow is considered to be one of the most important and oldest technologies developed in fact the history of the plow stretches back to the neolithic new stone age that began about 8000 bc in mesopotamia in the middle ages however the plow was radically improved and was used with multiple oxen teams this innovation facilitated the clearing of the forests of fertile northwest europe gies gies 1994 before this time because of the nature of the soil it was difficult to plow these fields and obviously this inability to cultivate these fields reduced the population of northwest europe after the redesign of the plow allowing the plow to plow the heavier and wetter soil of northwest europe there was a dramatic increase in agricultural productivity and subsequently the population of these areas finally from medieval technology pages horse harness the horse collar seems first to have been used in europe around the 8th or 9th century white p 61 this may have been a northern european development or as both white white 1962 p 61 and usher usher 1954 p 183 suggest imported from the east the horse collar rests on both the shoulders and the breast of the horse the traces and thus the traction points are over the horse s shoulders not high on the horse s back this allows the horse to develop much more power without putting any pressure on its neck use of the horse collar seems to have spread rapidly though not uniformly through european agriculture and heavy freight hauling though in neither case did the use of oxen ever totally vanish langdon 1986 pp 19 20 oxen were cheaper than horses but horses are 50 faster than oxen and can work more hours during the day but they were no stronger than oxen in total pulling force were more difficult to care for and required specialized and more expensive food nevertheless by the late middle ages the use of the horse in agriculture became very common gimpel 1976 p 35 three field rotation an improved plow and the horse collar i love this stuff credits the technology in the medieval age page is under the supervision of dr patricia backer the chair of the department of technology and the department of aviation at san jose state university in san jose ca that page links to the horse harness page the medieval technology pages horse harness page is maintained by paul j gans copyright paul j gans 1997 2002 posted by the arthurian at 4 00 am 0 comments sunday june 14 2015 recap that stimulus money the guy says shovel ready jobs two trillion dollars he says that money went all around the world they didn t spend any of it here i m not sure exactly what the guy s complaint is as of 13 june 2015 two trillion dollars zero point seven eight seven trillion more like 787 billion two trillion would have been a good number if they spent the whole thing in about 365 days but they didn t plan to start spending it for a year or so no understanding of the word urgent no understanding of the word stimulus anyway i don t know where the guy got his numbers from i do know he listens to rush limbaugh oh and if you want to find out where they spent it it s easy enough to find out posted by the arthurian at 4 00 am 0 comments saturday june 13 2015 clearly marko says at jw mason s new blog in comments on the myth of reagan s debt marko writes the counterfactual i d like to see is what would have happened if debt gdp ratios both public and private had been held constant at their 1980 levels that would at least define a sustainable system he adds this thought clearly this would mean new debt growth would have slowed and or interest payback would have been increased both of which would have subtracted from aggregate demand clearly but only if we hold everything else constant i don t want to do that i want to reduce debt growth and do one other thing i want to increase the quantity of spending money i want to reduce debt and increase the quantity of spending money i ve showed you the ratio a thousand times graph 1 dollars of total public and private debt for each dollar of spending money obviously it can be done fdr did it plus it s not on the graph but it has been happening again since 2009 mostly by accident i think it also happened in the early 1990s without causing a depression trouble is we can t increase spending money because it gets parlayed into a ton more debt because we have the financial infrastructure to do that so we need to regulate that infrastructure and or discourage financial innovation and or reduce the demand for new loans and or just start paying off old loans faster if we design policy so people pay off old loans faster debt will increase more slowly debt might even decrease but as marko says that subtracts from aggregate demand that s okay think of the subtraction from aggregate demand as a way to fight inflation an alternative to jacking up interest rates again like the fed is getting ready to do i don t like jacking up interest rates jacking up rates is a way to reduce growth and create recession people have been talking for six years now about how interest rates should be at negative five percent or something like we can t get there but we damn sure can t resume the policy of jacking rates up until we get recession we need a better way to fight inflation we have a better way we have the paydown of debt we just need policy to encourage and support the idea instead of working against it if we can stabilize the debt per dollar ratio we have the policy tool we need for a golden millennium we want to seek the best level of debt per dollar the level that best promotes growth and we want to keep it there it s not difficult posted by the arthurian at 4 00 am 1 comments friday june 12 2015 i really don t know what this is bank s net interest margin for world it was almost zero then suddenly four percent looks like it was zero until 1996 but it was a little above zero there is data there after 1996 it jumps way up all of a sudden i don t like big mysterious changes see the first word of the series title bank s one bank belonging to one bank one global bank that can t be right in the future maybe but not yet so i don t know what this graph shows i did a quick google found a quick comparison of interest margins for the largest u s banks from forbes dated 11 september 2014 just a few months back here is the opening sentence net interest margin figures for all banks in the u s have been on a steady decline over the last three years as a direct result of the low interest rates being maintained by the federal reserve since the economic downturn of 2008 forbes is worried about a decline that doesn t stand out on the graph i think they are making an argument without really having one their evaluation seems one sided what i want to know is what law was changed to let that thing jump up so suddenly after 1996 posted by the arthurian at 4 00 am...
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