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rce data led to a downward revision to the dsr of about 1½ percentage points from 1980 through 2002 and the lion s share of this revision was due to the lengthening of our assumptions about remaining maturity on these loans even so the debt service ratio today is half or less than half what it was back when that data was still called the debt service burden that s a very large decrease especially given the very large increase in outstanding debt which occurred during that same period whatever i got the result i got and that s what i got do with it what you will by arts edsr47 dataset regression result year tdsp of dpi my estimate 1947 5 696 1948 5 887 1949 6 118 1950 6 276 1951 6 337 1952 6 502 1953 6 739 1954 6 899 1955 7 071 1956 7 289 1957 7 429 1958 7 543 1959 7 688 1960 7 938 1961 8 023 1962 8 134 1963 8 333 1964 8 423 1965 8 519 1966 8 519 1967 8 449 1968 8 467 1969 8 582 1970 8 508 1971 8 521 1972 8 678 1973 8 796 1974 8 887 1975 8 750 1976 8 875 1977 9 152 1978 9 506 1979 9 921 1980 10 478 10 312 1981 10 348 10 559 1982 10 435 10 934 1983 10 383 11 021 1984 10 671 11 185 1985 11 463 11 483 1986 11 883 11 620 1987 11 936 11 522 1988 11 687 11 355 1989 11 709 11 510 1990 11 609 11 509 1991 11 362 11 400 1992 10 633 10 948 1993 10 387 10 668 1994 10 532 10 623 1995 11 095 10 963 1996 11 300 11 076 1997 11 321 11 179 1998 11 170 11 124 1999 11 455 11 255 2000 11 766 11 506 2001 12 373 11 612 2002 12 369 11 390 2003 12 246 11 436 2004 12 206 11 638 2005 12 583 12 424 2006 12 737 13 027 2007 13 033 13 495 2008 12 907 13 157 2009 12 331 12 663 2010 11 289 11 878 2011 10 622 11 076 2012 10 063 10 453 2013 10 113 10 362 2014 9 905 10 044 2015 9 927 9 896 2016 9 998 9 864 2017 9 934 9 827 2018 9 717 9 758 at october 26 2019 no comments email this blogthis share to x share to facebook share to pinterest labels debt service before 1980 thursday october 24 2019 that old sumner post again sumner s 2012 post at money illusion comes up again debt surges don t cause recessions this time the comment by woj the use of credit debt instead of money income savings has an extra cost associated with the interest payments as the aggregate amount of debt and interest rises the percentage of income used to pay interest costs or pay down debt also rises lowering the amount available for consumption investment sumner replied woj you said as the aggregate amount of debt and interest rises the percentage of income used to pay interest costs or pay down debt also rises lowering the amount available for consumption investment this is simply factually wrong every debt payment is money received by someone else see what sumner does here he lets the circular flow run just long enough to make me think the money i pay against my debt is income to my creditor 1 note that he doesn t count anything else that happens during that moment of time the other lending and spending and earning and repayment of debt and he doesn t call the payment income to the creditor because it isn t income to the creditor he s not stupid but he wants me to think it is income 2 3 that would be wrong as positivemoney points out when you take out a loan new money is created when you pay down your debts the money that leaves your bank account doesn t go to anyone else it just disappears this is because loan repayments are just the opposite process to money creation sumner says every debt payment is money received by someone else well of course they receive it but they can t spend it they have to do their accounting they use the money to offset the money they created by lending it to you the one cancels the other the payment cancels the debt money created by fractional reserve lending is destroyed by repayment of debt not only do you not owe that money anymore it doesn t exist anymore nobody gets to spend it nor is it income sumner is engaging in pure deceptive bullshit from truthout government debt and deficits are not the problem private debt is by michael hudson march 2013 the problem is private debt the problem is the carrying charges on this private debt and the fact that debt service is eating into personal income and also business income to deflate the economy michael hudson says the same that woj says and positivemoney and me and so do karen dynan kathleen johnson and karen pence of the federal reserve board s division of research and statistics in recent changes to a measure of u s household debt service from 2003 when a large share of household income is devoted to debt repayment households have fewer funds available to purchase goods and services what was it sumner said this is simply factually wrong i don t like to use the word liar but i think in sumner s case it might be appropriate from the private debt crisis by richard vague at naked capitalism september 2016 when private debt is high consumers and businesses have to divert an increased portion of their income to paying interest and principal on that debt and they spend and invest less as a result that s a very real part of what s weighing on economic growth after private debt reaches these high levels it suppresses demand richard vague says the same that woj says and michael hudson and positivemoney and dynan and johnson and pence and me if we re wrong sumner convince me of it don t bullshit me and hey i don t jump to conclusions but you are slowing me down i ve been thinking about what you said for seven years thinkin maybe you re right and i have things wrong but you are the one who is wrong scott sumner stop wasting my time notes 1 the time lag between making a payment and receiving it may be near zero today this was not always so during the historical period when the financial sector grew large enough to become a source of economic problems computers were still only toys see float money supply at wikipedia 2 sumner lets the circular flow run a little long so that my most recent payment on my debt has time to be received by the lender and we can imagine it to be the lender s income but sumner doesn t count anything else that happens during that extra moment of time if for example the overall trend is that debt grows faster than income as from 1947 to 2008 then a preponderance of the annual data will show evidence of that trend so will a preponderance of the quarterly data now you can take one of those quarters and extend it just long enough for your lender to receive your most recent payment on your debt then immediately stop the clock and this is just what sumner has done but what goes into the extended quarter must come out of the following quarter so in the big picture such manipulations change nothing if you take the whole history from 1947 to 2008 and break it down to a sequence of brief moments each just as long as sumner s extension in the preponderance of that data you will still find evidence of the same trend that is visible in the annual and quarterly data and in the data as a whole unless like sumner you look at only one of those brief moments sumner s manipulation changes nothing this has been eating at my brain since 2012 i finally have an answer 3 the interest portion of my payment is income to the lender but the principal portion is not however the interest is income to the financial sector not to the productive sector of the economy at october 24 2019 no comments email this blogthis share to x share to facebook share to pinterest labels attitude tuesday october 22 2019 mollifying america i m in the middle of something important here drinking coffee and making graphs but i have to interrupt myself because old mother google is at it again it s almost drug take back day they offer social insights like that far too often if they re gonna do that they need a button on their search page so you can send them a message what are you my mother and if it s so damned important why do we have to wait four days to take the stuff back it s all nonsense and gibberish dressed up like little red riding hood they seem to want to play the walter cronkite role mollifying america with their little one liners i m not mollified i m horrified and i think it s creepy you ll probably focus on today s creepy message and say it s good they re concerned about drugs sure whatever but shouldn t it be it s almost drug take back day with a hyphen in there you know a dash i m not complaining that they re concerned about drugs i m complaining that they are wearing it on their sleeve uh excuse me a moment i have to check something yeah that on the sleeve and yes it was google i checked with the one i m complaining about about the on the sleeve thing that s part of the irony of what s going on here the other part of the irony is that the google search page does not have beliefs values emotions or sentiments i m just dealing with the search page not with the people who work at google yes i m sure the people who work there have beliefs and values and emotions and all that shit that s not the point i m sure there is a whole department at google where it s their job to deal with beliefs and emotions and values and sentiments the bevs department but what that means is it s their job the shit we see on our screen those one line bevs it s not from the heart it s just their job sure lots of those people care about lots of those issues but not all of them care about all of those issues so why do they expect me to care about all of those issues and why do you object so strongly when i happen to complain about one of their one liners me i don t even use the word issues stop putting that shit on my screen go to church and pray about it or donate money or volunteer your time do what the fuck you want but stop putting that shit on my screen see it wasn t about drugs was it at october 22 2019 no comments email this blogthis share to x share to facebook share to pinterest establishing parameters for debt originally posted 18 november 2016 at nae how much economic growth can we get by adding a dollar to total debt not much graph 1 change in gdp relative to change in debt and the hodrick prescott trend line not much but it does vary the high point was back in the 1960s and 70s on average we added 60 to 70 cents to gdp for every dollar we added to tcmdo debt that s twice as good as we ve done since the mid 80s as the red line shows i m only looking at the old normal economy before the crisis we can say the 1960s and 70s show the best performance the highest level reached by the red line on graph 1 but after about 1968 that line is already going downhill economic performance deteriorated in the 1970s so let s just say the 1960s then and forget the 1970s but the great inflation started in 1965 so forget the second half of the 1960s let s say that the best performance on graph 1 is from 1960 to 1964 in those years we gained 60 cents of gdp for every new dollar of debt and the trend in those years is upward not downward and not turning downward why does the ratio on graph 1 vary it varies because debt is a drag on growth having debt is a drag on growth it s adding debt that boosts growth but adding debt increases the debt we have it s a conundrum we need to keep total accumulated debt at the level that gives the most gdp for each new dollar of debt graph 2 total public and private debt as a multiple of gdp in the years of its best performance 1960 to 1964 total debt was about one and a half times the size of gdp in all of the 1960s and 70s really where the red line runs high on graph 1 total debt was about one and a half times the size of gdp together these graphs tell me that we had the best economic performance when total debt was about 1 5 times the size of gdp each new dollar of debt added the most to gdp in the years when total debt was half again the size of gdp that s not just the federal debt by the way these graphs show the federal debt and everyone else s debt added together there is something to be said about public versus private debt but we can t see it on the above graphs we have to separate public debt from private and compare the one to the other this next graph takes the debt we ve been looking at tcmdo at fred and separates the federal debt from all the rest from the debt other than federal call this other debt non federal the graph shows non federal debt relative to federal graph 3 non federal debt as a multiple of the federal debt in the years 1960 to 1964 our years of best economic performance non federal debt runs between two and three times the size of federal debt after 1964 there was never again so little non federal debt we get the most output from an increase in debt when we have about 1 50 of debt for every dollar of gdp and the best distribution of that debt is to have non federal debt between two and three times the size of federal debt so for one dollar of gdp we want 40 to 50 cents of federal debt and 1 00 to 1 10 of debt other than federal these are ballpark targets for maximizing economic growth graph 4 targets for federal and non federal debt to gdp ratios at october 22 2019 1 comment email this blogthis share to x share to facebook share to pinterest sunday october 20 2019 debt service interest principal red the interest portion of household debt service blue the repayment of principal portion of household debt service since 1980 graph 1 components of household debt service principal blue and interest red as of dpi wow at october 20 2019 no comments email this blogthis share to x share to facebook share to pinterest labels debt service before 1980 friday october 18 2019 just ask fred the larger the debt the larger the burden as households need to pay more interest on a larger principal too many people talk about interest rate increases too few talk about increases in the size of accumulated debt as a private sector cost thanks fred at october 18 2019 no comments email this blogthis share to x share to facebook share to pinterest wednesday october 16 2019 to jackie deanna will jan randall jon and kevin in google i asked why was the economy slow in the 1970s to see what people think other people asked let me repeat that one the economy of the seventies was terrible dubbed with an oil embargo and a mix of other problems led the american nation to an almost depression state the energy shortage was the start followed by high unemployment and inflation us history economics of the 1970 s omg 1 i never saw the word dubbed used that way and i don t think it s right 2 a mix of other problems that s not an explanation 3 an almost depression state what i was there yes new york city almost went bankrupt and yes farmers were ploughing their crop into the soil to reduce their costs but the main problem that policy was addressing was inflation and policymakers addressed it by creating recessions to reduce inflation by slowing the economy 4 the energy shortage was the start no it wasn t the start 5 the energy shortage was the start followed by high unemployment and inflation no the rising price of oil was a response to inflat...
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