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the new arthurian economics mmt the new arthurian economics challenging the premisses newer posts at econcrit start with the debt problem three views of it and the most important thing here s a longer look at the debt problem here s a short one on economic policy some surprising trends and a few unusual policy recommendations how d we get into this mess read policy venn and policies of the venn overlap still with me read a matter of life and death and for an overview download my 12 page pdf art s vigor page debt accumulation two new versions of an economic model showing how accumulating debt hurts economic growth 1 jerry s stand alone php version 2 my googledocs file mine brings up a preview window click the use this template button to open it introductory post google translate blog archive 2018 31 january 31 there is one thing are you high seeing past the aberrations in debt to gdp where we stand shiller what drives these decade long swings in c an interesting footnote on the federal debt on raising interest rates the forgotten crash 1966 you wanna count what my how the story has changed interest cost by sector dolts for better theory keynes on excessive finance non financial in name only repetition helps anna zabai of bis on household debt us population back to 1929 households and hedge funds the eye that looks ahead to the safe course is cl two sides to every story not investment advice labor share as index and as percent inequality is a symptom wages and salaries arising from government employment never confuse them again tell me there s no price fixing going on here labor share there may be more here than meets the apparently they really do have economic concerns desire for wealth as such that is for the apparently i m out of the loop this goes all the way back to sumer in the third the point of maximum gain 2017 274 december 31 november 26 october 21 september 23 august 27 july 21 june 17 may 21 april 13 march 25 february 25 january 24 2016 318 december 26 november 20 october 30 september 27 august 29 july 17 june 30 may 24 april 30 march 30 february 30 january 25 2015 283 december 7 november 11 october 21 september 23 august 26 july 27 june 26 may 30 april 25 march 28 february 27 january 32 2014 374 december 25 november 25 october 26 september 30 august 34 july 35 june 32 may 34 april 33 march 35 february 28 january 37 2013 412 december 33 november 31 october 35 september 32 august 33 july 36 june 31 may 36 april 39 march 40 february 31 january 35 2012 476 december 38 november 35 october 51 september 41 august 35 july 39 june 37 may 31 april 38 march 36 february 44 january 51 2011 571 december 44 november 38 october 41 september 53 august 54 july 52 june 50 may 45 april 54 march 46 february 37 january 57 2010 361 december 51 november 43 october 47 september 43 august 35 july 39 june 31 may 9 april 8 march 12 february 23 january 20 2009 79 december 17 november 10 october 14 september 20 august 3 july 7 june 4 april 1 march 1 february 1 january 1 links the 12 pages pdf html scribd money as credit paul krugman john mason gavin kennedy crisis timeline 1 crisis timeline 2 statistical abstracts measuringworth bea economic accounts bls inflation jobs flow of funds debt st louis fed fred money stock 1947 58 economagic usgovernmentspending top tax rates recession dates corp taxes 2006 irs tax data pk sources historicalstatistics org historical charts perot charts mark wieczorek the secret economist econompic john williams sgs crystal bull aquinum s razor flavianopolis william f hummell ecometry the l curve businomics blog on banking crises cybereconomics tim duy like a father to me worthwhile canadian the skeptical optimist nextblog better of thought action the troublesome economist the candid blogger blended purple frozen arctic tundra truth addicts anon jbpeebles mayday books dredd blog dolor s rants the 40 year old freshman thinking on the margin redonomics broad oak unsettling economics irrational 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 showing posts with label mmt show all posts showing posts with label mmt show all posts monday november 15 2010 a look at the debt problem pretty much everybody is focused on spending cuts and balancing the federal budget everyone sees the federal debt as a problem but for thirty years or more we have been unable to solve the debt problem to me this suggests that something is wrong with our solution so i thought it time to take another look at the debt the size of it people say the massive government debt is a problem i agree and yet private debt is four times the size of government debt graph 1 shows public and private debt as shares of total u s debt against a background showing recession years graph 1 the portions of total debt the red line that starts high drops in a sharp v during world war ii then rises again and ends high is private debt as a percent of total u s debt private debt is very high government debt is low by comparison the black line that starts low rises to a peak during world war ii then drops off and ends low is government debt as a percent of total u s debt that s federal state and local government debt combined if the debt is too big and there can be no doubt it is too big private debt is by far the biggest part of it if we reduce government debt to zero 80 percent of our debt problem remains numbers for the graph come from different sources older and newer this is why the red and black trend lines both have mis match areas from the mid 50s to 1970 the cost of it if the federal debt was by some magic totally wiped out we might see a 5 3 reduction in our taxes that s all it takes to cover the interest on the federal debt by contrast if corporate interest costs were reduced by half that would free up enough corporate revenue to give every employee a 30 raise debt drives up cost and reduces profit in the private sector and competes with labor for income the numbers graph 2 total debt in billions graph 2 shows the increase in public and private debt since 1974 i say the level of debt has been too high to permit our economy to grow with vigor but look how much the debt increased since 1974 the red line on this graph is private debt the black line is public debt these trend lines show great increase of debt and remember the area under these trend lines represents thousands of billions of dollars of debt and for each of those dollars somebody paid 2 cents or 3 cents or 5 cents or maybe 9 cents interest for the use of that money each and every year it is the cost of debt that kills us the numbers in context graph 3 total debt as a percent of gdp a couple years back there was a flurry of excitement over a graph showing that total u s debt had reached 350 of gdp graph 3 breaks that 350 into its public and private components the previous graph showed great increase in the dollar amount of our debt this one shows that same debt relative to gdp the trend in government debt relative to gdp the black line is essentially flat from 1960 until the paulson crisis and all that time private debt the red line was climbing so if the increase in debt relative to gdp is a problem the fault lies entirely with the private sector the timing of it graph 1 reduced as you can see on graph 1 repeated here government debt rose to a peak during world war ii at the end of the war government debt was at its highest level after the war government debt declined continuously until 1974 by no coincidence between 1947 and 1973 the u s economy experienced a golden age but it was not the decline of government debt that drove economic performance the private sector drove it the economy grew because the private sector grew and the private sector grew because private debt was growing and private debt was able to grow because it was low to begin with after the war graph 4 shows private debt relative to public debt a relative increase in public debt will drive the red line down as it does here during the depression and world war ii a relative increase in private debt will drive the red line up as it does here from 1947 to the 1974 recession roughly equal growth of public and private debt will leave the red line roughly flat as we see for 20 years after the 1974 recession graph 4 private debt as a multiple of public debt during our 1947 1973 golden age private sector debt increased 1974 was when the trouble started by 1974 interest costs took so much out of wages and profits that our golden age came to an end since 1974 by no coincidence the best performing part of our economy has been the financial sector since 1974 the level of debt has been too high and the cost of debt too great to permit the productive sector to grow with vigor graph 4 also highlights a difference between arthurian economics and modern monetary theory mmt wants to increase the denominator i want to decrease the numerator the mmt way increasing the federal deficit is exactly what we have been doing since reagan that is why the federal debt is so large it s why people are up in arms about the federal debt moreover even in a weak economy the method fails because no matter how fast government debt increases private debt increases as fast or faster the thing we need is some measure of balance between public and private debt we don t need public debt to increase in dollars but we do need it to increase relative to private debt not forever but only until balance is achieved and since it is private debt that shows inordinate increase since the 1970s see graph 3 the appropriate solution is to reduce private debt recently our economy took that task upon itself economists call it deleveraging a better solution to the problem would be to apply forethought to the task late as it may now be the solution is to use policy to reduce private sector debt in the least painful and most productive way we can the best solution is to achieve balance painlessly and how will we know when the task is done we will know balance has been achieved because economic performance will be at its peak summary in the years after world war ii there was no significant interruption of increase in private debt relative to gdp until our recent financial crisis by contrast since world war ii government debt relative to gdp fell and then stabilized at a comparatively low level private debt is now four times the size and the cost of it much greater than the size and cost of our public debt economic growth depends on the growth of private debt but the accumulation of private debt ultimately hinders growth as it has for us since 1974 once that limit is reached the further increase in private debt cannot significantly improve growth meanwhile the increase in public debt leads only to popular discontent the solution the arthurian solution is to have the federal reserve take all that bad debt it bought up and use newly printed money to pay that debt off the fed gets this money back immediately so it cannot cause inflation but private debt is reduced by a significant margin and no new taxes and no government spending are involved posted by the arthurian at 4 09 am 2 comments labels mmt older posts home subscribe to posts atom you can lead a horse to water but you can t make him drink stay thirsty my friends fred graphs federal reserve bank of st louis 2016 all rights reserved all fred graphs appear courtesy of federal reserve bank of st louis http research stlouisfed org fred2 the st louis fed
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