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ow this would be beneficial for economic growth 4 in the long view i foresee that the credit cycle would become a thing of the past indeed everyone would have his own credit cycle but the economy as a whole would see no cyclic pattern thus the major force that drives the business cycle would be eliminated economic growth would be driven by low interest rates and other factors but there would never be an accumulation of debt that leads to recession or depression long view of course posted by the arthurian at 4 00 am 7 comments labels accelerated repayment of debt tuesday may 24 2011 too giamatti to fail too big to fail was on tv last night and it brought this to mind a long while back the wife and i went to see the negotiator in the theater good movie with samuel l jackson and kevin spacey it was the first time i saw paul giamatti in anything there was one big family in the theater that must have been giamatti s relatives every time he was on screen they were all hootin and hollerin laughing and celebrating they had to be relatives anyway since then i could always identify paul giamatti about too big to fail just remember everything they re talking about in the movie has to do with the crisis stage which came some 40 years after our economy started failing it s not like they stepped up and took the bull by the horns or anything they still think of those 40 years as pretty good times put finance people in charge of policy and they cannot see debt as a problem posted by the arthurian at 8 00 am 0 comments the other big debt i don t mean to be neurotic about this but i want to compare my new look at debt to my earlier look the gold line here is the new look based on the fred numbers total nonfederal debt as a multiple of total federal debt like graph 8 from mine of the 22nd tcmdo fygfd fygfd the blue and red lines show what i took to be total private debt as a multiple of total public debt where i messed up was that i counted financial debt entirely as private debt in the gold line i fix that just to add to the confusion some of the difference between the lines here is because for the gold line the government share includes only federal debt not state and local the red and blue include all government federal state and local whatever the lines show the same general trend no longer can i say the economy ran into trouble when the multiple reached 3 and ran into crisis when the multiple reached 5 but that s okay there s still a lot more debt to consider than just the federal debt and it is still true that times were good when the nonfederal debt was relatively low in the 1950s and 60s and that times have been hard since nonfederal was high posted by the arthurian at 4 00 am 0 comments monday may 23 2011 i can t get no satisfaction from yesterday s post that s the number one most popular debt graph at fred today federal government debt total public debt gfdebtn the units are mar jun sep dec end of month which i will call mjsd going forward from mankiw never make up your own acronyms you re kidding right i have mjsd i have dpd debt per dollar i have mrto money relative to output i have eroc excessive reliance on credit i have tot totally off topic i even have caput capacity utilization though i cannot be the first guy to think of that one if you are satisfied with economics as it is today then you have no need for new acronyms but if you have an original thought and you keep coming back to it and every time you do it grows in significance and if you have already reduced the thought to a single phrase that you use often then maybe it is time to adopt an acronym if the world adopts your acronym then your original thought was a good one dunno maybe mankiw is satisfied with economics as it is today posted by the arthurian at 4 00 am 1 comments sunday may 22 2011 a new look at debt it is 1 30 in the morning and i have no post written for 4 00 am but i woke up with a thought graph 1 that s the number one most popular debt graph at fred today federal government debt total public debt gfdebtn 1966 3 31 2010 12 31 the units are mar jun sep dec end of month which i will call mjsd going forward these units are incompatible with quarterly units that affects the combinations of data i can look at the graph goes back to 1966 the year i graduated high school note that the number tops out at 14 trillion graph 2 my graph 2 is number six on fred s list of debt graphs total credit market debt owed tcmdo 1949 q4 to 2010 q4 quarterly data the graph goes back to 1949 the year i was born graph 3 graph 3 shows the first two together tcmdo is given in billions total public debt is given in millions so i divided by 1000 to convert it to billions using the data above i cannot divide the one debt number by the other because the frequency differs the one data set is quarterly and the other is mjsd fred simply reports an error graph 4 this is number four from the fred list of debt graphs gross federal debt fygfd 1939 to 2010 annual the value of the latest observation here is 13528 8 billion as compared to 14025 215 billion for the gfdebtn graph above close but not a match graph 5 that s the two graphs of federal debt combined indistinguishable in my book the red line starts earlier and the blue line finishes later that s about the only difference oh and fygfd is annual numbers q why does the one graph show 14 trillion federal debt and the other show 13 5 trillion a apparently because the 13 5 number is from an earlier date that s what the graph suggests to me you with me so far hayward it s 2 27 am how m i doing graph 6 graph 6 is total debt as a multiple of total federal debt graph 7 graph 7 is like graph 6 but inverted 2 35 am the clock is running graph 8 graph 8 shows non federal debt as a multiple of the federal debt it has been pretty high for a long time this graph is my carefully done version of a comparison between public and private debt the old graphs are not trustworthy so i m doing some new ones graph 9 graph 9 is like graph 8 but inverted federal debt relative to non federal debt starts high but drops quickly then slows but the decline comes to an end with the 1974 recession the federal number is not quite as low as it looks because this graph does not start at zero but the federal debt has been stuck in the neighborhood of 30 of non federal debt since the late 1960s a long time 2 53 am graph 10 this is the graph i woke up wanting to see year to year change in total debt compared to year to year change in the federal debt the big red spike on the left is federal spending during world war ii in the 1950s and 60s the growth of federal debt was substantially lower graph 11 graph 11 is the same as graph 10 but it eliminates the big red spike by starting in 1949 so we get a close up view of what remains in the 1950s and 60s the growth of federal debt was substantially lower than that of non federal debt there is a red spike in 1968 associated with the near recession of 1967 there are red spikes associated with the 1970 recession and the 1974 recession and the 1980 and 1981 recessions that is what pushed federal debt growth upward recessions the federal government was trying to promote economic growth they were trying to do right by us i think things just got away from them i ve been meaning to re do my debt graphs for quite some time gene hayward found an error in my ways back in april i was like a deer in the headlights didn t know what to do first and i ended up doing nothing dumbass but it was getting harder and harder for me to write and i went to bed last night with nothing scheduled to post this morning but i woke up early and i m on the case now gene thanks for keeping an eye on me everybody really thank you art 3 25 am gonna take a nap now posted by the arthurian at 4 00 am 10 comments saturday may 21 2011 if it cost nothing debt would be no problem below is a list of significant moments based on simple dollar tallies everyone else on the planet it seems wants to attribute economic conditions to world events to some war some technological innovation some policy decision some business mentality some foreigners or some defect in character sure most of those event issues are related many of them create disturbances in the force some of them may even be causal but all those things together comprise a scatter brained patchwork tale my story ties everything together with one common theme an economic theme dollar tallies graph 1 1 by 1929 the level of debt was so high that it caused a depression 2 by 1947 the level of debt was low enough to permit vigorous expansion during the expansion debt grew with gusto and as long as accumulated debt remained yet small economic growth was superb that era is today considered a golden age 3 by 1973 the level of debt again reached the high point that had previously led to depression debt was again high enough to hinder growth and the golden age ended but from the 1947 73 experience policymakers understood that golden economic performance is associated with the rapid growth of debt policies designed to improve economic growth therefore ignored the possibility that debt had grown beyond its economies of scale and that debt itself was hindering growth 4 nevertheless in 1986 a slowdown of debt growth began this slowdown continued until about 1992 coincidentally some time around 1986 the declining rate of saving changed direction and began to increase the increase continued also until around 1992 thanks to liminal hack for pointing out the saving rate trend graph 2 graph 3 i am not yet convinced these changes are related and significant i am not yet sure whether i interpret the graphs correctly the downtrend on graph 2 or rather the trend change on that graph may not begin at the peak of the third tall hump in 1986 but at the tail end of that hump in 1989 remains to be seen in any event there was a significant decline in debt growth during 1989 1992 graph 4 5 coincidentally after 1989 the rate of increase of m1 money accelerated and continued to accelerate rapidly until about 1994 this increase combined with the reduced debt growth noted above was a prelude to the mini golden age of 1995 2004 a similar if smaller disturbance is visible on graph 4 between the years 1985 and 1990 this may be related to the apparent rate inversions beginning around 1986 shown on graphs 2 and 3 above 6 by 1994 the economy had more spending money than it was used to in addition the level of debt had fallen enough to create financial slack in the economy it was again possible for debt to increase rapidly for a few years before bumping up against the limits of financial innovation and rapid debt increase is what happened next graph 1 shows extremely rapid debt growth during the years 1995 2004 the time of the mini golden age as during the period 1947 73 it was the debt growth that in a sense sponsored the economic growth the economy was good because rapid credit expansion was possible 7 by 2004 the level of debt had again increased enough to interfere with economic growth for the next few years the level of debt continued to rise rapidly gdp did not on graph 1 you can see a departure from trend between the labeled points 5 and 7 the downtrend was a necessary preparation for growth the uptrend was the moment of improved growth by point 7 debt growth had returned to trend and growth of the economy was again impeded by excessive debt 8 in 2008 just beyond the graph the crisis hit the rising trend of debt once again has started to decline just as it did after 1929 and just as it did after 1989 graph 1 shows three separate peak events it shows debt increase leading to crisis in 1929 followed by debt decline leading to a golden age for the economy it shows debt increase until 1990 followed by debt decline leading to ten years of significantly improved economic growth a golden decade and it shows debt increase leading to crisis in 2008 followed by debt decline and the possibility of a golden future four peak events if we count the 1985 1990 disturbance on graph 4 if we want our economy to recover if we want another period of golden growth then we must again reduce the level of debt so that rapid debt expansion is possible keynes preferred the quasi boom to the semi slump as do i we have lived with a semi slump since the mid 1970s and it is time for something better the quasi boom arises when debt is low enough to permit a vigorous boom and debt is capped off at that relatively low level related link credit efficiency posted by the arthurian at 4 00 am 0 comments friday may 20 2011 the trouble with bill mitchell from the billy blog 16 may 2011 my principle concern when it comes to economics is how we can keep unemployment and underemployment low that was the reason i became an economist in the late 1970s when unemployment sky rocketed in australia and has been relatively high ever since so when i read commentary which i know would worsen unemployment levels or duration if the opinion was influential i feel the need to contest it that has been my motivation in economics all my career approach economics with an agenda and the agenda will interfere with the science posted by the arthurian at 4 00 am 10 comments thursday may 19 2011 changes the shape of this one interests me 1 increasing until about 1970 2 increasing more quickly and more unstably until about 1986 3 declining until about 1992 4 increasing with regularity until the crisis 5 decline it isn t the last stage that intrigues me we re well aware of that and it s not the increasings that intrigue me debt increases when the economy grows that s normal though why the rate of growth of debt must increase why we think it is okay this is a question worth asking i am fascinated by the decline in the rate of debt growth from 1986 to 1992 or thereabouts why fascinated because debt growth slowed significantly and we didn t have a crisis like we had with lehman and all and then a golden decade started soon after that s why fascinated wasn t there a revision of the tax code in 1986 posted by the arthurian at 4 00 am 12 comments wednesday may 18 2011 indirection from the wikipedia article on indirection a famous aphorism of david wheeler goes all problems in computer science can be solved by another level of indirection kevlin henney s corollary to this is except for the problem of too many layers of indirection which cracked me up and which leads to this observation all problems in economics can be solved by using more credit except for the problem of excessive reliance on credit posted by the arthurian at 4 00 am 8 comments tuesday may 17 2011 but it rhymes posted by the arthurian at 4 00 am 11 comments newer posts 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 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