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Text of the page (random words):
lf got so big let s look at the red and blue as a percent of the black graph 2 red and blue as a percent of their average from the previous graph okay the bulges are not so big now compared to the other areas plus on this graph we can see the bulge between the 1974 and 1980 recessions and even the tiny one between the 1980 and 82 recessions in addition i think i see a bulge now between the 1970 and 74 recessions the blue and red lines didn t come together for the 1970 recession but that doesn t mean there s no bulge after it so apparently the growth of debt in general has something to do with the size of the bulges but that s not the only factor because bulge size still varies what could it be i d like to say vigor it s a measure of vigor but that seems quite obviously wrong hey know what i just noticed look at just the blue line it reminds me of the private to public debt ratio figure 3 non federal debt relative to the federal debt posted by the arthurian at 4 00 am 0 comments labels debt bulge tuesday september 27 2016 firming up my best guess yesterday s conclusion so what does this tell me if i remove even one piece of data from the bulge 3 calculation the predicted date of recession could change substantially or if i do this calculation again after the next release of data the predicted recession date could change substantially i guess nothing can be done about that after i said that i went on to guess what my graph would look like if i changed it i made a guess about how soon the graph would predict recession uh i mean a guess about the soonest a recession could be predicted to occur based on changing the selection of data on which the prediction is based if you get my drift i don t like guessing so again i will start with graph 6 from sunday s post graph 1 predicting the closing of the current bulge i ll start by eliminating the blue line and chopping off everything before 2007 on the red line graph 2 the current bulge now that s a pretty bulge the solid line shows federal debt data from fred the series gfdebtn indexed to 1980 q1 with each year s average of indexed federal and private debt subtracted out it s a simple calculation but i haven t been looking at it long enough yet to describe it easily in words no matter what i want to do today is show a bunch of trend lines for different subsets of the data and see how they compare to the dashed red line if they curl down faster than the dashed line it indicates the recession will occur sooner than the date i predict if they curl down more slowly it suggests the recession will occur later i anticipate that recession will occur where the dashed red line crosses the 100 0 level that s about where the solid red line was the last time a recession started so when we look at the trend lines i ll add we should look at the 100 0 level look straight down from there and get the date from the x axis i m not going to start by showing the trend lines i m going to start by looking at r squared values for different subsets of the solid red line i ll get the value for all the data shown 2007q1 to 2016q1 then drop the first data item and get the value again then drop the next data item and repeat my goal is to get both the highest r squared and the most data but r squared is my higher priority i m writing the r squared values in the spreadsheet linked below r squared reaches a peak of 0 99504834 in 2008 q1 so i will use this as the start date for the data on which the trend lines are based graph 3 finding the start point for trend data selection oh just for the record the title of this graph says finding the best starting point that s my intent but i just do this for a hobby i think i have a good feel for what i m doing but if i have something wrong and you have a suggestion you think i can understand do let me know now that i ve got a starting point i can select a bunch of different end points and use these different subsets of the data to create different polynomial trend lines there should be a lot of them when i m done and it would be too messy to identify each one so i won t identify them on the graph you can pick thru the spreadsheet if you want my objective is to get an impression from the several trend lines i ll create i ll call this impression my best guess of what the trend line should be that best guess will give me a start date for our next recession that s what i want to see just reading this over it s amazing how many times i say i start i will start with graph 6 i ll start by eliminating the blue line i m going to start by looking at r squared values now i ll start with the last available data 2016 q1 and use the 2008q1 2016q1 period as the base data for my trend line then i ll drop the last data used giving me a different subset and add a trend line for that one and i ll keep repeating the process until i get tired of it or till i discover something interesting okay wrote a little vba to delete and add trend lines for me and make them second order polynomials here s the first bunch of trends i came up with graph 4 trendlines based on 2008q1 start date and 2011q1 to 2016q1 end dates damn i m good there s one trendline gone wild like a hair that won t stay combed the rest are all pretty well clustered around the faint gray line that used to be my dashed red prediction the wild hair is the trendline for the series that ends with 2011 q1 as you can see on graph 2 2011q1 is on the early part of the line labeled public maybe just before the jiggies start continuing this trend line out till it reaches down to the 100 0 level would bring us to our next recession some time around 2050 i know we ll have another recession long before 2050 so i m going to throw the wild hair away working our way down the right edge of the graph from that wild hair the trend lines we come to in order are 2011q2 2012q1 and 2012q2 after that they get pretty dense i m going to delete the six earliest ending data series 2011q1 thru 2012q2 and look at what s left hey it looks better already i also want to start the low value of the vertical axis at 100 0 because when the trend line gets to that level that s when i think the recession starts plus i put some tick marks on the x axis graph 5 trendlines based on 2008q1 start date and 2012q3 to 2016q1 end dates pretty neat assuming that the recession starts when the trend line hits the 100 0 level our next recession should start somewhere between 2022q2 and 2024q2 looks like most of the trend lines fall in the early half of that time period so i d venture the second half of 2022 or the first half of 2023 for the start of recession eh i ll be dead by then the excel file posted by the arthurian at 4 00 am 0 comments labels debt bulge monday september 26 2016 testing a prediction yesterday i made a prediction about our next recession it won t happen until 2022 2024 it s six years out or more the accuracy of that prediction depends on many things no doubt but one of the things it depends on is how well the future paths of public and private debt conform to the paths predicted by excel s trend lines there are things we cannot know like future shocks that divert debt from the predictions such things are beyond the scope of prediction i should say though that on yesterday s graph i see little evidence of shock induced diversion in past data apart from the unknowable the accuracy of the prediction depends on whether the polynomial trend calculation that i used is suited to the behavior of the debt numbers i mean i didn t use the linear trend calculation for example because i don t expect debt to follow a linear path maybe it won t follow the polynomial path either in that case my predicted timing of the next recession would be incorrect i can test for this here s graph 6 from yesterday graph 1 predicting the closing of the current bulge first of all the blue line is the same as the red mirrored about the zero line i will eliminate the blue line to give more space to the red line i ll cut off the years before 1988 because those are pretty boring and i will make the red line gray and make it wider we are left with a graph that shows the three bulges of debt graph 2 a look at three bulges the solid gray line is calculated from data for 1988 to 2016 the dashed gray line is calculated from the polynomial estimate of the future path of debt based on 2008 2016 data below is the same graph from fred modified from yesterday s graph 3 it lacks the estimate of the future path of debt but it shows when recessions occurred graph 3 public debt relative to public private average indexed values recessions restrain the bulges of debt like a tight belt restrains a fat gut returning to the excel graph i show the first half of each bulge in red graph 4 the left half of each bulge is indicated in red i use the word half loosely next i put a trend line on each red section the purpose is to see how each trend line matches the gray half of the bulge obviously the trend line for bulge 3 the rightmost bulge will match perfectly because i used the same trend line yesterday to develop the dashed gray line the other two bulges provide the test if the black trend lines match the gray data for the bulge of the 1990s and the bulge of 2001 2007 then my confidence is increased that the dashed gray line is a good estimate of the future path of debt and if that is the case my confidence is increased that my predicted date of our next recession is also a good estimate so here is the graph with the trend lines graph 5 polynomial trend lines added okay for bulge 1 the leftmost bulge the trend line rides along the bottom edge of the fat gray actuals i d call that trend line good for bulge 3 rightmost the trend line is a perfect match of course because the dashed gray line was modeled on that trend line so this one doesn t count bulge 2 is a bit of a problem the trend line runs higher than the gray half of the bulge but let me show you what happens if i make the red part of bulge 2 longer by one piece of data graph 6 bulge 2 trend line adjusted trend source data now ends at 2005 q3 not 2005 q2 the bulge 2 trend line is now much closer to the actuals in gray still not perfect but pretty good so what does this tell me if i remove even one piece of data from the bulge 3 calculation the predicted date of recession could change substantially or if i do this calculation again after the next release of data the predicted recession date could change substantially i guess nothing can be done about that but i don t think there is anything in the red part of bulge 3 that if i play with data selection would bring the predicted recession date to anywhere within the next three or four years i think the soonest we could have that recession is around 2020 and i could only get that by ignoring data we have i ll stick with yesterday s prediction the excel file posted by the arthurian at 4 03 am 0 comments labels debt bulge sunday september 25 2016 bulges a version of yesterday s graph where both series are quarterly graph 1 public red and private blue debt path comparisons there s a bulge in the 1990s and a bulge expanding since the 2009 recession i want to put a line right down the middle between the red and blue lines like a centerline graph 2 public and private debt paths with path average dashed black i just took the average of the two indexed values it was easier than i expected if i take the black line and subtract it from itself and show it on a graph it will be a nice flat line at the zero level that makes sense right if i take the red line and subtract the black line from it i will keep the basic shape of the red line but transform it down so it runs somewhat above the zero line if i do the same for the blue line it will run a little below the zero line graph 3 indexed public red and private blue debt with their average subtracted out ain t that neat subtracting the average creates symmetry don t ask me how i know how to do this it comes from doing it all the time the text at the top of the graph was taking too much space so i deleted the dashed black line couldn t see it anyway as it was hidden by the horizontal axis i see something in 3 that i couldn t see in the earlier versions of the graph there is a bulge between the 2001 and 2009 recessions so that makes three bulges not two and if you get a close up of the graph you can see a bulge between the 1974 and 1980 recessions and a little one between the 1980 and 82 recessions lots of bulges then and what i said yesterday recessions come when the bulges close is confirmed since it appears the bulge on graph 3 is not going to close any time soon i don t think we ll have a recession for another five years at least probably longer upon close inspection i see no bulges before 1974 in other words the bulge doesn t close for the 1970 recession but the data inexplicably only goes back to 1966 so i can t talk about recessions before 1970 the bulge doesn t close for the 1991 recession either but i might be able to explain that one private debt growth slowed a lot between 1985 and 1992 this unusual debt behavior is probably somehow related to the unusual bulge behavior maybe i ll look into that some other time for now i must point out the obvious the future is not guaranteed but it seems to me that the bulge we are in right now is a bulge that will close with a recession like the two bulges before it and the non bulge that ended in 1991 and earlier bulges going back to the 1974 recession i assume the current bulge will close in other words i expect the blue line on graph 3 over the next several years to continue curving upward making the sort of bowl shape that we have talked about before i also expect the red line over the next several years to continue curving downward developing an inverted bowl and i expect the two bowls coming together to pinch off economic growth and give us a recession that s just imagery i m not making a claim about causal relations here due to these expectations on my part with some confidence i predict that our next recession will occur just as the two bowls are meeting therefore i want to go to excel and use second order polynomial trends my bowl maker to determine when the public and private debt trends will meet pinching off the bowl we are in right now with a little work in excel i can put a date on the start of our next recession i know they re symmetrical but i did em both anyway graph 4 future path of public debt for graph 3 graph 5 future path of private debt for graph 3 both these trends are based on data from 2008 q2 to 2016 q1 so i added those two estimates of future debt to a version of graph 3 in excel added a bunch of years to the right end of the graph and deleted some years from the left end to make room here s what i got graph 6 predicting the closing of the current bulge wow that s a big bulge okay so around 2024 this graph of debt relations predicts our next recession to start some time around 2024 ridiculous you thi...
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