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e increased among consumers there is a chronic shortfall of demand these changes have consequences chronic shortfall aside when the cost of finance increases as a share of output cost it drives up the price of output it makes the basket of goods more expensive it makes exports more expensive i make that argument that the rising cost of finance in the us economy increased the prices of us exports putting the us at a disadvantage and contributing much to our unfavorable balance of trade i make that argument that was the fireworks in my head when i read those five words the u s balance of trade was really pretty stable until after the 1974 recession graph 1 u s balance of trade since 1950 some people attribute our trade imbalance to nixon breaking the link to gold could be nixon took us off gold in 1971 but milton friedman says it was the economic policy of the 1960s the kennedy and johnson administrations that ultimately forced us off gold nixon had to do something because the situation had become very critical in 1971 friedman says according to friedman then even if our trade imbalance was created by breaking the link to gold the underlying causes go back a decade before the link was broken at least a decade i should say posted by the arthurian at 4 00 am 3 comments sunday april 26 2015 rogoff debt cycles and optimism the name ken rogoff ring a bell how about reinhart and rogoff or maybe you remember the notion that once central government debt reaches 90 of gdp economic growth falls off you remember that one right and the name thomas herndon too maybe reinhart and rogoff growth in a time of debt our main result is that median growth rates for countries with public debt over roughly 90 percent of gdp are about one percent lower than otherwise average mean growth rates are several percent lower you might expect ken rogoff to be a man of principle not a man of science you might expect his economic analysis always to come up heads for the right and tails for the left if so you might be surprised by his recent article at vox rogoff writes there has been far too much focus on orthodox policy responses and not enough on heterodox responses that might have been better suited to a crisis greatly amplified by financial market breakdown in particular policymakers should have more vigorously pursued debt write downs that s downright arthurian from rogoff s article has the world sunk into secular stagnation with a long future of much lower per capita income growth driven significantly by a chronic deficiency in global demand or does weak post crisis growth reflect the post financial crisis phase of a debt supercycle where after deleveraging and borrowing headwinds subside expected growth trends might prove higher than simple extrapolations of recent performance might suggest i will argue that the financial crisis debt supercycle view provides a much more accurate and useful framework for understanding what has transpired and what is likely to come next all in all the debt supercycle and secular stagnation view of today s global economy may be two different views of the same phenomenon but they are not equal the debt supercycle model matches up with a couple of hundred years of experience of similar financial crises the secular stagnation view does not capture the heart attack the global economy experienced slow moving demographics do not explain sharp housing price bubbles and collapses it s an important topic and because i think in terms of debt as cause of problem and problem that fits a cycle of civilization rogoff s debt supercycle catches my eye in the introductory paragraph above rogoff s vox article we read unlike secular stagnation a debt supercycle is not forever i like the clarity in that secular stagnation is long term stagnation by contrast we expect a cycle to have its ups and downs the introductory continues after deleveraging and borrowing headwinds subside expected growth trends might prove higher than simple extrapolations of recent performance might suggest so if we think in terms of a cycle or no but if the economy actually moves in a cyclic pattern of sorts then we have reason for optimism rogoff says simply because of the cyclical pattern good times are bound to return secular unexplained stagnation offers no reason for optimism unexplained yes rogoff observes the view that the world is suffering from long term secular stagnation due to a chronic shortfall of demand well that s circular for sure a shortfall of demand is stagnation but if the problem is a debt supercycle it s the pattern that s circular not the argument and if it is a debt supercycle then we can be pretty sure the problem arose with debt with overall economy wide debt to use rogoff s phrase he s knocking at my door but one doesn t adopt cyclical thoughts because they allow for optimism good grief have we reason for optimism again rogoff writes the us appears to be near the tail end of its leverage cycle near the end of the leverage cycle i don t think so look at the start and end levels for the previous blue and current red depression scale peaks of private debt on this graph graph 1 comparison of debt growth around the 1929 and 2008 debt peaks see my decline from peak debt 2015 update spreadsheet on google drive previous version of this graph 17 december 2012 private debt rose much more quickly in the 2000s than in the 1920s but the deleverage was much less in the recent period this time private debt has been reduced almost not at all it s not that the period of deleveraging is almost over it s that the deleveraging never really got under way that leaves little room for baseless optimism posted by the arthurian at 4 00 am 0 comments wednesday april 22 2015 an interesting detail i quoted from some of the notes on fred series for yesterday s post i didn t need this part from the small time deposits total series yesterday but it is too significant to pass up the small denomination time deposit component of m2 excludes individual retirement account ira and keogh balances at depository institutions because heavy penalties for pre retirement withdrawals make them too illiquid to be included in the monetary aggregates they are too illiquid to be included in the m2 measure of money posted by the arthurian at 4 00 am 0 comments tuesday april 21 2015 the components of m2 money one more time i just want to be comfortable with the fred datasets on savings so i feel like i know what they show if one is a stock and i think it s a flow obviously i have something wrong i want to be able to talk about these datasets without wondering what i have wrong so i look i googled total savings the first hit was total savings deposits at all depository institutions fred fred s notes on that graph say the savings deposits component of m2 consists of passbook type savings deposits as well as mmdas at banks and thrifts that got my attention i started looking at economic data in the late 1970s i started with the bicentennial edition of the historical statistics that was before a lot of the financial innnovation so they didn t have the money measure mzm and other newer measures and they didn t have retail money funds and other newer things to do with money at least i don t think they had those things yet but i don t know maybe they did maybe i was just trying to simplify things enough to understand the economy i know they had the m1 and m2 money measures m1 counted money people spend m2 counted money people have whether they spend it or save it the distinction was between money people ordinarily spend and money people ordinarily don t spend it still is fred s notes on m1 say m1 includes funds that are readily accessible for spending m2 starts with m1 and adds things like total savings deposits at all depository institutions anyway when i read the notes on that savings series and saw them describe it as the savings deposits component of m2 i had a thought if i can find this component of m2 money maybe i can find the others also so i went to fred for the notes on m2 m2 consists of m1 plus 1 savings deposits which include money market deposit accounts or mmdas 2 small denomination time deposits time deposits in amounts of less than 100 000 and 3 balances in retail money market mutual funds mmmfs here are the fred series i came up with m2sl for m2 money m1sl for m1 money savingsl for savings deposits stdsl for small denomination time deposits and rmfsl for retail money market mutual funds i started with fred s savings series but switched to savingsl when i noticed the other four end with the letters sl for the record the stdsl series notes say the small denomination time deposits component of m2 includes time deposits at banks and thrifts with balances less than 100 000 and the rmfsl series notes say the retail money funds component of m2 is constructed from weekly data collected by the investment company institute so both these series are at least in the ballpark if we re looking for components of m2 money here are those series all shown separately graph 1 m2 money dark blue and components a bit messy same data series shown as percent of m2 graph 2 components as percent of m2 oh that s not any better get rid of the m2sl series and look at the components as percent on a stacked area graph graph 3 components of m2 money a little easier to see now posted by the arthurian at 4 00 am 1 comments monday april 20 2015 how much money is in savings posted by the arthurian at 4 00 am 10 comments sunday april 19 2015 historical federal workforce googling payroll of the federal government turned up a link to a table of total government employment since 1962 from the u s office of personnel management shows executive branch civilians uniformed military personnel legislative and judicial branch personnel and a totals column that google search also turned up this hit which i didn t bother to click the era of big government has returned with a vengeance in the form of the largest federal work force in modern history it says i had already seen the table of federal employment numbers 5 4 million employees in 1962 4 2 million in 2013 so i grabbed the federal employment numbers and stuck em in a spreadsheet then i went to fred and got the numbers for total us population and stuck that in there too then i made a graph of total federal employment as a percent of total us population graph 1 federal employment trending down since before the vietnam war is now below 1 5 posted by the arthurian at 4 00 am 1 comments saturday april 18 2015 still looking for savings the other day i wrote do we have a vast quantity of savings stored up you know we do i don t like that i don t like pretending innuendo is evidence maybe it bothered you too i hope so i wanted to show vast savings on a graph but that wasn t as easy to find as i thought that day i skipped the graph i looked on friday but did not find i m looking again today and today i will take a different approach to the problem i will wander from fred i will see what other people have to say i remember steve roth a while back offering a definition of money i ve bruited the notion in the past that money should be technically defined as a term of art as the exchange value embodied in financial assets in this definition counterintuitively relative to the vernacular dollar bills aren t money they re embodiments of money as are checking account balances stocks bonds etc etc if this definition is safe then the stock of money i hate the term money supply which suggests a flow equals the total value of financial assets forget the endless wrangling about monetary base m1 m2 divisias and all that add up the value of all financial assets and that s the money stock i wasn t happy with that definition of money then but maybe i can use it now it s a very very broad definition of money and when you re pondering savings a broad measure is the right one to use roth shows graphs of total assets as a proxy for the stock of broad money i like that approach it gives me numbers to work with it s also the biggest money measure that comes to mind that s why i want to use it here from it i want to subtract the portion of money that is commonly used for transactions the part that i see as money and consider the rest to be savings by this method i may arrive at a measure of savings the biggest measure of savings that i can come up with you know vast savings i found a few links to estimates of total accumulated savings most of em unfortunately are like this gross savings plural figured as the part of gross domestic income that we don t spend that s a flow dammit stf might call it gross saving singular we were looking at gross savings in yesterday s post trying to trust that it is a stock without success maybe now we know why here s a world bank link on gross savings shows the same definition as the indexmundi clip their gross savings numbers for the u s are 2 38 trillion 2010 2 45 trillion 2011 2 7 trillion 2012 and 2 91 trillion 2013 the useful total assets links i found are shown next in date order rutledge capital may 24 2009 total assets 188 trillion as of 2008q4 yahoo finance october 22 2013 total assets 225 trillion as of 2012q3 wikipedia april 17 2015 total assets 269 6 trillion as of 2014q1 that s about it really maybe you can find more hey since we can now draw lines on fred graphs i m gonna show gdp and add this total asset data to the graph graph 1 gdp blue and total us assets red hey friggin wikipedia at the financial position of the united states page that i linked above among the graphs on the right side is a green one assets of the united states as a fraction of gdp 1960 2008 clicking that brings up a bigger image along with related data the graph is by equilibrium007 who would get the arthurian prize of the day if there was one i clicked more details below the graph is a summary section where the description includes a link to the source data clicking that brings up a page of the fed s data download program somewhere i ve never been before there is a package of 16 data series there for download or review see how easy it was to find all that data but you know i m not so sure now that i want to take total assets or even total financial assets and say that it s a good proxy for vast accumulated savings a lot of financial assets most of em maybe were not created by saving they were created by borrowers and lenders reaching agreements that create money from nothing it doesn t worry me that they create money from nothing but we surely cannot then turn around and say the assets were created by acts of saving if i go to the bank and borrow 1000 and the bank creates the money by depositing it in my account there was certainly no saving that accumulated to 1000 so that i could borrow it maybe it s true i think it is quite definitely true that after i borrow the money and spend it it soon finds its way into savings so there is going to be a relation between savings and asset...
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