Wednesday, April 1, 2015

And don't forget...


An advantage of investing in 10-year Treasury notes, and other federal government securities, is that the interest payments are exempt from state and local income tax.

So I want to say what, here? The larger the Federal debt...

The larger the Federal debt, the larger is the pool of funds that are exempt from state and local tax. This financial sector untaxable, the tax burden shifts to the productive sector.

Tuesday, March 31, 2015

Hey, sometimes I don't explain 'em


Graph #1: Same as Graph #3 from yesterday, but showing 1790-2014

Monday, March 30, 2015

Pushing the Incalculable into the Past


If you leave out the debt you don't know how to adjust for inflation -- like all the Federal debt from before 1947 -- your graph looks like this

Graph #1: From mine of 22 March 2015
If you find data that goes deeper into the past, so far back that the stuff you cannot adjust for inflation is 150 years distant, then the same graph looks like this:

Graph #2: Data subset from mine of 29 March 2015
I think Graph #2 is the better graph.

Hey, if you take nominal as a percent of real, blue as a percent of red on Graph #2, you can see the effect of inflation on debt:

Graph #3: Relation of the two lines on Graph #2

Sunday, March 29, 2015

From scratch


I have to recreate this graph:


The blue line is GFDGDPA188S at FRED. It is calculated from Gross Federal Debt (FYGFD) and Gross Domestic Product (GDPA).

The red line takes changes in Gross Federal Debt (FYGFD), strips away inflation using the GDP Deflator (GDPDEF at FRED), and keeps a running total of the adjusted values. And I divided that running total by Real GDP (GDPCA) to get a ratio of reals.

I have to recreate the graph because I ignored debt before 1947, figuring it was small by today's standards. But it was large in comparison to GDP. Comments on my calculation have raised doubts in my mind.

I was thinking about pushing the start-date farther back in time. FRED's FYGFD goes back to 1939, GDPA to 1929. I'm sure I can get numbers for Federal debt before 1939, at least back to 1929.

TreasuryDirect has it. Reverse chronological. Of course. But they go all the way back to 1790.

Measuringworth has nominal GDP and real GDP and the GDP Deflator, also all the way back to 1790. And suddenly I realized I have everything needed to show the graph all the way back to 1790. Wow.

Well Auburn, I guess that's why I'm using Federal debt.


I had some trouble getting the TreasuryDirect data into a useful form. There are five separate tables, and when I copied them and pasted into Notepad, two of them ended up with quote marks around the debt numbers. One of the two came into Excel just fine. The other one turned out to be a six hour headache.

Finally, after I gave up on it, I asked the wife if she had a way to convert stubborn data like that. She's a practical girl. She took the TreasuryDirect data, pasted it into Word, searched for quotation marks and replaced them with spaces, then copied it to Excel and Presto, my problem was solved. I think it took her six minutes to do what I couldn't do in six hours.

I went back to TreasuryDirect the next morning and took samples from all five tables, so I could show you. But none of the numbers came out surrounded by quotation marks, and all of them copied over to Excel just fine.

I don't know why.


After I got all the Federal debt data from TreasuryDirect into Excel, and into one file, and into chronological order, I brought in the GDP, Real GDP, and Deflator data from Measuringworth. That part was easy.

But more preparation was needed. I had the 1790 data from both sources on the same row. But the 2014 numbers were on different rows. TreasuryDirect provides one more data item than does Measuringworth, in the 1790-2014 period. That sounds odd, but I was expecting it. The notes for the TreasuryDirect data say

The first fiscal year for the U.S. Government started Jan. 1, 1789. Congress changed the beginning of the fiscal year from Jan. 1 to Jul. 1 in 1842, and finally from Jul. 1 to Oct. 1 in 1977 where it remains today.

I knew about the 1977 change. I've had to correct for extra data there once or twice before. I didn't know about the 1842 change, but given the date it was easy to find:


I suppose the law was passed in 1842 but was not implemented until 1843.

All I had to do was delete one of the two 1843 items. But which? I want to keep the 07-01-1843 entry because the debt is unusually high at that point and it probably means something.

Couple other fixes I had to make before the data was useful. Measuringworth's GDP and RGDP are in millions; the TreasuryDirect data is in dollars. Usually I have to convert Measuringworth data to billions to match FRED's units. But this time I can convert the TD data to millions and leave the rest as is.

I put commas in the numbers, as TD had, to improve readability.


A boring note on the spreadsheet column labels:

I use NGDP for "nominal", and RGDP for "Real", GDP. Anything in the spreadsheet labeled "Debt" refers to Federal debt and traces back to the TreasuryDirect numbers in Column B (unfortunately shown as Column D in the preliminary snip above). And the symbol "Δ" ("delta") means "change in". So "Δ Debt" reads as "change in debt". You might be more comfortable thinking of it as annual deficits.

That much, I hope, is obvious. Now it gets a little messy. If "Δ Debt" in Column G (of the final version) is the deficit, then "R Δ Debt" in Column H is the "Real" (inflation-adjusted) deficit.

In Column J, "Δ Debt" is reduced to "ΔD" to make room for "Accum". In the "ΔD Accum" column I add up the changes in debt. ("Accum" is "Accumulated".) So the accumulated deficit numbers in Column J are equal to the debt numbers in Column B except the number for 1790 is missing. That number is missing because the year before 1790 is missing, so 1790's change from previous year value cannot be calculated.

The same is true for Column K, where "RΔD Accum" stands for "Real Change in Debt, Accumulated"... or the running total of inflation-adjusted deficits.

Column M is the same as Column J, except instead of leaving 1790's "change from previous year" blank, it uses the entire debt 71.06 million dollar Federal debt of 1790. Using that start value, then adding each year's change in debt, all the values in Column M match the original Federal debt values from Column B.

Column M is sort of like checking my work. The next column, N, takes that original 1790 number for the debt and adjusts that whole lump sum for inflation by using the 1790 Deflator number.

That is exactly the same calculation that is commonly used when the "real" (inflation adjusted) value of debt is figured. All of the Federal debt existing (in this case) in 1790 is adjusted using the 1790 deflator number. This is a bad calculation, I say, because much of the debt existing in 1790 (or in any one year) was accumulated in prior years -- and really should be adjusted by the deflator values of those prior years.

I think this is much more of a problem for recent years' debt than for ancient debt. So I'm hesitantly willing to use the flawed calculation for the ancient 1790 number. I couldn't bring myself to use it for the 1947 number in last weekend's calculations, and I very rightly got called out for it.

So, from four columns of source data (B, C, D, E) I have generated six columns of calculated data (G, H, J, K, M, N) -- three columns nominal and three columns inflation-adjusted. The three in each case include one for deficits and two for debt. Which of the two is the better debt measure is still unresolved in my mind.

Based on these six calculated columns I created six additional columns -- in each case the "as a percent of GDP" version. The three nominal columns are shown as percent of nominal GDP, and the three real columns are shown as percent of real GDP.


From the Open Office Spreadsheet: Long View.ods at Google Drive

Saturday, March 28, 2015

cracks me up



"Historical" they call that? Since the year 2000??

When I think "historical" data, I think stuff from the 1800s. Or at least, stuff from before the 1947 start-date that FRED uses so often. It's only one financial cycle -- or less -- if we start in 1947. I need more.

a private moment


I have no post for this morning.

My desk was a mess so I had to clean up. But most of the mess turned out to be stuff that had to go in my wallet, new medical cards and some kind of value card from an automobile dealer I'll never go back to for the rest of my life.

Anyway, that meant I had to clean out my wallet. What was in there? Some cash. Money left over from my weekly allowance. My wallet has become my best savings account since the coffee shop closed a few years back.

Some credit cards were in there, too. And some medical cards. Oh, and six registrations for my car, five old ones and one current. I never know when to throw things out. I guess if I have six of them, I should throw out at least three...

But it got me thinking: Cash I understand. There it is, in my wallet, and there it sits until I spend it. There is a kind of simplicity in that, that I like.

I don't understand the cards. They have dates on them -- getting hard to read 'em these days -- that tell me when the cards expire. But I don't go thru my wallet every week looking for expired cards. So they tend to collect in there.

Medical cards, too. There's no dates on 'em -- well, the new ones have dates. That's what got this whole rigmarole going, I got new medical cards. That means the old ones are no longer valid. Or they won't be valid soon, so do I keep them for a little longer? Yeah maybe I don't know. If I throw them out and then I need them, I'll be in trouble. It's easier to keep them just in case.

Yeah the new medical cards do have a date on them. I got two sets, apparently identical. After looking at them a long while I noticed one set is dated March 2015 and the other is dated March 2014. Why did I get them both on the same day? I don't understand the cards.

Well, I threw out all but two of my car registrations, and all the medical cards except the two sets that came the other day. And I found an old library card and two old credit cards that had expired and I could throw them out.

How do you do that? You can't just throw out the credit cards. You have to cut them up in little pieces.

Tiny little pieces? How tiny? Usually I cut thru the important numbers and throw away pieces of the card into two or three different garbages. First, though, I take the cut pieces and cut them up tiny. As tiny as I can for as long as I can stand to keep doing that, and then I just throw the rest away. I hope the thieves will appreciate my efforts, and leave the big pieces alone.

Well, it's four o'clock.

Friday, March 27, 2015

"The TPP has developed in secret an unaccountable supranational court for multinationals to sue states. This system is a challenge to parliamentary and judicial sovereignty."


At Wikileaks.

There's more to it than similie and metaphor


Unfortunately, we know what money is the same way the fabled Blind Men of Hindustan know what an elephant is: the one who grabbed the trunk knows it is “like a tree”...

Wait a minute! I thought the leg was like a tree...


In What Is Money And How Is It Created?, Steve Keen writes:
... they haven’t worked out what money really is. Only one person ever really ever did—and no, it wasn’t Ayn Rand. It was Augusto Graziani, an Italian Professor of Economics, who died early last year. He understood what money is because he posed and correctly answered a simple question: how does a monetary economy differ from one in which trade occurs by barter?

This ruled out gold being money, since gold is a commodity that anyone can produce for themselves with a bit of mining (and a lot of luck). So even though gold is really special and incredibly rare, it is in the end, a commodity: an economy using gold for trade is really a barter economy, not a monetary one.

First time I read that, I thought it was great: If we're trading gold for other things, it's a barter economy. But I changed my mind. The notion that gold is the same as money is an oversimplification, a gross oversimplification. One could as well argue that if we're trading green paper for other things it's a barter economy. Or for that matter, if we're trading electronic ones and zeroes for other things, it's a barter economy. It's an oversimplification that ignores the concept of value.

Money captures value.

Thursday, March 26, 2015

Oh, my!


With Anonymous 2:09's correction, my graph looks totally different:

Federal Debt Prior to 1947 is not ignored in this graph
That's quick-and-dirty. I modified the Excel graph in Open Office.

I have to look at this, and think about it. Not tomorrow but probably Saturday the topic will return.