Friday, April 15, 2011

For what it's worth...

I took the numbers used to create the first graph from this morning's 4 o'clock and made up a trend-line for them. I used the first value (first quarter 1952) and the highest value (fourth quarter, 2007) and ran a straight line through those points.

You can see a departure from trend running from fourth quarter 1981 to fourth quarter 1993, give or take, and from there a return to trend by first quarter 2001.

Before Reagan, private debt grew more quickly than public debt, at a consistent rate. Then for 12 years, beginning with Reagan, private debt grew very slightly less than public debt. Then, with timing to match the start of the "golden decade", private debt again grew more quickly than public debt and, in fact, made up for lost time.

For what it's worth.


Jazzbumpa said...

The reason I tracked own the accounting identity that led to this post

Was to ask if you have taken it into consideration in your examination of public vs private debt.


The Arthurian said...

Jazz, my background in math (B.A., 1970) allows me to do things like figure out a lot of stuff in Excel, and learn to program computers, and use AutoCAD to advantage, and stuff like that. It does not, however, give me the ability to balance a checkbook.

I understand positive and negative numbers and such, and I know that when money goes into one pocket it is generally because it came out of another. And I have a sort of intuitive feel that the "sectoral balances" thing is a useful tool for analyzing some problems. I trust it.

But my approach to economics comes from one three-credit course in macro, and from reading The General Theory and The Wealth of Nations, with a little Milton Friedman thrown in for good measure. That's it. That gives me a basic "feel" for how the economy works. With that, back in the late 1970s I started pulling numbers out of Statistical Abstracts and the Historical Statistics in the library and drawing up some graphs of things that seemed like they might be relevant to the problems of the time.

That's the whole thing. So to answer your question, I don't know if I have taken that accounting identity into consideration in my examination of public and private debt. I think see it in the trends. But frankly, I'm hoping that people who understand things that I don't, will look at what I am doing and translate it into their own terms, and evaluate it, and tell me what they think.

The Arthurian said...

On the other hand, JzB, my recent graphs and this one show domestic sectoral balances -- monetary balances, if money is debt. The trendline of the linked graph correlates with the history of U.S. economic performance. And, to my way of thinking, it demolishes the argument that reducing government deficits must be our top priority.

Greg said...

Interest payments from government debt can be used by the private sector to pay off private debt.

Give me $500,000 of T Bills and I'll send the interest payments to my bank to go towards my principle.

The two debts have an opposite affect on the private sector.

The Arthurian said...

"The two debts have an opposite affect on the private sector."

Agreed. Well said.