Tuesday, May 31, 2011

The Limbo: CFPY

It occurs to me that if I take the Limbo graph, eliminate the early years where there's no data...
// something I have only started to think about in the past few days
...and take a look at "percent change from year ago" values, I'll get a look at the varying slope of the graph. This could be useful because the slope is related to economic performance.

Graph #1

There ya go. Ah, but what do the tea leaves say? That is the question.

First thing I notice is a trend-of-peaks. Starting with the first peak after 1960, running to the highest peak in 1983, there are four peak points that lie on a straight line. Five, if you count the "low" high-point of 1971. This rising trend indicates some kind of increasing severity, perhaps.

Next thing I notice is, the peaks seem to be associated with recessions, almost without fail. At the right end we have the spike associated with the Paulson crisis, tallest thing on the graph. Probably the height of a point indicates not so much severity as the strength of the federal response to recession.

On the other hand, note that before 1974 the entire trend-line is below zero. This means that the federal debt was growing more slowly than everybody else's debt -- generally 5 to 10 percent more slowly -- until 1974. The private economy's strength gave out with that 1974 recession.

I also observe a peak in 1991 followed by a long and atypical decline lasting until 1998 or so. In the middle of that decline there are two breaks (at perhaps 1993 and 1996) which make the decline something of a zig-zag. I think something happened in there to make this decline atypical. I think if this part of  the trend was typical, the 1993-1996 downtrend would have been an uptrend. And maybe the 1998 low would not have been as low as it turned out to be.

Graph #2

Come to think of it... the 1993-1996 period was when the federal budget was moving toward balance...

Graph #3

... and just before that, there was an unusual increase in the growth of M1 money in the early 1990s...

Graph #4

... which followed on the heels of a significant decline in the growth of debt that began in the mid-1980s...

Graph #5

... all in all, creating a noticeable swoop in the debt-per-dollar graph from 1990 to 1994, just before the good years -- just paving the way for the good years that began in 1995. Good years, that permitted the federal budget to be briefly balanced, before things went bad again.

Yeah, the slope of the Limbo is related to economic performance.

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