From mine of 1 June:
The picture is different if we look at the change in Federal debt as a percent change, rather than raw dollars:
The monster increase during World War Two makes all the other changes look small by comparison.
The growth of federal debt was minimal (near zero) and mild in the 1950s and '60s, though already in the mid-'60s fails to drop as it drops three times before, since 1950.
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| Graph #3 |
The monster increase during World War Two makes all the other changes look small by comparison.
The growth of federal debt was minimal (near zero) and mild in the 1950s and '60s, though already in the mid-'60s fails to drop as it drops three times before, since 1950.
The growth of federal debt in the mid-'60s fails to drop as it drops three times before...
I want to look at that. So I'll grab a few years from the above graph -- say, 1949 to 1972 -- and look at that piece of it:
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| Graph A |
A peak, then a low point in 1951. Then a peak, and a low point in 1956. Then a peak, and a low point in 1961 -- though this low does not drop below zero.
Then another peak, but this time there is no low. Federal debt growth hangs at the two-percent level for three years, but does not drop to a low as it did three times before.
Then the trend line spikes up, spikes down, and spikes up again. From this close-up view it is fairly easy to see that there is a gradual increase in federal debt growth throughout the 1949-1972 period.
But it is not time to draw conclusions. It is time to compare what we see in this graph to a thing we dare not look at: the rest of debt. The other part, other than gross federal debt. That.
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| Graph B |
I just have this gut feeling that it is the growth of "other" debt that pulls the federal debt growth upward.
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| Graph C |
If it is true that the growth of "other" debt pulls the growth of federal debt upward, then we can see it starting to happen almost immediately after "other" debt grows larger than federal debt on Graph C.
4 comments:
Art -
It's one thing to suggest that the other pulls the Fed, but another to make it credible. There is no specific linkage that I'm aware of. Check your graph B carefully. There is contrary motion almost all the time between the two. I should set it to music. It would make great counterpoint.
And drop a best fit across both data sets. I'll bet you see a negative slope for green, and a positive for blue.
That whip-saw around 1969 is interesting. 69-70 had the worst GDP growth in a decade.
Cheers!
JzB
Just a suggestion. A gut feeling. There is no specific linkage commonly discussed in the media, that is for sure. It is just an idea, or a way of presenting an idea, that may be worth chasing down.
Actually, I'm pretty sure that growth of private-sector debt implies (a) growth of private-sector cost, and/or (b) growth of the private economy in general.
(a) has implications like falling profit, a falling standard of living, an expanding financial sector, and perhaps an expansion of government countercyclicals and of government debt.
(b) has implications like, well, regulation of the financial sector (and chicken parts and imports from China) has to expand with the supply side, or fail to expand with it and fail to perform adequately.
There is contrary motion almost all the time between the two.
Good observation, there definitely is. My graphs from last November incorrectly attributed public-sector financial debt to the private sector, but you can see the "contrary motion" anyway, and for a longer period, too.
Wow, you see things in terms of music.
Art -
Re: a) Well, that's just inflation. Right now we have very little. I'm not sure your implications necessarily hold. They would if GDP growth is slower than debt growth (DOH!) So yeah, now. Maybe not during the golden age.
Re: b) Now you sound like a socialist and an isolationist.
I believe Financial sector debt is much greater than industry sector debt.
I don't always see things in terms of music. This was striking. Contrary motion doesn't happen all the time but it's a common feature of counterpoint, especially in outermost voices
I take a shot at it here.
Cheers!
JzB
Had 3 years of piano lessons (before I was 10) but that doesn't help me appreciate music. Yours sounds good, though, and the other one has a graphic that helps me see what the sounds are doing.
I'm not sure your implications necessarily hold. They would if GDP growth is slower than debt growth (DOH!) So yeah, now. Maybe not during the golden age.
Oh, yeah, GDP grew slower than debt in the golden age, too. But the accumulation of debt was less in those days, so the "drag" it created was less.
Therefore, the use of credit was more efficient in those days, and the age was golden. (Google "credit efficiency"... see if I turn up.)
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