Tuesday, February 28, 2012

FCM and the Long View


Using Jazzbumpa's source,

I dug up productivity data from the BLS website, which took quit a bit of digging. Fortunately, Skeptic at Reality Base did the same thing, and identifies the data series - year-over-year non-farm productivity growth (% change) as PRS85006092.

we can now take a longer-term view of productivity and the Factor Cost of Money.

The BLS site offers "Major Sector Productivity and Costs" and provides numbers with units given as "% change quarter ago, at annual rate". I couldn't get "change from year ago" numbers but it probably doesn't matter.

I grabbed the data for all the years I could get -- back to 1947. (Annual numbers since 1948.) Popped 'em into a Google Docs sheet and fiddled with moving averages to get something fairly smooth.

Brought my "FCM per GDP" numbers into the file and threw a graph together:


Source: My Google Docs Spreadsheet

In outline: Productivity goes down as the Factor Cost of Money increases; and productivity goes up as the Factor Cost of Money declines.

Looking at the early years, one could argue that productivity and the FCM moved up together when the FCM was very low, when finance was still facilitating economic performance. On my graph the two travel together until 1962, then veer apart. If I plotted the moving average at the last year of the period, the separation date would be 1966. So, somewhere in the 1962-1966 period is when finance became excessive and started hindering rather than helping economic performance.

1 comment:

Jazzbumpa said...

For a different reason, I was just looking at money supply (MZM) output (productivity) and inflation (CPI) - all from FRED. Money supply and productivity positivity correlate. Productivity and inflation negatively correlate - both at low R^2 values. MZM and inflation negatively correlate. Go figure. I'll post this when I have my ducks lined up.

Cheers!
JzB