Sunday, June 17, 2012

Fisher dynamics and brain farts

Well this is weird:

Graph #1: Real Debt relative to Nominal GDP

It runs flat, except during the Great Inflation.

Even more weird:

The mind goes where it will. Responding to comments, I looked at maybe half a dozen FRED graphs. Stopped when I got to the one above because I thought it interesting. Wrote the first part of this post easily, and looked at it on my test blog, as usual.

Then I realized what I had done: I used the standard inflation-adjustment calculation.

I am still in the middle of arguing that the standard inflation-adjustment calculation works correctly for a flow like GDP, but gives incorrect results for a stock like accumulated debt.

(But I didn't even think about that when I did this graph.)

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