Tuesday, November 13, 2012

The Medium of Account relative to GDP

Graph #1: Total Financial Assets as a Multiple of GDP
Click Graph for FRED page

Rising in the 1950s.
Stable for most of the 1960s.
Falling during the Great Inflation
Rising from the end of the Great Inflation to around 1993. Again, 1993.
Sharp ups and downs thereafter.

Before 1993 TFA ranged between 2 and 2.7 times GDP.
After 1993 TFA peaked around 3.7 times GDP -- twice, so far -- but never again fell as low as the previous high.

Something definitely changed around 1993. The uptrend became a shocking uptrend. Anyway, by then, to drive asset values down we'd have needed another Great Inflation or some clever policy designed to discourage debt accumulation.

Even the Crisis of 2008 brought the number down hardly at all.

1 comment:

Clonal said...

From the Glass-Steagall Act

Quote:Melanie Fein notes courts had confirmed by 1990 the power of banks to securitize their assets under Glass–Steagall
Wilmarth reported that during the 1990s credit card loans increased at a faster pace for lower-income households than higher-income households and that subprime mortgage loan volume quadrupled from 1993–99, before the GLBA became effective in 2000.