Friday, January 11, 2013


In yesterday's post I showed a graph and asked, "When is the blue line below zero?"

Answering that question, I said several things that you cannot see on yesterday's graph. That's why I'm showing a different graph today.

The blue line on yesterday's graph shows "percent change from a year ago" for Federal debt relative to GDP. The blue line on today's graph is Federal debt relative to GDP, again, but just the plain ratio. No "percent change".

Today's graph shows whether there is "much" or "not much" debt. The blue line is Federal debt. The red line is everybody else's debt. Both are shown "relative to GDP".

The text below is from yesterday's post.

Debt relative to GDP
BLUE: Federal debt
RED: Everybody else's debt
When is the blue line below zero?

It was below zero until 1970. Of course, there was not much debt relative to GDP (other than Federal debt) in those days. And GDP growth was good.

And the blue line was below zero most of the time until the 1982 recession. There was still not a huge amount of "other" debt relative to GDP in those days.

But after 1982 the blue line almost never goes below zero again, because there was lots and lots of debt relative to GDP, Federal and other debt -- mostly other. And all of that debt hindered economic growth. And when growth is slow, the blue line goes up.

Oh yeah. The blue line does go below zero from 1994 to 2000, when the economy was growing well again. That was right after the years 1990 to 1993 when debt other than Federal debt went down. Relative to GDP, of course.

If you want to get the Federal debt down, you want to think about calling for all sorts of policies to reduce private debt so we can get the economy growing again.


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