Thursday, April 11, 2013


Change in TCMDO, corrected for inflation. Log of that, so that a constant rate of growth looks like a straight line.

Graph #1: Natural Log of the Inflation-Adjusted Change in "Total Credit Market Debt Owed"

Same graph in Excel, with a Hodrick Prescott trendline:

Graph #2: Ditto, plus Trend

Straight lines indeed. The red line is flat, briefly, before 1958... Straight line uphill, 1958-1986... Straight line downhill, 1986-1992... And straight line uphill, 1992 to the crisis. I stopped the HP calc at that point so that the later decline did not drag down the earlier years' numbers.

The media would tell you debt is a problem over there on the right, where the blue line is broken and there is no red line.

Most people would tell you debt was a problem in the 2000s, where the red line goes above the 3.5 level, or maybe where it goes above 3.

Lots of people would tell you debt went up during the Reagan years. For some reason, most people don't seem to know about the great slowdown of debt growth, 1986-1992. Too many media stories, maybe.

Apart from that downtrend, I would say the only time the graph does not show a problem is in the early years, the early 1950s. That's the only time the trend does not show increase. Looking at this graph, you could have known by 1961 that debt was going to be a problem.

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