Monday, May 13, 2013

An inverse relation

Via Random Eyes:

Pretty interesting: The interest rate and the Federal debt (relative to GDP) move in opposite directions. For a good long period, too: half a century.

It would be a mistake, however, to assume there is a causal relation between these two factors. That would leave out too much. Why do interest rates (blue) continue to rise in the 1970s when the Federal debt (red) is essentially flat? Why do interest rates fall through the 1990s while the Federal debt makes an S turn? There is more to the story than we can see on this graph.

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