Following up on yesterday's post where the uptrend-to-crisis pattern of debt dominated all three graphs:

Graph 1: Year-to-year change in TCMDO debt, in billions.

Graph 2: Revision to the first graph to allow for rising prices.

Graph 3: Revision to the second graph to allow for real growth.

The two considerations, price increases and real growth, had almost no effect on the pattern of increase in debt. Debt was the dominant factor.

But you know, it was only three graphs. So today I want to look at variations on the relations we looked at yesterday. Maybe it was just a fluke that made debt seem to dominate the other factors.

Yeah, right.

All these graphs from yesterday and today are based on three FRED data sets:

TCMDO debt

GDPDEF (the GDP Deflator) as a measure of prices

GDPC1 as a measure of real (inflation adjusted) GDP

Yesterday we looked first at the year-to-year difference in debt. For the second graph I divided the year-to-year number by the price series. And I divided that result by real GDP for the third graph. Not much science in that sequence of events; it's just where my

Today I want to start with the year-to-year difference for prices, and for real GDP, as we did yesterday for debt.

Graph #1: the GDP Deflator as a measure of prices. Usually a graph of prices shows the percent change. This graph only shows the difference in the Deflator value from one year to the next.

At about 4.5, the high point on Graph #1 is lower than what we usually see. And the later values are higher than usual, near half the peak. But that high point is part of the Great Inflation, to be sure.

Graph #2: Change from prior year value of inflation-adjusted GDP, in billions of 2005 dollars.

There is a general uptrend throughout the period. But as with the previous graph, this graph shows a simple difference, not percent increase.

Okay. Next I want to take the other data series and divide by it. That's what I did yesterday when I started with debt. Today I save debt for last.

Graph #3 shows the Graph 1 values divided by Real GDP.You can still see the Great Inflation, that high spot that should go from the mid-1960s to the early 1980s. A little hard to read the dates.

Graph #4 divides the Graph #2 series by the price level. Where Graph 2 went up, Graph 4 goes down.

I want to say Graph 4 goes down because prices went up. Writing this in the wee hours here, I don't have much to say about these graphs other than "here they are'. But I think it is important to look at different relations of the same data we looked at yesterday. Maybe something will turn up that suggests yesterday's impression of things was simply coincidence, or was not.

Okay. Now we've looked at the change in prices, relative to real output, and the change in real output relative to prices. All that's left is to divide Graph 3 and Graph 4 by debt.

Graph 5 shows what happens when you take the numbers from Graph 3 and divide by TCMDO debt. You can still see the Great Inflation there, but much reduced. And the numbers are very low, and drop off to zero because debt is so big and so dominant.

Graph 6 shows what happens when you take the numbers from Graph 4 and divide by TCMDO debt. The line still goes downhill, quickly now. The numbers are very low, and drop off to zero because debt is so big and so dominant compared to everything else.

Debt is the dominant factor.

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