Reprise: Debt and Potential GDP

Building on mine of 31 March 2013...

Graph #1: NonFederal Debt as a Multiple of Federal (blue) and the Rate of Change of Potential GDP (red)

In the early years when the blue line is low, the red line is high. In the late years when the blue line is high, the red line is low.

In the early years when Non-Federal debt is low (relative to Federal debt), Potential Output is high. In the late years when Non-Federal debt is high (relative to Federal), Potential Output is low. Now you have everything you need to fix the global economy.