Tuesday, October 1, 2013

Pictures of debt, and the questions that are raised

After I wrote this morning's post I came across Krugman's Debt History from 2011:
As part of that long-term project, I’ve been looking at the long-term debt history of the United States, using both the Fed’s flow of funds data (which start in 1952) and the earlier, not quite comparable, data from Millennial Historical Statistics. Here’s what I think is a key chart; it shows nonfinancial private-sector debt as as percentage of GDP:

Krugman points out that the 1929-1933 spike is the result of collapsing GDP, not growing debt; "call it Irving Fisher’s revenge," he writes. He doesn't point out that the same thing could yet happen to us.

And he points out "the U-shaped trajectory over time." Kind of a key point.

The most recent comment below Krugman's post is a complaint about the discrepancy between the two series:

So, nobody wonders why the new series states indebtedness considerably lower than the old series (about 40 % of GDP at the end of the old series)? Looks a lot like making the figures appear better than they are.

A completely wrong focus. First of all, it's off the topic of Krugman's post. Second, the commenter has probably never run across the data discrepancy before, or not many times, for no one would express that complaint who is familiar with the data. To me this suggests that the commenter has spent little time looking at pictures of debt.

Maybe I find the comment irritating because I don't like the discrepancy, either. But jumping to the conclusion that they wanted to make the figures look better than they are is less the style of Evel Knievel than Wile E. Coyote.

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