Friday, March 21, 2014

Getting it

I saw one of those build-a-story things on the internet the other day. You know -- read what everyone else has written, and add a sentence to build the tale.

I think stories get told like that on serious blogs, too: economic and political blogs. It's like building a meem. (I'm spelling it "meem" from now on, by the way.)

You know, I don't like those stories. Not when it comes to politics and the economy. These things affect people's lives. We need something better than just good stories. We need the stories to be right.


You got this from me. I got it from Tom Hickey. Tom got it from Mark Buchanan.

"A picture makes it clear", Buchanan says: "the recession IS over". He presents

a graph showing that the level of private debt — an indicator of how much businesses and individuals are borrowing—is now going up again after a long decrease during the recent crisis.

It's a little funny... Buchanan thinks the level of private debt is "an indicator of how much businesses and individuals are borrowing". I think the level of private debt is a measure of how much we have borrowed in total (and not repaid). It's the changes in that level that show whether people are borrowing. It's like "present tense" versus "past tense".

Anyway, Buchanan got it from Steve Keen:

Figure 1: Deleveraging is over -- for the time being

Referring to that graph, Keen writes:

The period of private sector deleveraging that caused the crisis appears to be over. Debt is now not merely growing, but growing faster than GDP...

Looks right to me.


Keen's post is dated 10 March 2014. In a post dated 9 July 2013, Nick Rowe wrote

If you look at business cycles this way, as a trade cycle, in which the volume of trade rises in booms and falls in recessions, it is totally unsurprising that the volume of borrowing and lending should also rise in booms and fall in recessions...

What would be surprising and in need of explanation would be if trade in IOUs did not follow the same cyclical pattern as trade in other goods.

Neil Irwin tells me that trade in IOUs is increasing in the US. (HT Mark Thoma). He's right that it's good news.

Nick Rowe got it from Marc Thoma. Marc Thoma got it from Neil Irwin.


Okay. Let's put a date on the "taper". From the Financial Times Lexicon:

"Taper talk" started in June 2013 when speculation increased that the Fed would start on a tapered end to QE in 2014. The increase in bond yields had already inflicted heavy losses on bond investors.

So, June. A month before Rowe and Thoma and Irwin. I think I know where Irwin got it. Irwin got it from the Fed.

But where'd the Fed get it?


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