Friday, December 5, 2014

Day 17, Page 12

Clopper says the NIPA series Net interest and miscellaneous payments on assets is a measure of all interest that is in GDP. That's a pretty useful piece of information.

I took the two "Net interest and miscellaneous payments on assets" series that we looked at yesterday and put 'em on a graph with FRED's "Monetary interest paid", the green one on Graph #1 here. The two "Net interest" series are dwarfed by it:

Graph #1: Net interest, quarterly (red) and annual (blue); and Monetary Interest Paid (green)

Obviously, then, I had to see the "as a percent" version:

Graph #2: All the Interest in GDP as a percent of Interest Paid

"Monetary Interest Paid" only goes back to 1960, so we lose the picture before that date. And because the series is annual, FRED converted the quarterly "Net interest" series to annual. That made the red and blue lines the same -- both annual, I mean -- and now the blue line is completely hidden by the red.

So, what do we see?

The interest in GDP rose to around 30% of interest paid in the mid-1970s, then trended down to half that number in time for the crisis. Up and down, part of the cyclical thing.

Now I'm thinking about all the interest that is in GDP, subtracted from GDP. I'm thinking about looking at GDP with and without the interest. I'm thinking about adding in all the interest that's not counted in GDP, and comparing that as well. The interest that's not counted is still a cost. We still have to pay it. It still affects demand.

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