Wednesday, January 7, 2015

Failures and TCMDO Growth

Failures and TCMDO growth are not unrelated:

I took "Failures" from earlier today, put it in context (i.e., divided by inflation-adjusted GDP), showed it in blue, and put the annual percent change in TCMDO debt on the same graph. (The debt number is scaled down to make the two high points roughly equal.)

There is definitely a relation between "failures" and the decline of debt. So, there is definitely a relation between  debt growth and economic growth. I just think we need to be careful and cautious when we attempt to describe that relation.


Looking again at the above graph... It is interesting that the high peak in the blue line seems to occur at the same moment as a "secondary" drop in the debt trend. After 1970 the red line shows three substantial peaks, and three "bottoms" that seem to sustain the general upward trend of debt growth. The last of those three bottoms comes just before 1990 and just after the red and blue lines cross: the red line briefly jogs upward again.

But that is the moment that the blue line peaks; and concurrent with the fall from that great blue height the red line drops, making a substantial departure from its general upward trend. I think that's interesting; I wonder what policy was doing just then; and I wonder in particular whether monetary tweaks had anything to do with it.

"I wonder in particular whether monetary tweaks had anything to do with it." Before you object to that thought, please recall that debt is a monetary phenomenon, and that a "fiscal" policy of deficit spending is very much a monetary tweak.

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