Tuesday, January 19, 2016

Because I had to look

Jared Bernstein's recent productivity post includes this graph of price changes in IT equipment:

Graph #1
Note the low in the good years of the 1990s. When I see something odd in the 1990s I always think of the debt-per-dollar graph:

Graph #2
That's a new version of my DPD graph. TCMDO is "discontinued" at FRED. This graph uses the two series that together form its replacement. And I used the M1 measure with "sweeps" money counted in. Doesn't go very far back in time, but then that's the tradeoff: This is the "new" version of the graph. Even the oldest data on it is still new.

And then, what the heck, I re-created the DPD as an Excel graph and brought in Bernstein's IT Price graph as a background image. Moved and sized the background image to make the dates line up with my DPD dates. And there you go:

Graph #3
Any relation between the two graphs? Eh...

Maybe. I can imagine that the red and blue run parallel from 1984 to 1994, one smooth, one not, but parallel. Then the big drop in the blue, big price drops for half a decade, these follow after the down-jog in financial cost (red), just as soon as the economy started growing again.

After the 2000-01 peak, the red and blue run parallel again to the crisis. After the crisis, no relation.

I can imagine it.

This graph makes me want to look at other price patterns (other than IT) compared to DPD. I don't expect to find much. But maybe I'll take a look... I should look. My argument is that we had the good years of the 1990s because of the 1990-94 reduction in financial cost that the red line shows. I should expect to find price pattern changes in lots of sectors. Maybe not all as substantial as in the booming IT sector, but visible nonetheless.

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