Saturday, March 19, 2016

A Pictorial History: Private and Public Debt

The graph shows the size of private debt, as a multiple of public debt, for the years 1917 to 2014.

This graph shows the level of private debt relative to the level of public debt.
Or you could call it Non-Federal debt relative to Federal debt.
The older (blue) data are from the Bicentennial Edition of the
Historical Statistics. The newer (red) data are from FRED.
All these images use the same graph, with different highlighting.

The Ratio of Private to Public Debt Fell During World War One

After the War, the Roaring Twenties

The Great Depression and World War Two

After World War Two, a "Golden Age"

Beginning Around 1974, Two Decades of Sluggishness Ensued

Beginning Around 1994, a "Goldilocks" Economy. Good Years.

Since 2000, Slowing Growth

Crisis and Aftermath

A New "Goldilocks" Economy?


The Arthurian said...

When the line is going up, the economy is good... except, when the line is high, the economy is not good.

netbacker said...

Thank You! This is one of your best post ever!!
Took the liberty of posting them on Twitter.

The Arthurian said...

Thank you netbacker. You added words to my pictures, which really enhances the story. Nice work.

Plus, thanks for the praise. I can't get enough of that.

The Arthurian said...

From an old version of Mason & Jayadev's Fisher Dynamics PDF:

"While outside the scope of this paper, it seems clear that it was only the massive increase in federal borrowing that allowed the private sector to deleverage successfully in the 1940s."

Yes, that is definitely the sort of thing that is required before vigor can be restored. Okay. For example, the sixth graph above highlights the 1974-1993 period when, for the most part, Federal debt grew very fast and private debt almost kept up.

If private debt fell instead, the period of decline could have been much shorter, and vigor restored much sooner.