Three samples

The series starts here

Over the last few days we looked at FRED data for the period 1948-2014. And we looked at Historical Statistics data (along with RGDP from MeasuringWorth) for the period 1916-1970. Overall, 1916-2014. Almost a century.

I want to drop the first two years, 1916 and 1917, wartime years that throw off my trendline. So suppose we do that. And then, suppose we take what's left and divide it up into equal parts. Near equal: 1918-1949, 1950-1981, and 1982-2014.

Now I've got three non-overlapping time periods that span near a century in total. For each period, I want to do what I've been doing lately: figure the P2P (Private-to-Public debt) ratio. Make a scatterplot with P2P on the horizontal and RGDP growth on the vertical. And add a trendline, but this time a curved trendline for each period.

I want to put all the data and all the trendlines together on one graph. And I want to compare trendlines.

I expect each period will show higher RGDP growth associated with a lower P2P ratio. // yup, it does.

I expect the scatterplot trend will always show an increase in RGDP growth when P2P is below optimum, a peak at optimum P2P, and decrease when P2P is above optimum. // nope, it doesn't.

What I would like to see is whether the peaks occur together or not. My inclination is to expect that as private debt increases and as financial innovation develops ways to support that debt, we will see the peak shift rightward toward a higher P2P ratio. But that's just a gut feel. // the peaks came out all over the place, with no apparent relation even to the previous graph.

This is why we do graphs. // yup.

I'll go with the same data sources as in the earlier posts -- Historical Statistics and MeasuringWorth for the 1918-1949 period, FRED for the later years.

Graph #1

A little disappointing: It lacks clarity. The blue line peaks early -- at a low P2P, I mean -- but the red line hits bottom at that point. And the red is low again around 4.0 P2P where both blue and green are peaking. So there will be no jumping to conclusions today.

Still, growth does appear to be better at lower levels of P2P. The blue line has an obvious high at around 1.5 P2P, with a weaker high later. The red has a peak above 5% RGDP growth near 3.0 P2P, with a weaker high later. And the green has a peak near 4.0 P2P, with a weaker high later. In each sample there are two highs in RGDP growth, and in each sample the better growth occurs at the lower P2P.

Policy guidance.

// The Excel file.