Sunday, August 7, 2016

About the vigor created by our next President


"The underlying reality of low growth", Neil Irwin says, "will haunt whoever wins the White House in November". I don't think so. I expect vigor, no matter who wins the White House in November.

I think it would be pretty ironic if Hillary Clinton gets elected. Because what I'm looking at amounts to vigor starting about a year into the first term of the next U.S. President. If Hillary is elected, we will be hearing stories that it takes a Clinton to create economic vigor. But Bill Clinton had no more to do with the good economy of the 1990s than Hillary does with the good economy of 2018-2024.

It would be more accurate to say that the changes which created the good years of the latter 1990s happened mostly during the Reagan and H.W. Bush years; and that the changes which will create the good years to come happened mostly during the Obama years.

For the record, the vigor of the 1990s was made possible by a big drop in debt growth (1985-1991) combined with a big increase in spending money (1990-1994). The debt-per-dollar ratio shows this as a decline (1990-1994). That decline was followed by unusually rapid increase (1995-2000). This increase was the source of the funds that made vigorous growth possible in the latter 1990s.

The changes are indicated in red on the graphs below:

Graph #1: The Growth of Total Debt
Graph #2: The Growth of Spending Money
Graph #3: The Debt-per-Dollar Ratio

You can see the same effects in the graph of household debt service.

Graph #4: Household Debt Service

The stage has already been set for the vigor that will be attributed to our next President.

3 comments:

The Arthurian said...

Arthurian monetarism.

Michael Leddy said...

I read and understood everything in this post. (There’s usually a lot I don’t quite get — which reflects on me, not on you.) I hope what you think will happen does happen.

The Arthurian said...

Thank you, Michael!