Bezemer & Hudson:
Growth in credit to the real sector paralleled growth in nominal U.S. GDP from the 1950s to the mid-1980s — that is, until financialization became pervasive. Allowing for technical problems of definitions and measurement, growth of bank credit to the real sector and nominal GDP growth moved almost one on one, until financial liberalization gathered steam in the early 1980s.FRED:
If the growth of debt was one-for-one with the growth of GDP before the 1980s, the line would be flat before the 1980s.
Bezemer and Hudson say that the relation was one-for-one until the early 1980s. I don't see it. And this graph shows nominal values. If I showed inflation-adjusted values the increase would be steeper, especially in the 1965-1984 period that you want to say is flat even though it isn't.
I didn't make it up. It's BIS data, from FRED (copyright BIS).
Here is Figure 1 from the B&H article. It follows immediately after the paragraph I quoted above.
|Figure 1 from the Article by Bezemer and Hudson|
The dashed line shows the "cumulative difference between credit growth and income growth". It's always going uphill. This means the cumulative difference is always increasing. In other words, from 1953 to 2010 credit growth was consistently faster than income growth.
That's what the dashed line shows.
If you need a better look at change-in-debt relative to change-in-GDP, back in October I showed exactly that. It's a different, more comprehensive measure of debt than Bezemer and Hudson consider. But it shows what's going on. There is a slowdown of debt growth in the latter 1980s, and another during the crisis. But it's all uphill from 1952 to the mid-80s. Just like that dashed line of theirs.
It's not what their graph shows, either.