tag:blogger.com,1999:blog-2098432983500045934.post6209078129787675016..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: "I argue that the increase started well before the 1980s."The Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2098432983500045934.post-74589368658340896362015-06-18T17:22:37.676-04:002015-06-18T17:22:37.676-04:00My post had a very narrow focus - to justify my co...My post had a very narrow focus - to justify my continued contempt for Reagan. I wanted to indicate that his taxing and spending policies blew up the primary budget. Mission accomplished.<br /><br />Your graph 2 really brings home JWM's main point - that the interest payments were huge during the 80's and dominated the total deficit.<br /><br />I didn't intend to eliminate the influence of GDP on the deficit. That wasn't on my radar screen. I was just making sure the math wasn't distorted. Certainly GDP growth and interest rate changes are related; but it's not clear to me that there is a stable leader-follower relationship.<br /><br />Re: "Graph #2 shows a big increase in deficits in the 1980s, an increase that began, I'm tempted to say, in the 1950s."<br /><br />Yeah, there was an interest payment influence even back then. But I don't think anyone would have extrapolated the 50's numbers into the 80's reality. Nor do I think that the seeds of the 80's were planted in the 50's. Too much intervened. And, clearly, your graph 2 shows an inflection point right around the inflation peak of 1978. As you show in your graph 2 of the "Inflation Was Still High" post, interest rates remained well above inflation for the next 12 years.<br /><br />IIRC, Krugman has made the case that 70's inflation was largely the result of energy price shocks. <br /><br />http://www.macrotrends.net/1369/crude-oil-price-history-chart<br /><br />Now I wonder - did Volker really kill the inflation dragon, or did it die a natural death when it ran out of fuel?<br /><br />Cheers!<br />JzB<br /><br />Jazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-11095127295297585852015-06-18T06:41:13.632-04:002015-06-18T06:41:13.632-04:00not sure if that last line should read "a big...not sure if that last line should read "a big increase in deficits" or something else: "a big increase in financial costs" maybe<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.com