Thursday, April 14, 2011

Big Red

When your memory is as short as mine, sometimes it is easier to start from scratch than to figure out what you did and where you got your data. So I went to Federal Reserve Statistical Release Z1 to get fresh data on debt.

Clicked the link for the current release (March 10, 2011). Downloaded the CSV file for the "Debt growth, borrowing and debt outstanding tables." Imported the D3 file to an Excel file and made it downloadable via Google Docs: D3 of 3-10-2011.xls.

I was going to do the same with the oldest available file. But there was no CSV, and the PDF was uncooperative. (There was a problem with my first-use of the Adobe Reader X, I think.) So I decided to work with just the one file.

The debt numbers run from 1979 to 2010. The file breaks total debt into several categories. I grouped them to get totals for private-sector debt (including household, business, and financial debt) and public-sector debt (including federal, state and local).

Private debt was roughly stable at about $3 per dollar of public-sector debt through the 1980s and early 1990s. But from 1992 to 2000 there was a continuous reduction in federal deficits. And from 1995 to 2004, more or less, the economy was particularly "good" for a while. (No relation.)
Other factors caused both those results, I think.
We use credit for growth in this country, so when the economy is "good" you expect to see the expansion of private-sector debt. This expansion, coupled with falling federal deficits and the briefly balanced federal budget (the denominator here) resulted in a jump you can see on the graph.

Private-sector debt rose rapidly from $2.50 (per dollar of public-sector debt in 1993) to more than $5 (in 2001). By 2007, private-sector debt rose to over $5.50 per dollar of government debt. Then everything fell apart.

Here is another look at the same source numbers. The red bars are total private debt; the blue bars are total government debt. In the blue you can see the debt growth of the Reagan years, and declining federal deficits in the latter '90s. You can also see an up-trend during 2008-2010, a result of stimulus spending and other policy responses to the financial crisis.

The red bars are total private debt.

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