Stylized Facts
- Net Exports goes negative in 1973 and never recovers. One word: oil. Even the USD depreciation after the Plaza Accord (the one Martin Feldstein likes to pretend was inevitably going to happen then) can’t quite get it back to being positive. And once outsourcing industry to China hits full stride…
- Private Investment peaks in 2006. Dating the start of the
currentrecession from December of 2007 still strikes me as being six months late. - Consumption goes up fairly steadily from 1981, encompassing 8% more of total GDP—around a 12% increase over less than thirty years. Coincidentally, the Reagan Revolution moves taxes more heavily onto consumers at the same time. (Note that only about half of the appreciation in consumption is reflected in the change in Net Exports.)
- Government spending declines starting around 1991, when the Real George (H.W.) Bush breaks his “no nude Texans” pledge. The era of Big Government remains over until George “Dad’s Rolodex Got Me Another Job I Can Screw Up” (W.) Bush desperately needed people to be employed:
Those are my top-of-the-head ones. What are yours?
you can’t understand the economy until you see this:
http://research.stlouisfed.org/fred2/series/TCMDO
Something bad happened in 1995.
Scaling this by wages makes everything clearer:
http://research.stlouisfed.org/fred2/graph/?g=2Hh
Adding back in total debt (red line):
http://research.stlouisfed.org/fred2/graph/?g=2Hi
Shows there’s still $20T of unsustainable debt compared to 1999.
Of course, interest rates were 5%+ in 1999, so today’s lower interest rates can support some of that debt.
But people thinking 5% interest rates are coming back need to get their head around that leverage.
“Net Exports goes negative in 1973 and never recovers. One word: oil” Another word[s]: Triffen Dilema.
Troy,
Steve Keen writes on this extensively. Send a post? Or I can borrow one from Steve.
WRT my “something bad happened in 1995” thing above, there’s:
http://research.stlouisfed.org/fred2/graph/?g=2Hs
which breaks down system debt by sector; blue is federal, yellow is financial, red is corporate, and green is consumer.
Up to 1980 things were rather restrained as the postwar debt was inflated away.
The yellow curve shows 2 s-curve events, the first in response to Fed easing and deregulation in the 1980s, and the second coming in the mid-1990s.
The 1990s saw the financial sector go from last to first in terms of leverage relative to the overall economy, then they added another 50% during the bubble.
Corporate debt consolidated in the tech bubble, but household debt took off in 2000 and only topped out in 2007.
Corporate debt returned towards the end of the bubble, and once everything collapsed in 2008 federal debt has spiked to try to give us a “soft landing” as everyone else continues to default and deleverage.
That Steve Keen stuff looks very interesting.
I agree with him that we need to model the global economy at the money level not just take things in isolation.