Summary:
I saw a comment about the drop in the U.S. Federal debt-to-GDP ratio, which reminded me that I wanted to discuss it once the data started to settle down. As can be seen in the above chart, the public debt-to-GDP ratio went from 135% in 2020Q2 to 120% in 2022Q3 (latest figure on FRED). A drop of (roughly) 15% in the ratio without some kind of “austerity” policies might seem surprising — but it is only surprising if you look at debt dynamics the wrong way. That wrong way is relying on “real” variables — real GDP growth, real interest rates — as well as thinking too much about long-term “steady state” or “equilibrium” values.The reliance on “real analysis” (ha ha) leads to silly things like charts of the U.S. debt/GDP ratio marching in a straight line towards 200%. (Yes, CBO, I am not
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
I saw a comment about the drop in the U.S. Federal debt-to-GDP ratio, which reminded me that I wanted to discuss it once the data started to settle down. As can be seen in the above chart, the public debt-to-GDP ratio went from 135% in 2020Q2 to 120% in 2022Q3 (latest figure on FRED). A drop of (roughly) 15% in the ratio without some kind of “austerity” policies might seem surprising — but it is only surprising if you look at debt dynamics the wrong way. That wrong way is relying on “real” variables — real GDP growth, real interest rates — as well as thinking too much about long-term “steady state” or “equilibrium” values.The reliance on “real analysis” (ha ha) leads to silly things like charts of the U.S. debt/GDP ratio marching in a straight line towards 200%. (Yes, CBO, I am not
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
Lars Pålsson Syll writes When usefulness is more important than precision
Bill Haskell writes The Plan to destroy Obamacare
NewDealdemocrat writes The ISM services index, measuring 75% of the economy, sounds an ‘all clear’ – for now, anyway
Joel Eissenberg writes High fructose corn syrup and your health
I saw a comment about the drop in the U.S. Federal debt-to-GDP ratio, which reminded me that I wanted to discuss it once the data started to settle down. As can be seen in the above chart, the public debt-to-GDP ratio went from 135% in 2020Q2 to 120% in 2022Q3 (latest figure on FRED). A drop of (roughly) 15% in the ratio without some kind of “austerity” policies might seem surprising — but it is only surprising if you look at debt dynamics the wrong way. That wrong way is relying on “real” variables — real GDP growth, real interest rates — as well as thinking too much about long-term “steady state” or “equilibrium” values.Bond EconomicsThe reliance on “real analysis” (ha ha) leads to silly things like charts of the U.S. debt/GDP ratio marching in a straight line towards 200%. (Yes, CBO, I am not laughing with you.) This framing also leads to neoclassical economists going on about the question: is r greater or less than g?...
Debt/GDP Ratio: Beware "Real Analysis"
Brian Romanchuk