Friday, January 21, 2011

GDP Minus Debt

Now THAT is an interesting chart. Ticker subtracted debt from GDP. He discusses it here.

1 comment:

steveegg said...

One basic problem with that chart - it does not discuss the why behind the "positive" movement of late. It isn't "exactly" because either GDP increased (it didn't in 2009) or because debt was actually paid off (it wasn't). Rather, it was the utter, involuntary repudiation of private debt, which overwhelmed the government's attempts to replace that with its own, that caused the "positive" spike.

Indeed, the upward ticks in my lifetime (coincidentally, perhaps, with the decoupling of the dollar from gold) sure seem to correlate rather well with major economic pain. Of course, not all the downward ticks since then correlate with economic growth.

It's a function of the type of debt, as well as the total amount of debt, that is the true indicator of economic health. At least in limited form, debt that goes toward infrastructure is "good" (private more so than public), while the increased use of debt as nothing more than a money-transfer vehicle is invariably a bad thing (public more so than private).