I like that word, 'perky'

I was extremely happy with my recent post "We tried that already", except that in the middle of it I said

expansion of the Federal debt leads to expansion of private-sector debt

One of those things: I believe it's true. And nobody objected to it, so I figure nobody objected to it.

I'd say it is Keynesian. Or maybe fusion economics, Keynesian plus modern-era. From Keynes, the idea that big Federal deficits pull the economy up; and from us, the notion that using credit is good for growth.

I didn't doubt what I said. I just didn't like it dangling there, unsupported. So I was looking for a graph that shows the expansion of Federal debt leading to the expansion of private sector debt. It's one of those things: I needed it to be obvious on the graph. I didn't want to argue the point. It should just be obvious.

The dogs woke me up in the middle of the night to go out, and while waiting for them to return I turned the computer on and thought about the graph that should make it obvious. Funny thing, after a few days of nothing being obvious, I wake up at one o'clock in the morning and I know it should be obvious on this graph.

So I made the graph, and added arrows to show increases in Federal debt leading to increases in private-sector debt. Actually, increases in Federal debt leading to increases in everybody else's debt, the non-Federal debt:

Graph #1:  Federal (blue) and Non-Federal (red) Debt Growth Rates

The arrows show where it is obvious that the growth of Federal debt leads to the growth of non-Federal debt: Nothing really since the 1980s, and the one in the early '80s was not very perky.

Not what I expected to see. But come to think of it, maybe I should have expected it. The graph in the "We tried that already" post shows a change in Federal debt growth beginning around the mid-1970s. This one does, too.

"Expansion of the Federal debt leads to expansion of private-sector debt." Now, I doubt it.

Private-sector debt is already so big and costly that it undermines the effectiveness of the boost provided by the big new public spending: a problem that was making itself obvious in the mid to late 1970s.