Did I forget to tell you about the Great Inflation?

Many economists say debt was "stable" before the 1980s. If you show them a graph of debt increasing rapidly since the early 1950s, they show you a graph of debt-to-GDP and point out that from the early 1950s to the early 1980s, the graph runs flat at 1.3-to-1 or 1.4-to-1 or maybe 1.5-to-1, but always flat and stable.

What agenda drives this nonsense?

Economists like to use "domestic nonfinancial debt" in their calculations, TCMDODNS at FRED. TCMDODNS includes the debt of governments, consumers, and nonfinancial businesses. It leaves out only the debt of financial business, the fastest growing debt of all. 

No problem. We can do it their way.

Lately I've been changing the "frequency" of the data from quarterly to annual, which gets me back to a 1946 start date, instead of to 1951 -- or back to 1945 if I go fetch the data item myself.

Anyway, here is TCMDODNS since 1946 and during the so-called "stable" era:

Graph #1: Domestic Nonfinancial Debt, 1946-1980

It reminds me of the covid graphs from early 2020: No problem, no problem, it's going up slowly, what's the worry?

IT'S A GODDAMN EXPONENTIAL CURVE. IT GOES UP FROM THE START AND IT WILL NEVER STOP GOING UP UNTIL WE DECIDE TO MAKE IT STOP.

We handled covid and debt the same way, pretending they were not problems. And our economy still has not recovered from either.

Take the debt from Graph #1 and show it in a Debt-to-GDP ratio:

Graph #2: Domestic Nonfinancial Debt relative to GDP, 1946-1980

I see first a lightening-bolt of downtrend, hitting bottom at 1.25 in 1951. Then, a persistent and rather rapid increase to 1.41 in 1963 and 1964. After that, it's flaccid -- or "stable", as they say. 

It is still 1.41 at the end there, in 1980, 1.41794. It rounds up to 1.42 this time, but I guess this is why economists say debt was "stable" before 1980, you get almost the same debt-to-GDP in 1980 as in 1963 and 1964.

I can see setting aside the lightening-bolt, because it happened before 1951 and because we can't see what happened before 1946. Myself, I would prefer not to say much about it except "there it is." But from 1951 to 1963 there was a pretty high-powered uptrend. I can see where it starts, and I can see where it ends.

Economists ignore this uptrend and say debt was "stable". I say 1951-1963 was the start of the problem of increasing debt. 

If the economists are right, there was no increase in debt before the 1980s. 

Did I forget to show you Graph #1?

 

If the economists are right, the 1964-1980 stability of debt was normal and natural. If I am right, it was abnormal and unnatural.

Did I forget to tell you about the Great Inflation?