The Tides of Prosperity

The graph shows three periods of prosperity: the Roaring Twenties, the Golden Age of Capitalism, and the New Economy of the latter 1990s.

Shooting from the hip, I figure 9 years of prosperity in the Roaring Twenties, 25 years during the Golden Age, and 6 for the New Economy. That's a total of 40 years of prosperity out of 100 years (and more) shown on the graph.

Forty good years, sixty bad years. We can do better. It should be easy to do better. The graph provides clues:

1. Prosperity only happens when the plotted line is going up. The line goes up when private debt is growing faster than public debt. But prosperity does not begin until the ratio is low enough to let it happen.

2. When the plotted line gets too high, prosperity gives way to hard times. 

3. In hard times, there is no relief until the plotted line is low enough for prosperity to begin again.

These things, the graph shows. What the graph does not show is that political "debt ceiling" strategies, by forcibly reducing federal spending, will ceteris paribus increase the private-to-public debt ratio and move us away from the low that we need to reach so that prosperity can begin again.