Oddbean new post about login | logout One thing financial analysts tend to discount, is how much fiscal deficits feed into nominal GDP growth. It's a recursive destruction of the denominator that masks the issue. For example Argentina's deficit as a share of GDP historically hasn't been that big, but that's because their large deficit inflates the denominator and brings nominal GDP up at a fast rate. The deficit relative to the GDP from a year or two ago, was indeed a big ratio, but not the deficit relative to the GDP in the year it happens. Similarly, some financial analysts looked at the 1940s USA and saw that the Fed's purchases of Treasuries to fund the war deficit weren't that big of a share of GDP in any given yea. But my counter was, nominal GDP increased massively, due to the huge deficits and monetary base expansions. After a few years, the amount of Treasuries the Fed had purchased relative to the GDP of three years ago... was huge.
I hate to say it is all about the money, but it is all about the money.
Government spending should not be included in GDP. It’s malinvestment and isn’t a measure of economic productivity.
Loved your book, and very much appreciate nostr Lyn! Thank you 🙏 This clip came to my attention from a footnote of a recent article by nostr:nprofile1qqs2j4kx6hpqlejtf6q90mh285xvqlt4l596jm83j94kgpfgtk6usfgpz4mhxue69uhhyetvv9ujuerpd46hxtnfduhsyfgr6j https://youtube.com/watch?v=TLApM61XViA Only tangentially related to your post, but wanted to mention in case you might be inclined to share your perspective. Best
Cognitive disingenuous ance
Been trying to tell people this...it can be a big eye opener
In other words, Deficit spending is part of GDP, and also part of Debt. Thus, GOV DEBT/GDP has Deficit on top and bottom. If you add 5 to the top, you add 5 to the bottom. If Debt 35T, and GDP 25T (the USA now) you have: 35/25=1,4 (or 140%). Then, for example, deficit is 10T (actual deficit is like 3T) since Deficit is Spending it is part of GDP (since GDP is the sumation of all spenditure), but deficit is also debt. Then, you have (35+10)/(25+10) = 45/35 = 1.29 (or 129%). VOILA! Your Debt to GDP decreased, your government’s finances are now healthier. Shhhh 🤫🤫 don’t talk about the inflation 10T would generate.