Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Changes in federal debt seem to foretell changes in per capita GDP.
The following chart depicts the entire period, from the time the U.S. became Monetarily Sovereign until the most recent data:
To get a closer look, I’ve divided the above chart into segments. Here’s 1972 – 1975:
Federal debt and real GDP per capita changes both peak in 1973.
Federal debt and real GDP per capita changes both trough in 1974
Federal debt and real GDP per capita both peak in 1976
1980 – 1993:
Federal debt and real GDP per capita both peak in 1981.
Debt troughs in 1981; GDP troughs the next year, in 1982.
Debt peaks in 1983. GDP peaks the next year, in 1984.
Debt troughs in 1989; GDP troughs the next year, in 1990.
Federal debt troughs in 2000; real GDP per capita changes trough the next year, in 2001.
Federal debt and real GDP per capita changes both peak in 2004
2007 – 2010:
Debt troughs in 2007; GDP per capita troughs in 2009
Debt peaks in 2009 then drops precipitously; GDP per capita rises in 2010.
GDP per capita data is not yet available for 2011, but total GDP direction may give us a hint, as it peaks in 2010:
In summary, changes in federal debt correspond with, or closely precede the same changes in per capita GDP. What does that tell you about the “super” committee’s efforts to reduce federal deficit spending?
(See a related post at “Oh, you want to cure unemployment?“)
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings