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 = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
In the post Federal Debt/GDP – a useless ratio, I described the reasons why it was an apples/oranges ratio that had no descriptive or predictive value for any economist – though it is quoted often. You can read the post to see the argument.
Recently, I had a painful conversation with a 24 year old lad who, based on his vast experience, repeatedly told me I was wrong about nearly everything in economics, while providing zero data to support any of his beliefs – in other words, typical.
At one point, when he didn’t understand a basic graph I showed him, he informed me it was “obscure” and “crankish” (I have no idea), and that “most people use the federal deficit as a % of GDP,” a reference mostly irrelevant to our discussion.
Nevertheless, it occured to me that some of my earlier comments regarding Federal Debt/GDP may not apply clearly enough to Federal Deficits/GDP.
By law, the total of all federal deficits constitute the federal debt. I say, “by law,” because the federal debt, i.e. the total of outstanding T-securities, is not functionally necessary. The U.S., being Monetarily Sovereign, does not need to “borrow” the dollars it previously created and has the unlimited ability to create.
More specifically, federal “debt” is the total of all Treasury security accounts held at the Federal Reserve Bank. Essentially these are savings accounts held at “our” bank. To repay the so-called “debt,” the FRB merely debits the T-security accounts and credits checking accounts — exactly the same procedure as when you transfer dollars from your bank savings account to your bank checking account.
Banks boast about the size of their savings account deposits, and work hard to gain savings account deposits, but for reasons unknown, those deposits are not called “deposits,” when they are in the FRB. There, they are misnamed “debt,” and that misnaming has everyone all atither. T-securities are no more “debt” than are bank deposits, and place no burden on the FRB.
T-securities are optional relics of pre-Monetary Sovereignty days. But for the law, they need not exist today in any correspondence with deficits, which are nothing more than the difference between spending and tax collections.
Tweak the law and we could have infinite deficits with no debt, or we could have infinite debt with no deficits. Think about that, and if it puzzles you, feel free to comment on this post; I’ll go into further detail.
Anyway, there are vast numbers of people who not only fret about the Debt/GDP ratio, but also wring their hands about the Deficit/GDP ratio. Here is a historical graph of that later ratio:
The gray bars are recessions. What generality comes to mind about the relationship between the blue line and the gray bars? My generality is: When growth in Deficit/GDP falls, we eventually reach a recession, at which time growth in Deficit/GDP rises and we come out of the recession. If Deficit/GDP were negative to the economy, we would not expect such a result.
One could say it’s a result of automatic stabilizers or even coincidence, but I suggest there can only one serious explanation for such a dramatic graph: Reductions in Deficit/GDP lead to recessions and increases in Deficit/GDP cure recessions.
This should be no surprise, when we also look at the red line, which is deficit growth itself. It too demonstrates how deficit growth drops year after year (as debt hawks worry about deficits and force “revenue neutral” projects) until we have a recession, at which time the government spends stimulus money to get us out of the recession. Then, when we recover, we fall back on our bad, old “cut-deficits” ways.
Memo to debt hawks: If deficit growth were harmful to the economy, wouldn’t you expect to see at least a few occasions when several years of deficit growth led to recession? But that simply does not happen. Why? Partly because Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports. And, Federal Deficits – Net Imports = Net Private Savings – two fundamental equations in economics.
Federal deficits are an important component of GDP, Private Investment, Private Consumption and Net Savings. Reduce deficits and you reduce them all.
Perhaps this post can close the book, not only on Debt/GDP but also on Deficit/GDP. The next time you see or hear either of these ratios decried, you’ll know whether the writer or speaker understands economics and Monetary Sovereignty, or is just following the popular myth.
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports
40 thoughts on “–Myths about Debt/GDP and Deficit/GDP, while being 24 and believing those myths”
Given the equation for GDP that you provide, it seems like the number it would provide would be completely arbitrary and a meaningless indicator of the economy. Federal spending consists in great part to policy decisions. If the policies favor spending then GDP goes up and if the policies favor austerity GDP goes down (or at least the “federal spending” portion of the equation). These policy decisions would sway the final sum while no in way being predictive or descriptive of what is happening in the rest of the economy. Beyond the meaninglessness of the Debt/GDP ratio… is GDP a useless number as well?
If you think crime, prisons, car crashes, divorce court, environmental clean up from a giant oil spill, clear cutting a forest, privatizing water from a nearby stream, producing lots of bombs to kill brown people with, are “productive” economic activity, GDP is a great measure.
GDP ignores the non-market economy of household & community (did you clean your own floors today or babysit your neighbors children for a spell?), treats the depletion of natural resources as “income”, increases with pollution, ignores wages/distribution (GDP loves a single mother working 3 dead end jobs).
The GDP is a non-starter. The GPI ain’t perfect but would be a far better measuring indicator.
I’ve had a very similar response from the local UnCut group which focuses on taxation, specifically on increasing the amount of Federal taxes paid by corporations and the rich. I attended one of their meetings and stated to them that I believed they were barking up the wrong tree and that they first should attempt to understand economic realities before focusing on taxes as the culprit for our economic malaise. The group was comprised of many individuals in their mid-twenties to mid-thirties. The response received was very similar to the one you received. That your material and other material from MMT/Monetary Sovereignty was purposefully difficult to understand, calling it arcane. There was no swaying them from their beliefs. They are right and anyone who believes in anything contrary to their own beliefs is a buffoon or is purposefully making things difficult for persons like themselves to comprehend.
Award each of them a dunce cap and tell them you will continue to award dunce caps, you never will run short of dunce caps, and never will need to tax them any dunce caps — and that is how the federal government creates dollars — simply by awarding them.
They’ll respond, “But, printing money causes inflation.”
Then you’ll be able to say, “O.K., then we are agreed that the federal government doesn’t need to tax, federal taxes are unnecessary, and all we need to talk about is inflation.”
It probably won’t work, but there is a minuscule possibility someone will get it.
Rodger Malcolm Mitchell
At the moment the rich have huge amounts of money that they are neither spending to buy stuff nor investing to create new productive capacity. Taxing this money back (even though the government doesn’t need it) makes more sense than simply creating more dollars to make up for what is essentially dead money.
No, it’s not useless. The economy is highly interconnected. Spending in one area affects all other areas. If the government were kind enough to send me a trillion dollars, within a few weeks those dollars would be spread all over the economy, benefiting many millions of people and thousands of businesses — and increasing GDP.
In short, federal spending stimulates the economy and lifts GDP.
Rodger Malcolm Mitchell
“If the government were kind enough to send me a trillion dollars, within a few weeks those dollars would be spread all over the economy, benefiting many millions of people and thousands of businesses — and increasing GDP.”
Does this mean you support more quantitative easing from the Fed, since our current Congress is gridlocked?
Unfortunately, QE doesn’t work. It doesn’t add money to the economy, though it does add liquidity. It merely trades one form of money for another. If the Fed had the ability to buy lots of stuff, that would be good, but only Congress can do that.
I see what you’re saying, but it still seems like GDP is a “trumped up” number given that one of the variables is discretionary.
It would be like your doctor trying to create a single health index score for you to help you gauge your health. The formula would take into account weight, blood pressure, cholesterol count and how many smiley-face stickers he stamps on your hand. If he decides to go crazy with the stickers, he just positively effected the resulting product.
There may be some physiological or placebo effect to the stickers, so you would want to quantify the effect of the stickers not quantify the stickers themselves. Same too for the economy… don’t count the spent dollars, but rather quantify their effect once they’ve entered the economy. No?
Sorry for my abstract analogy, I hope its clear.
All the variables are discretionary. Gross Domestic Product is exactly what it says it is. It’s gross, not net. And it’s domestic, not international. It simply is the quantity of all goods and services produced in America.
How you use that number is up to you.
Rodger Malcolm Mitchell
My first impression of the graph was that deficits go up during recessions, and down during good times. That is, that the causality runs the opposite way. The empirical evidence indicates that automatic stabilizers are a large part of the causal mechanism.
And since there are no instances of deficit growth outside of recessions (or wars), we can’t know what would happen if the deficit grew in the absence of a recession. Given the automatic stabilizers, that would require some heroic policy measures.
Standard business cycle theory holds that the seeds of the recession are sown during the boom, that economic activity rises to an unsustainable level, and must correct itself. And it always overcorrects, leading to the next cycle. (Just like many other things in nature and human behavior.)
My second impression was that the dramatic policy changes had the opposite effect of what the conventional wisdom would say. Taxes were raised in 1981, and the deficit went up. Taxes were cut in 1983 (and spending started to rise faster than it had been rising before) and 1986, and the deficit went down. Raised in 1990, and the deficit went up. Etc., etc.
So, to pick one point at random, you’re saying that in 2006 if the deficit had only been large enough, and stable or rising rather than falling, then Lehman Bros. would still be with us, my house that was $300,000 in 2004 and $500,000 in 2006 would be worth $1M now instead of $200,000, growth would have continued, unemployment would have kept going down (and would be negative by now)? And, of course, no inflation? The economy would not have encountered any constraints to its continued growth?
Is your point, adding dollars to an economy causes recessions and taking dollars out of an economy is stimulative? Or are you just experiencing a “Let’s be negative” moment? 🙂
Deficits rise to cure recessions. Then, when the recession ends, the debt-hawks take over, and we start once again with the “revenue neutral” nonsense, leading to yet another recession.
You can attribute some of it to automatic stabilizers or to a conscious attempt to cure recessions. Or to both. Whatever.
The point is that increasing deficit growth grows the economy and reducing deficit growth leads to recessions — one every five years on average.
This is not surprising, since depressions come with reduced federal debt. (See: Item #3 at https://rodgermmitchell.wordpress.com/2009/09/07/introduction/ ) Look at the financial history of the Great Depression.
The other point is that maintaining the same deficit growth during good times, as we had during recessions, would prevent future recessions.
Since there has been zero relationship between deficits and inflation since we went off the gold standard, for which constraints have you found data?
Rodger Malcolm Mitchell
“If deficit growth were harmful to the economy, wouldn’t you expect to see at least a few occasions when several years of deficit growth led to recession?”
I’m thinking of one occasion, but I’m probably wrong about it. Didn’t the 2007 recession start after Bush had grown the deficit massively in the prior six years?
No need to reply, Rodger. I found the answer in one of your previous posts.
2004-2007 Federal debt fell from 15% to 3%
Actually, like virtually all recessions, this one began with reduced federal deficit growth:
Remember the Clinton surpluses?
It’s ironic that Dems criticized Bush for growing the deficit, but really he needed to grow it more in 2007 to prevent the coming recession – and I know you knew this and tried to tell the same to people back in 2007. I wish the federal government had listened to you.
I definitely remember the Clinton surpluses, and now understand that they guaranteed a recession.
Everyone criticizes the deficit and debt — Democrats, Republicans, Tea Party, #OWS, newspapers, economists. Clinton still brags about his surpluses, conveniently omitting the fact that they caused the recession.
None of the above ever has answered the simple question I repeatedly ask: What is the mechanism by which a reduction in the dollar supply can reduce unemployment and grow the economy?
Pete, I like the philosophy behind GPI (Genuine Progress Indicator), but the devil is in the details. GPI attempts to place a measure on such things as sustainability, wetlands, ozone, crime, pollution and all sorts of well-being concepts.
As such it is massively subjective — far more so than GDP. What is the value of a 1% increase in ozone, vs a 1% decrease in armed robbery (vs a 1% increase in car jacking) vs a 1% increase in the use of solar panels? And on and on and on. What is the value of a divorce with two, teen age children, versus a childless divorce?
You mentioned “. . . crime, prisons, car crashes, divorce court, environmental clean up from a giant oil spill, clear cutting a forest, privatizing water from a nearby stream, producing lots of bombs to kill brown people with . . .”
How would you measure each of those, and then combine those measures into a larger measure? What does privatizing water from a nearby stream cost?
Yes, GDP is an imperfect measure of our economy. But opting for GPI just because GDP is imperfect is a classic frying-pan-into-the-fire. Whatever the faults of GDP, GPI is orders of magnitude more vague, subjective and misleading.
Though GPI may have some emotional appeal, I can’t imagine how it could be measured and used in the real world.
Perhaps you have the answer.
Rodger Malcolm Mitchell
I feel like any attempt to include “costs” like environmental and social impacts are a step in the right direction. It could only be an improvement on the dated GDP, even if imperfect. Since ‘money’ itself is a vague attempt to measure/monetize an exchange amongst people (a social construct), why not attempt to put value to the externalities and non-monetized exchanges? It can’t be worse than burying them.
Pete, if you think GDP is controversial, try adding any social cost to the equation. For example, let’s take just one of the many thousands of social costs, divorce.
For instance, what is the economic cost of divorce? Think of all the variables in divorce, and how they all impact the economy. When you figure that out, what weight should it be given to divorce the GDP equation?
Again, I empathize with your desire to include some sort of happiness index in GDP, but I believe it cannot be done.
It reminds me of MONEY magazine’s list of “Ten Best Place to Live. Their rankings are based on: “the qualities American families care about most – great job opportunities, top-notch schools, safe streets, economic strength, nice weather, plenty to do, and more.”
Sounds wonderful, except how do they measure “great job opportunities”? How do they measure “top notch schools”? “Plenty to do”? Then how do they weight each of those variables against the others? And who says this all is correct in anyone’s opinion?
They came up with their answer: Louisville, Colorado is the best place to live in America. Do you believe It? I don’t. It may be a nice place by some measures and terrible by others. (Personally, I’d go nuts in a tiny town).
These subjective measures are based partly on psychology, and you know how hard to measure that is.
Rodger Malcolm Mitchell
“Tweak the law and we could have infinite deficits with no debt, or we could have infinite debt with no deficits. ”
So what journal entry would you process
At present the treasury
Debits P+L Expenses
Credit Liability (Govt debt or Fed reserves)
The credit is posted to a liability account. As it should be as the offsetting party (ies) would recognise the offsetting debit as a financial asset.
I know some propose crediting treasury revenue instead by say issuing high value coins but to me this is just creative accounting that would a dodgy accountant proud but is something I could not support.
Why does it matter? In previous posts I have awarded dunce caps for ignorance. I also have awarded “un-American” symbols. I can award an infinite number of dunce caps and un-American symbols.
I can account for them any way I please. My accounting method would not change one fundamental truth: I have the unlimited ability to award dunce caps and un-American symbols.
Similarly, the federal government has the unlimited ability to award dollars, no matter what accounting method it uses. It can debit an account called “Dollars created” if it wishes. Or any other account it can invent. Bottom line: Nothing limits the U.S. government’s ability to create dollars.
But what then is your accounting entry?
I agree with everything you say re money. But debt free money???
In a debt based money system debt free money is impossible. There is debt based money that will never have to be paid back. There is debt like Govt debt that can be created by a journal entry and allows people to save for their retirement (so IMO is good not bad and we need a lot more not less).
I would consider classifing Govt debt as a liability still but as say a non Govt retirement provision. Or base money rather than debt.
But NOT AS REVENUE. That’s all I’m asking. What accounting entry do you propose if not credit Liability Govt debt.
And the accounts do matter. So if your proposal is to
CREDIT Treasury Liability Dollars created
CREDIT Treasury Revenue dollars created
This is creative accounting that should have no place with either MS or MMT
Lifelong said, “At the moment the rich have huge amounts of money that they are neither spending to buy stuff nor investing to create new productive capacity.”
What are, for instance, the top five things the rich do with their money?
In what way does removing money from the economy “make sense”?
“In what way does removing money from the economy “make sense”?”,RMM
Perhaps by raising its loan rates when there is a need to control inflation ?,or to control private debt accleration?
Agreed, there is no debt free money, as all money itself is debt. However, that does not mean the federal government needs to borrow the dollars it previously created and has the unlimited ability to create.
I really don’t care what you call the accounts. The key is the government’s unlimited ability to add dollars to the economy.
Having worked as a programmer who wrote programs that updated the Federal General Ledger, I can shed some light here for both you and Rodger.
What you both seem to not understand is that there is actually two types of dollars and they are posted to the GL in two different ways.
1. Treasury issued coins and greenbacks (which we haven’t created since the civil war), enter the GL as capital in the same manner that an owner of a business puts his own money into a business.
Here is where Roder is correct, the Federal government can create any amount of coins and greenbacks and most important this type of dollar does not enter the GL as a liability!
2. Federal Reserve issued notes which are a PRIVATE bank’s commercial paper that has been granted MONOPOLY legal tender status (under a corrupt Senate vote passed by unanimous consent by only 3 Senators during a Christmas proforma session I might add!), which enter the GL as a liability in the same manner that an owner of a business borrows money to put in a business.
Here is where Roder is “technically” incorrect, the Federal government cannot create any amount of Federal Reserve notes because the Federal government is “technically” not the issuer!
But Rodger is “practically” correct, because the Federal Reserve would NEVER refuse to issue the requested notes because the government has to go thru the OBSOLETE mechanism of issuing Treasury securities to get those notes, and as a result the Federal Reserve earns the interest when those securities mature (to which 40% of our so called national debt is owed to them by the way!), even though the Federal Reserve is required by law to pass any excess profits back to the Treasury, since this interest is not considered profit like the difference btween paper bills and their face value is!
Also even if the Federal Reserve ever said no to the government out of spite, the government could simply create greenbacks and bypass the Federal Reserve anyway.
I hope this clears things up and helps Rodger better understand where I was coming from on our previous exchange about how the bankers “profit” from money creation and not the citizens, and why I am so anti Federal Reserve.
“. Treasury issued coins and greenbacks (which we haven’t created since the civil war), enter the GL as capital in the same manner that an owner of a business puts his own money into a business.
Here is where Roder is correct, the Federal government can create any amount of coins and greenbacks and most important this type of dollar does not enter the GL as a liability!”
Are you sure?
You are saying both notes and coins enter as
CREDIT TREASURY SHAREHOLDERS FUNDS
and is not included in treasury debt
I believe notes DO enter as a liability (and debt). But coins enter as revenue in some countries like Australia (an accounting treatment that seems very suspect)
Treasury issued coins and greenbacks (which we haven’t created since the civil war),
OK since the civil war. What I can almost guarantee is this treatment would be looked at very closely if the were used again in any quantity.
Who do you think those bankers are, who “profit” from money creation? Name one banker at the Fed who profits from Fed activities.
And how do any citizens ever “profit” from the federal government other than receiving federal payments?
Having owned a software company, I know this: Each programmer knows a tiny piece, not the big picture. You may have written programs, but your understanding of the fundamental truths about federal money creation is lacking — something like seeing a couple individual trees and having no idea about the forest.
The pervasive myth about the Fed being independent from Congress and the President is so ludicrous I have trouble believing intelligent people still believe it.
The Fed is part of the U.S. government. Bernanke and all the members of the Board are appointed by the President of the United States and serve at his pleasure. They are confirmed by Congress, which sets their salaries. The same is true of all the higher level employees. None of the Fed’s employees profits from any Fed activities. They all are salaried.
Although a Wikipedia source always is suspect, in this case there actually is a pretty good summary at http://en.wikipedia.org/wiki/Federal_Reserve_System
Rodger Malcolm Mitchell
You like most, fail to make the distinction between the Federal Reserve Board Of Governors which is the PUBLIC entity and the Federal Reserve Bank itself which is the PRIVATE entity.
Go to the Dunn & Bradstreet site ( https://smallbusiness.dnb.com/ ) and search for the both entities and you will see that they are listed as separate organizations and have two DIFFERENT credit reports, which obviously makes them different entities.
I think it is disrespectful for you to insult my intelligence just because you don’t know of this distinction!
You may know the forest of how money creation works but you sure don’t know the details if you don’t understand that coin and greenback dollars issued by the enity called the United States, are not the same as Federal Reserve note dollars issued by a PRIVATE entity called the Federal Reserve Bank which is not the PUBLIC entity called the Federal Reserve Board of Governors.
I did not have access to the whole computer system, but I sure as hell knew what accounts I posted which transactions to, and the coin transactions were posted as capital and the Federal Reserve Note transactions were posted as liabilities just like RJ said they were, to which you said you didn’t know or care.
You don’t think the bankers who have banks that are members of the Federal Reserve system, don’t profit from fractional reserve baking, where they are able to lend more money than what their depositors deposited, because the Federal Reserve bank can loan their member Federal Reserve notes that have monopoly legal tender status, which they would be unable to do if we had a 100% owned government central bank?
Credit Unions which can only load their depositors money don’t have this benefit, now do they?
The recent audit of the Federal Reserve for which we have Ron Paul and Bernie Sanders to thank for, showed that between Dec 2007 and Jul 2010, the Federal Reserve created $16 TRILLION dollars to loan to banks across the world.
Did we citizens profit from that $16 TRILLION dollars or did the bankers who gave themselves big bonuses profit?
If we had a 100% government owned central bank, we citizens would receive part of the interest paid by the entities receiving those loans made with that $16 TRILLION dollars, instead of the banks receiving all of it.
Google how much excess profits that the Federal Reserve returns to the Treasury each year, and you will see that for that last decade and it has been somewhere between $40 billion and $50 billion dollars.
Please note that this is “excess profits”, which is less than what the Federal Reserve deducts what it considers expenses, and we have no idea of how large this difference is, and that difference would be “profit” to we citizens if we had a 100% government owned central bank.
I know that if you gave my company’s commercial paper notes monopoly legal tender tender status, I could make a helluva lot more than $50 billion dollars in profit to return to the Treasury, how about you?
That is what I mean by bankers “profiting” from the Federal Reserve being the central bank and not we citizens who would “profit” with a 100% government owned central bank.
” . . . the bankers who gave themselves big bonuses profit?”
How big was Bernanke’s bonus?
“Credit Unions which can only load their depositors money don’t have this benefit, now do they?”
But just to be correct here they do not loan? their depositors money
Depositors money is a bank LIABILITY as you should know. A bank can not loan a liability
Banks create new money by producing a simple journal entry.
DEBIT Customer loan
CREDIT Customer deposit
They do not need depositors money (a bank liability) to do this. And often find reserves after the event to settle with other banks if required.
“profit from fractional reserve baking”
This is also incorrect. (but it is a mistake many make)
Fractional reserve banking was a method used in the past to RESTRICT bank lending. So banks made less profit due to fractional reserve banking.
I appreciate your comments based on your work knowledge but maybe your attitude towards banks is based on some misunderstanding?
” Did we citizens profit from that $16 TRILLION dollars”
What is your view on Govt deficits and debt. Because Citizens can and do benefit from both
And the Fed profit is returned to the US Treasury. So even if this is true back then (is it) today it make no difference at all.
“(under a corrupt Senate vote passed by unanimous consent by only 3 Senators during a Christmas proforma session I might add!),”
If the Federal Reserve is a “public” entity and part of the Federal government, why can’t the General Accounting Office look at the Federal Reserve books whenever they want, like they can for the Treasury department and every other entity that we all agree that are part of the Federal government?
Why did Ron Paul and Bernie Sanders and Obama have to make a law to FORCE the Federal Reserve to open their books for an aduit by the GAO?
Did not the Federal Reserve argue that they couldn’t be audited by the GAO because they were an “independent” and not a “public” entity?
What benefit is it to we citizens of the United States in having the dollars in our wallets being issued by the “Federal Reserve” entity instead of the expected “United States” entity?
You just made my point. The Fed can argue anything it wants, but Congress and the President make the rules. The Fed is like the offensive line coach, making a few in-game decisions, but Congress and the President own the team.
If you want to be afraid of someone, forget the Fed. Be afraid of Congress and the President.
The dollars in your wallet aren’t dollars. They are notes, i.e. evidence of dollar ownership, similar to real estate titles. The actual dollars merely are balance sheet notations, and are guaranteed by the full faith and credit of the United States of America.
The Fed began in 1913. Dollars began long before that. Congress and the President could eliminate the Fed, and your dollars still would be guaranteed by the full faith and credit of the U.S. There were dollars before the Fed, and there will be dollars after the Fed.
Now that I have answered your question, perhaps you will answer mine: Who do you think those bankers are, who you say “profit” from money creation?
Oh, I got those kinds of comments when showing a graph between the non-existent relationship between Money supply and Inflation. One of them jumped right off to name-calling and said those were not the official stats (they were) and [further name-calling].
Supposedly, he was an economist. I think he realised what that meant, hence his vigourous denial.
GDP is not correlated to national credit because it does not include credit in the calculation.
A better calc of productivity would be
P = GDP – Government deficit – Private Deficit – Company deficit
I would love to see what that chart looks like.
Productivity is measured in many ways. One approach is GDP / Average Weekly Hours of All Employees: Total Private (CEU0500000002)
We also can measure Productivity in various industry classifications. Mostly, productivity tends to rise because of mechanization and computerization.
Productivity has risen faster than wages and salaries.