Felix Salmon lists this as the chart of the day. The blue line equals GDP, the black line potential GDP (where we think we would have been without the recession) and the red line total credit market debt*.
Going to FRED we get the following numbers. These are in billions of dollars, rounded off for simplification. I have taken them from the January 1 listing at the start of each new presidential term, so we can track debt with who holds office.
1977- 3,000
1981- 4800
1989- 12,100
1993- 15,300
2001- 27,800
2009- 53,600
2011- 54,100 (Inc.)
Calculating this out for the eight year presidencies (I think this is more representative of presidential policy than may be the case with a four year president), we get the following percentage increases.
Reagan- 152%
Clinton- 82%
Bush- 93%
Salmon notes the following.
From 1970 through the beginning of the crisis in 2008, GDP grew at a pretty steady pace. But the amount of debt required to generate that output just got bigger and bigger — the rate of growth of the credit market was much faster than the rate of growth of GDP. In 1970, GDP was $1 trillion while the credit market was $1.6 trillion: a ratio of 1.6 to 1. By 2000, when GDP reached $10 trillion, the credit market had grown to $28.1 trillion: a ratio of 2.8 to 1. And by mid-2008, when GDP was $14.4 trillion, the credit market was $53.6 trillion. That’s a ratio of 3.7 to 1.
I would ask the following questions? What happened in the 80s to increase total debt so much? Is this sustainable? If we have become a credit driven economy, what ratio of debt to GDP is consistent with growth?
*Total credit market debt is a measure of ALL issued debt in the system including state, local and federal government debt, household debt (mortgage, consumer, etc.), non-financial business debt, financial debt and foreign debt.
Totally not tongue in cheek and not singling out Carter, I”m going to point to Depository Institutions and Monetary Control Act again, along with the Alternative Mortgage Transactions Parity Act of 1982 passed under Reagan.
http://money.cnn.com/2008/01/30/real_estate/congress_subprime.fortune/
Lots of credit is as seductive as the Sirens. But, there comes a point where people begin hitting the wall. Then the shit hits the fan. Federal debt actually lessened under Clinton, but Bush and Obama have pushed it way back up.
In general, the idea we can spend like crazy, personally, locally, and federally, and pay for it next year or the next decade seems to have become widely accepted. Maybe that’s rooted in us Baby Boomers. For a generation that protested against materialism, amongs other things, we certainly became materialistic, self-centered and selfish. In converstions, I’ve been amazed how little many in my generation care about what we pass on to our children. Of course, most of these with this attitude have no children.
This started when the Greatest Generation was in charge. The DIMCA may have contributed. It did let S&Ls expand outside of mortgages. It did lift limits on deposit account interest rates which was needed at the time. The FDIC has a nice chronlogy of events at the time. It is actually unclear to me what all of the factors were.
http://www.fdic.gov/bank/historical/s&l/
Steve
I can’t help but think that the popularization of bank credit cards (VISA, MasterCard) contributed quite a bit.