Fifty Years of Economic History in one Figure

by on November 5, 2009 at 6:51 am in Data Source, Economics | Permalink

David Beckworth sums up a lot of recent economic history in one figure.

Spending history

A few thoughts:  I wish Arnold Kling were correct that inflation is around the corner.  We could use some inflation to get back on track.  Nominal wages are simply not flexible enough to get the job done in short order and there is much to fear from populist backlash.

See also the link above for a remarkably similar figure for the OECD which illustrates the US's role of monetary hegemon. 

1 not_scottbot November 5, 2009 at 7:01 am

‘We could use some inflation to get back on track.’

Irving Fisher on the phone, prof. Tabarrok. And I think his call took less than 49 seconds to place, by the way.

2 Ironman November 5, 2009 at 8:03 am

The U.S.’ demographics don’t as yet support a return to inflation (assuming that there is a demographic component to spending that affects its rate.)

3 stinkaroo November 5, 2009 at 8:36 am

I don’t have hard numbers, but I feel that we could help defeat deflation by lifting immigration barriers and restrictions. Wouldn’t that be the most painless way?

4 spencer November 5, 2009 at 9:11 am

the scales are the same. I do not see your problem.

5 Tim November 5, 2009 at 9:46 am

I think we’re experiencing inflation right now….asset price inflation. I agree though that we could use a little inflation in goods prices/wages.

6 Gabe November 5, 2009 at 10:50 am

how does inflating the money supply improve our mix of productive capital? And how does price inflation of goods improve our standard of living?…when food prices, health care and tuitions rise it decreases my standard of living. Of course silver gold and oil price increases are good for me because I am betting that the dollar will continue on it’s path to 3rd world status. Too many spineless idiots running this country and the Fed.

7 spencer November 5, 2009 at 12:07 pm

You should compare this to my chart of Labor’s Share of nominal output in my post on productivity at Angry Bear.

8 anon November 5, 2009 at 3:31 pm
9 Randall Parker November 5, 2009 at 9:46 pm

A larger fraction of total economic output is flowing to a smaller fraction of the populace and this smaller fraction is more inclined to save, not spend. This means more asset inflation and less consumer price inflation when monetary policy is expansionist.

10 Go Horns! November 5, 2009 at 10:24 pm

Why would it be bad if we ended up at 0% nominal growth on spending for a while?

11 Rick Caird November 6, 2009 at 6:06 pm

If you were on a fixed income, I doubt you would welcome inflation. I seem to remember the 70’s found inflation to be a problem.


12 Matthew November 7, 2009 at 7:20 am

Housing prices are rising because the zombie banks (and now the FedGov via Fannie, Freddie and FHA) are sitting on a nearly infinite amount of shadow inventory, not letting it hit the market, the no-money-down / bad credit mortgage is back (thanks to the Fed), and non-payment of mortgage means a free place to live for 12-24+ months instead of nonpayment of rent which gets you evicted in 30-60 days.

13 AVeryRoughRoadAhead November 8, 2009 at 4:32 pm

“Would the larger proportional growth in available workforce in the 1970’s account for a chunk of the 1970’s spending spree?”


Further, if we adjusted the graph to reflect per capita spending, then that plunging line at the end would have to be extended downward.

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