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Correlation between Italian GDP and Composite PMI (via More Awful Economic Data Coming From Europe Today)
In the figure below, I show two series. The red line (left scale) is nonresidential fixed investment spending – basically, business investment — as a percentage of GDP, from the BEA. The blue line (right scale) is the output gap — the percentage difference between real GDP and the CBO’s estimate of potential real GDP. (via Why Isn’t Investment Higher? - Paul Krugman Blog - NYTimes.com)
I’ve been playing around on a simple google spreadsheet on debt sustainability. The math of an indebted country with little GDP growth and a primary (i.e. before interest payments) deficit is rough and will ultimately lead to a debt spiral. Interesting how people forget about the exponential dynamics of interests and debt.
Mr. Lipsky said the average ratio of debt to gross domestic product in advanced economies was expected this year to reach the level that prevailed in 1950. Even assuming that fiscal stimulus programs are withdrawn in the next few years, that ratio is projected to rise to 110 percent by the end of 2014, from 75 percent at the end of 2007.
The ratio is expected to be close to or to exceed 100 percent for five members of the Group of 7 countries — Britain, France, Italy, Japan and the United States — by 2014. Canada and Germany are the other G-7 members.
I had never thought about a mix effect on velocity of money: wealth concentration reduces velocity of money because it shifts money from high-turning people (wage earners, that spend most of what they earn) to low-turning people (wealthy individuals that park their savings in investment funds).
