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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (3170)	1/13/2001 4:02:56 AM
From: Yorikke	Read Replies (1) \| Respond to of 33421

In a previous post I noted that according to the Minskian Economists the important point to note in economic data would be the rate of change of debt. They hold that the economic expansion has been funded primarily by increased debt loads of the private sector. Their contention is that continued economic expansion requires continued increases in total debt. The contention in many of the cited papers is that continued expansion of debt, would be impossible. And therefore a turn in the rate of change could be viewed as a precursor of economic contraction. Figures taken from the Fed web site and not adjusted for seasonality show the following. Average Rate of Change of Total Debt Q1 1999 0.6885% Q2 1999 0.5679% Q3 1999 0.5487% Q4 1999 0.3564% Q1 2000 0.3308% Q2 2000 -0.1091% Q3 2000 -0.0414% federalreserve.gov This indicates that the growth rate of total debt is reversing. It should be noted that this change is almost entirely the result of government debt retirement. The rate of change of Private sector debt is positive, it continues to grow, but at a somewhat declining rate. My supposition is that the Fed has the preliminary figures for December, and this along with the visible signs of slowing is what may have brought about the rate decrease. I don't know what AG is thinking but my bet is he very aware of this school of thought, and seriously considers the implications of declining debt on investment resources. Also, if we accept the contention that debt must continue to expand, then the tax cut concepts could help by limiting the expansion of Government Debt Retirement. Another possibility might be the ideas voiced by Levy. levy.org If political decision systems deadlock in the coming months, and Government debt continues to drop at rates grea t enough to offset consumer debt, then the Fed might actually be forced to take on this new roll of a pseudo development agency. Interesting, in the sense that Minsky's theory of Capitalist Development would predict some type of evolutionary change in financial institutions in such a crisis situation. If this is the case, business cycles would be impacted by yet another longer cycle operating above them.