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Posts tagged with: "GDP"

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Household debt meets corporate debt

Households take on debt for a variety of reasons, such as financing education and purchasing a house. Household debt in the U.S. increased from 59% of GDP in 1990 to 98% of GDP in 2009, and many economists argue that the Great Recession was “Great” because household leverage was so high at the time. It has since declined steadily. In fact, in 2019, household debt and corporate debt were the closest they have been in nearly 30 years.

The FRED graph above shows both series as a percentage of GDP: household debt and corporate debt. Household debt has exceeded corporate debt since the early 1990s, and this difference was particularly large in the years leading up to the Financial Crisis of 2008. For instance, in the third quarter of 2006, household debt was greater than corporate debt by as much as 31% of GDP. In the years since the Great Recession, however, U.S. household debt has steadily decreased. This decline, accompanied by an increase in corporate debt since 2012, has reduced the gap between household and business debt. In fact, in the last quarter of 2019, household debt and corporate debt were both around 74% of GDP.

What has driven this decrease in household debt? There are many types of household debt: mortgages, student loans, auto loans, credit card loans, etc. The second FRED graph decomposes household debt into some of these categories and shows that the decrease in household debt is driven primarily by the decline in mortgages over the recent decade. Auto loans have remained stable as a percentage of GDP; student debt has increased slightly, but not nearly enough to offset the large decrease in mortgage debt.

How these graphs were created: First graph: Search for and select “Nonfinancial Business; Debt Securities and Loans; Liability; Level.” From the “Edit Graph” menu, add the series “Households and Nonprofit Organizations, Debt Securities; Liability, Level.” For both lines, add the second series “Gross Domestic Product, Billions of Dollars, Seasonally Adjusted Annual Rate.” To rescale the series as a percentage of GDP, change the formula to (a*100/b) in the formula bar. Second graph: Search for and select “Households and Nonprofit Organizations, Debt Securities; Liability, Level.” From the “Edit Graph” tab, search for and add each of the following FRED series IDs: HHMSDODNS, MVLOAS, SLOAS. For each line, also add the series for GDP and then change the formula to (a*100/b).

Suggested by Asha Bharadwaj and Miguel Faria-e-Castro.

View on FRED, series used in this post: CMDEBT, GDP, HHMSDODNS, MVLOAS, SLOAS, TBSDODNS

Central banking since 1701

Three centuries of Bank of England asset data

The British have a history of recording excellent historical data, and we’ve already written a few related posts. Today we look at central bank assets for the Bank of England, founded in 1694. The graph above shows the assets as a share of GDP since 1701, which is a remarkable timeline, especially because it requires estimates of GDP from before the American Revolutionary War not to mention the Battle of Culloden!

This FRED graph shows us that assets in the 18th century reached a fifth of GDP before slowly receding. There were run-ups during the turmoil of the Great Depression, World War II, and the Great Recession and its financial crisis. For comparison, we added the (much shorter) corresponding series for the United States in red. It’s pretty amazing how well they match up.

How this graph was created” Search for “Bank of England assets,” select the appropriate series, and click “Add to Graph.” From the “Edit Graph” panel, open the “Add line” tab, and search for “federal reserve assets.” Once you have the series, change its frequency to quarterly, add a series looking for “nominal GDP,” and apply formula a/b/10. (We multiply by 100 to get percent but divide by 1000 to have the same units for a and b: thus, /10.)

Suggested by Christian Zimmermann.

View on FRED, series used in this post: BOEBSTAUKA, GDP, WALCL

Switzerland’s mountainous monetary base

More Swiss uniqueness on their national holiday

Today is the Swiss national holiday. In the past, we’ve taken this opportunity to discuss some unique (i.e., weird) feature of the Swiss economy. This time we use FRED to compare the Swiss monetary base with the U.S. monetary base. To make them comparable, we divide each by its country’s nominal GDP. We see that the general patterns are similar, with a sudden increase in 2008. While the U.S. monetary base has started to go back down (it’s lost a quarter since its high point), there’s nothing that shows any tendency to return to the long-run trend. Indeed, Switzerland is still working with extremely low (even negative) interest rates.

But let’s talk about the stark difference shown in the graph. This statistic for Switzerland is dramatically higher than it is for the U.S.: The Swiss monetary base is now worth over three years of its GDP, while the U.S. monetary base is worth only about two months of its GDP. There has always been a large difference, but it’s larger than ever now. This situation is likely fueled by the oversized banking sector in Switzerland as well as the refuge currency role of the Swiss franc. The latter is particularly true in times of uncertainty, including the uncertainty of its neighbors’ currency, the euro.

How this graph was created: Search for and select “Swiss monetary base” and click “Add to Graph.” From the “Edit Graph” panel, add a series by searching for “Switzerland GDP,” taking the quarterly series with nominal data, and applying formula a/b. Then, from the “Add Line” tab, search for and select “monetary base,” add a series by searching for “GDP” again taking the nominal series and applying formula a/b/1000. Finally, adjust the sample period to start in 1980.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: BOGMBASE, CPMNACSAB1GQCH, GDP, SNBMONTBASE


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