317. Global crisis: one interesting plot

The Obama deficits are simply stunning – to the extent that I start to be pretty serious about the Russian scholars’ seemingly crazy predictions of a U.S. collapse etc.

To revenge, I have followed your example and included a “print this post” button on my blog (individual posts), too.

Is that graph corrected for inflation? Or otherwise, wouldn’t it even be better if the surplus/deficit were calculated as a proportion to the GDP? It seems that if you don’t do any of these, variations will become exponentialy bigger and turn any analasys meaningless.

Dear Daniel, if you do so, the recent era will be essentially unchanged, while the World War II will generate somewhat comparable deficits to this year.

Dear Lubos and Daniel,

Or otherwise, wouldn’t it even be better if the surplus/deficit were calculated as a proportion to the GDP?

Exactly.

the recent era will be essentially unchanged, while the World War II will generate somewhat comparable deficits to this year.

That’s what I have found, too, the only significant fluctuation is the WWII, while present crisis is nothing special. So, I think I have to doubt that Soros can make his conclusion based only on deficit data. On the other hand, inflation is really noticeable – is it good or bad? Of course, it’s bad: although one can introduce an inflation-related correction to deficit data, this correction is not introduced in reality to your salary

That’s, if deficit is going to be covered partially by you as a tax payer, one might expect certain growth of taxes. On the other hand, if deficit will be covered by printing out more cash (as it seems to be dealt with in recent years), the instability of the situation will just grow.

Anyway, I conclude that the scary thing is not budget deficit but inflation.

the Russian scholars’ seemingly crazy predictions of a U.S. collapse

Lubos, I did not know you are familiar with Khazin’s ramblings I am impressed (do you speak Russian by the way?)

Cheers,
Dmitry.

Privet, Dmitry,

Khazin is interesting, and I am familiar with his musings, but I actually meant Igor Panarin and his collapse of the U.S. into 6 states. See e.g.

http://www.supercollide.com/2009/01/end-of-us.html
http://online.wsj.com/article/.....38419.html

I included the supercollider blog because it’s fun that a supercollider blog reported on it, too.

I still speak and understand Russian at some basic level. I used to be very good in it, as a kid, and Tolik Morozov told me that when I visited Rutgers in 1997 for the first time, my Russian was better than my English.

Now it’s just OK but you can still join the crowds of Russian fans of the musician called L.M.:

http://www.youtube.com/watch?v=LgzhG-B4zWM

Best wishes
Lubos

Right now people are much more worried about deflation than inflation. You don’t want to fall in a deflationary trap which is extremely hard to get out off and much more devastating to economies.

So the federal reserve is pumping money like crazy trying to inflate the system to fight this, the problem is they are at the zero bound on the interest rates which means they no longer have as much control directly. Fortunately, the interest rate cutting efforts as well as other tools that have recently been put to use seem to be working somewhat, so the deflationary tendencies are less bleak than they were a few months ago.

So yes, eventually in a year or two they will have to be very, very careful about not inflating too much and they’ll have a tightrope problem between keeping the recovering economy growing and taming the urge to keep inflation in check.

I got a doubt. When they say they are pumping money, they are doing it from China’s Swiming Pool, right? I mean, they are not stupid of just pumping by just printing money like Weimar Republic and Zimbabwe nowadays, right?