Complexity: Economics and Weather
Why cause and effect may not be obvious in our economy.
A large economy has, and must have, a greater supply of money than does a small economy. Therefore, a growing economy requires a growing supply of money.
Federal debt is one part of Total debt, which also includes consumer debt, business debt and state and local debt. Total Debt can grow, while Federal Debt declines. Any part of Total Debt can grow or decline, while Total Debt grows or declines.
Every form of money is a form of debt. There is no money that is not debt. Therefore a growing economy requires a growing supply of debt. This is the fundamental, though counter-intuitive, tenet of FREE MONEY. The majority view is: The Federal dept is too high; it weighs on the economy; a reduction in Federal debt would benefit the economy. To overcome the majority view for any idea, one needs powerful evidence, and indeed such evidence exists in the book FREE MONEY and on the pages of this web site.
Nevertheless, those who doubt the Free Money tenet point to times when a growing debt supply percentage has not corresponded with a GDP growth percentage. Such times do exist. See the chart, below:
The red bar shows Total debt (money supply) annual percentage growth. The green bar shows GDP annual percentage growth. As you can see, the two bars are generally parallel. But they are not perfectly parallel.
In 1980, 1986 and 1993 they seem to move in opposite directions. In 1980, money supply growth increased, while GDP growth decreased. In the other two years, the opposite happened.
This leaves the question, "If a growing economy requires a growing supply of money, why are there times when money supply growth and GDP growth are not parallel? That is the question this page attempts to answer, in part by presenting an analog to weather.
While history does indicate that a growing economy requires a growing supply of money, the U.S. economy is quite complex, and is affected by many factors. Energy prices and availabilities, the economies of other nations, technological, environmental and political changes, the location and direction of money (domestic vs. international) all can affect the course of our economy.
In this sense, our economy can be compared with the weather. The single most important determinant of temperature is the amount of sunlight hitting any specific place on earth. In Chicago, the amount of sunlight (length of day and angle of the sun's rays) increases from late December through late June.)
If there were perfect correlation between sunlight and temperature, every day in March would be warmer than the preceding day. Obviously, that is not true, because of other factors, such as wind, clouds, fronts, precipitation, air pollution, etc. Despite the unpredictability of daily temperature, no one denies that sunlight is the primary factor affecting temperature. What if we were to chart a very long period -- 1872 through 2006 -- to test whether sunlight really does determine temperature.