Visualizing the collapse of Keynesian policy in real time…
At the end of fiscal year 1970, in nominal dollars, the post-war US debt outstanding (blue line) hit the amazing sum of $370 billion and was beginning a parabolic climb, as the crisis of the 1970s led to an implosion of economic activity.
By today’s standard, that sum might seem a mere pittance, but for its time it was rather unthinkable.
Which makes this story sort of weird, because, in terms of value (proxied here in constant 1929 dollars), 1970 was also the year when the post-war US debt outstanding (red line) hit its high point and began plunging due to devaluation of capital resulting from the crisis of the 1970s.
For comparison, I have created a chart with the two measures of federal debt outstanding for the 30 years covering 1950-1981, so you can see that contrast.
The first (blue) line, debt outstanding in current dollars, clearly show the U.S. debt going parabolic; while the second (red) line, debt outstanding in constant 1929 dollar, just as clearly shows the U.S. debt plunging for a decade.
Mind you, U.S. federal debt outstanding was not plunging for lack of deficit spending: between 1970 and 1980, the accumulated federal debt actually increased 244%.; rather, the value content of this increased debt contracted during the same period by 84.5%.
What are the implications of all these numbers?
I think the implication is that for the fascist to have just stabilized the economy during the 1970s would have required far more Keynesian stimulus than they ever imagined. If I am approaching this correctly, they would have needed something on the order of 600% more accumulated debt outstanding by 1980 in value terms.
What would that have meant in terms of current 1970s dollars?
I have no idea.
In large part, the devaluation of capital was so severe because the fascists were not prepared for intervention on the necessary scale. In an inconvertible currency regime, devaluation is expressed in the contraction of the value represented by a unit of the currency. Intervention is designed to prevent, or at least limit, devaluation of capital. If successful, the currency may not lose as much purchasing power.
Even during the Great Depression, the dollar was only devalued about 70%. But again, fiscal policy was weak until WW2. The fascists, like the value-form school folks, think in terms of value-less dollar debt and will never get this.
This, I think, is why at the end of fiscal year 2021 they may be at least $12-$20 trillion shy on fiscal policy stimulus and facing a big time implosion.
But that is another post.