Thursday, March 19, 2009
Interesting Charts and Questions
I get a lot of stuff sent to me throughout the week. Here was an interesting economic graph and table from this week. They give an interesting global framing of the numbers we often hear in the news. Is the US in a position of relative strength or just less worse than everyone else?
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I don't understand what the chart is trying to say. All i gather from it is that the US deficit is greater than most countries' annual GDP. That doesn't tell me anything about the relative health of any country. It's like comparing XOM's debt to every company in the S&P 500. Of course once you start comparing it to the equity of the smallest members, the ratio will get huge. But this doesn't tell us anything about XOM's ability to service it's debt. (excuse this analogy using stock vs flow data, but I think it still works)
ReplyDeleteIt would be better to compare the 12% to the historical US deficit/gdp ratio (previous post-WWII high was 6%). Of if you really want to start comparing us to Europe you can compare our 12% to what their deficit/gdp ratios are (the EC has a 'ceiling' of 3% deficit/gdp for countries in the euro-zone, but i doubt any of them will hold to that during crisis times).
The top chart is also a little misleading with its lack of labels ... The US deficit line is straightforward enough, but I think the others are the countries' gdp's, not their deficits. I spot checked Spain, and their projected '09 deficit is about 6% of gdp, or $100bln. If you were to actually compare the countries' absolute deficit numbers, which I initially thought the chart was doing, I think you'd find the US number would be off the chart.
You are right. This set of data tells us nothing! I was reading the righthand most column as deficit as % of GDP - not US deficit as % of GDP.
ReplyDeleteThe former would at least give us a relative comparison of the holes the respective countries were digging themselves into.
The only solace I can take in this goof is that no one at work called my coworker out for the same error. As per 2outof4 standards, I will resist all urges to just delete the post and merely stand corrected!
-2outof4