Lies Damn Lies and Graphs - The Public Debt Illusion

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Here are four graphs, any of which might be used to tell a story about the same data about UK Net Public Debt 1900 - 2011. Take your pick. Which is telling the truth? All of them, yes, but which one is driving policy?

All the graphs show net public debt or adjusted figures for that on the vertical axis over the period.

The top one is the favourite one for the media showing a catastrophe in the making. Good for headlines.

Below that is the log-scale showing that the debt has been growing steadily at 6.86% p.a. compound. A log scale is a straight sloping line for a steady compound growth rate.

I placed the wrong graph here - it looks the same but goes higher than the next graph. Sorry I will look for the right one.

The third graph shows the compound growth rate after allowing for the rate of growth of the population - showing the debt per person.

Finally we get the real facts: This is what the debt to income ratio would be if there was only one person in the UK. The Net Debt peaked in 1946 at 2.37 years' income and has now returned to the relatively low 0.6 years' income and rising.  

Or if you prefer this is the average net debt per person. Still, 0.6 is a lot less than 2.37.

There is also the question of how the debt is constructed - a subject that needs urgent attention because fixed interest debt can be very destabilising to an economy as explained in various blogs and essays of mine.