The most remarkable thing about this piece from 2011 is that Robert Barro does not seem to feel under any pressure at all to provide an account of why it was that real GDP per capita was 52,049 dollars in the fourth quarter of 2007 and yet only 49,318 dollars in the second quarter of 2009—and did not surpass its 2007Q4 level again until 2013Q3
Brad needs a theory of cycles, why the sudden change in production, as measured in dollars.
The answer is the higher production in 2007 was for wasted goods and the losses are not priced in. The cycle appears on the chart, after repricing, ex post, the cycle tends to go away, the accountants figure out who lost the do-re-me and assign costs.
In other words, at some point government insurance fails the accounting test and debt service ends up on the backs of the one receiving insurance payouts. Accountants, and their tools, much more accurate today.
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