As someone who believes that stabilizing nominal spending rather than inflation is key to macroeconomic stability, I have taken the liberty in the past to reframe U.S. macroeconomic history according to this perspective. Thus, I renamed (1) the “Great Inflation” that started in the mid-1960s and ended in the early-1980s as the “Great Nominal Spending Spree” and (2) the “Great Moderation” of 25 years or so preceding the current crisis the “Great Moderation in Nominal Spending.” I also labeled the late-2008, early 2009 period as the “Great Nominal Spending Crash”. Below was the figure I used to summarize this reframing of U.S. macroeconomic history:
Recently, I learned the OECD has an quarterly nominal GDP measure (PPP-adjusted basis) aggregated across 25 of its member countries going back to 1960:Q1. The countries are as follows: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States. The combined economies of these counties make up over half the world economy and thus, provide some sense of global nominal spending. So in the spirit of reframing global macroeconomic history according to a nominal spending perspective I created the following figure:
I suspect the similarities between these two figures speaks to size and influence of the U.S. economy. I think it also speaks to the influence of U.S. monetary policy on global liquidity conditions and, thus, it influence on global nominal spending.
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