A rational metric

Karl Denninger proposes one at the Market Ticker:

[T}his is where government and regulatory interests align to the detriment of economy stability: Governments want to see big GDP increases, and increasing leverage (amount of borrowing outstanding in the economy for a given GDP level) is one way to do this.

The best way to control this trend would be to mandate (by law) that GDP be adjusted to reflect leverage changes in the economy – that is, if debt goes up by 4% of GDP then the 4% has to come off the reported GDP numbers.

The reason this isn’t tenable, of course, is that it would make it clear that we’re well into the economic contraction of massive proportions that is beginning to become visible despite the best efforts of the governments and banks to statistically obfuscate.