September 2013
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This document provides an economic update for the 7 Rivers region including indicators such as consumer sentiment, home prices, unemployment rates, GDP changes in various countries since 2008, and Federal Reserve policies and debt purchases. It discusses measures of consumer sentiment in the 7 Rivers region compared to national averages. Graphs show increases in case-shiller home price indices for Phoenix, Minneapolis and the 7 Rivers region from 1998 to 2013, as well as decreases in unemployment rates from 2000 to 2012 in La Crosse, Wisconsin, and the United States. The document also addresses the Federal Reserve's performance and challenges, communication policies, quantitative easing programs, and questions and answers from a talk given by the President of the Federal Reserve Bank of Minneapolis.
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September 2013
- 1. Economic Indicators: An Update for the 7 Rivers Region
- 2. This event is being streamed via the internet to a few small corners of the world… Warning:
- 3. The views expressed today are my own. They do not reflect the views of the sponsors, my employer, or probably anyone else, and if you don’t like them you can blame my mother for the way she raised me. Disclaimer:
- 5. 40 50 60 70 80 90 100 110 April 2002 October 2003 March 2006 February 2008*** February 2009*** August 2010*** Febraury 2012*** August 2013*** 7 Rivers Consumer Sentiment *** Survey moves to web 7 Rivers National
- 7. 80.0 100.0 120.0 140.0 160.0 180.0 200.0 220.0 240.0 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Case-Shiller Index of Home Prices Phoenix Minneapolis 7 Rivers Region
- 8. 0.0 1.5 3.0 4.5 6.0 7.5 9.0 10.5 12.0 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Unemployment Rates La Crosse MSA WI US
- 9. THE FEDERAL RESERVE PERFORMANCE AND CHALLENGES
- 10. -10% -8% -6% -4% -2% 0% 2% 4% 6% 2008Q1 2009Q4 2011Q3 2013Q2 Change in GDP since Q1 2008 US France Germany Spain Italy
- 20. $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 Fed Agency Debt Mortgage-Backed Securities Purch Liquidity to Key Credit Markets Lending to Financial Institutions Long Term Treasury Purchases Traditional Security Holdings Trillions
- 24. 1. I decide to build. 2. Bernanke decides to talk “taper”
- 26. “ ” If employment & prices are strong, We can give up QE before long, So we're tapering it, But just by a bit, In case we turn out to be wrong. FRIDAY, AUGUST 16, 2013 Advance Draft of Next FOMC Statement from: Dr. Goose (www.limericksecon.com)
- 27. $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 Fed Agency Debt Mortgage-Backed Securities Purch Liquidity to Key Credit Markets Lending to Financial Institutions Long Term Treasury Purchases Traditional Security Holdings Trillions
- 33. Q&A with Narayana Kocherlakota PRESIDENT FEDERAL RESERVE BANK OF MINNEAPOLIS
- 34. “ ” It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning HENRY FORD
- 35. “ ” local community bankers…two tiers of regulatory oversight ? REGULATORY OVERSIGHT
- 36. “ ” When will the failure to confront spending issues overcome the ability of the Fed to keep our economy in balance? FED POWER
- 38. “ ” Where are we trying to “get back” to with current Fed policy? FED POLICY
- 39. “ ” Has the market overreacted to “tapering” talk? EXIT
- 40. “ ” How long is the Fed likely to continue its low interest rate policy? EXIT
- 42. THANKS. PLEASE FILL OUT YOUR EVALUATIONS
Editor's Notes
- Poll Title: Please Rate the Economic Condition of the Regional Economy http://www.polleverywhere.com/multiple_choice_polls/CPze5SdpM1mM6RHAmericans' net rating of current economic conditions was -15 last week, representing 19% who say the economy is "excellent" or "good" and 34% who say it is "poor." This rating is down from -12 the prior week, but on par with the relatively low ratings Gallup measured in July.
- Everyone loves a 50% off sale, even if it comes the day after a 100% increase in prices. Anchoring.
- 5 Patients. 1 Drug, we will call it the FED, and a Placebo, we will call it the ECB.
- Poll Title: What is the closest number to the rate of inflation over the last 12 months? http://www.polleverywhere.com/multiple_choice_polls/Cf0ssGHNeUg4OL6
- Poll Title: What is the closest number to the rate of inflation over the next 12 months? http://www.polleverywhere.com/multiple_choice_polls/7JGasRY4Qs4xCKT
- http://www.policyuncertainty.com/methodology.html
- Dr. Goose (@DrGooseEcon) tweeted at 7:39 AM on Thu, Aug 15, 2013:The Fed will undoubtedly taperIts purchase of Treasury paperAs the jobless rate nowAnd inflation allowAn end to their stimulus caper.(https://twitter.com/DrGooseEcon/status/367988948871938048)
- http://www.flickr.com/photos/35034350216@N01/103090478/in/photolist-a7nd3-aKGgs-b4a3W-b4a3X-ciQE9-ciQEP-eNWwe-hyX1f-idBFj-irp81-iy3h2-kWZd7-mEVRf-oL9tU-pdVDA-piGRo-qi6cA-ra5e6-ra5e7-ra5e9-ra5ee-rFi5i-vPE2d-xpyNs-xpySt-xpyWw-xpz2M-xpz8i-xpzcs-xpzgR-xUDSm-y5wu9-yqAqd-yLnfw-zgjAE-zXpSU-zXwSx-AFafm-DnF9F-Fxkxy-H3uCQ-HCHFS-HCHGj-MfnVp-MfnYP-PW9gu-QhjTr-UFkad-XUfuh-2jFu6Y-2k9XjX
- http://www.flickr.com/photos/mernstie/361084588/sizes/o/in/photolist-xUDSm-y5wu9-yqAqd-yLnfw-zgjAE-zXpSU-zXwSx-AFafm-DnF9F-Fxkxy-H3uCQ-HCHFS-HCHGj-MfnVp-MfnYP-PW9gu-QhjTr-UFkad-XUfuh-2jFu6Y-2k9XjX-2kemXo-2pRdK5-2rrWV2-2wHHaF-2CpgFr-2FTfkT-2J7UXC-36KKwu-38dwp2-3f2gcc-3gW9kB-3pK1ZE-3qNJNA-3uLjrH-3uLjWt-3uLkye-3uLkzP-3uQNHW-3uQPDu-3wUTJL-3xjn7u-3KCheb-3YQGcs-47q34X-4bys6X-4iHkaC-4j1Woh-4rtx7o-4tRmMX-4uZA7D/
- http://www.forbes.com/sites/beltway/2013/06/25/is-the-federal-reserve-really-tightening-fed-policy-in-two-charts/
- “It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.” Henry Ford, founder of the Ford Motor Company.
- Our local community bankers, many of whom have been operating responsibly and successfully for decades, are now subject to a wide range of increased regulatory scrutiny, tighter credit requirements and increased risk and process documentation. Our local recommendation is to have two tiers of regulatory oversight - one for the bad actors whose performance of the past decade suggest higher requirements, and another for those good actors [typically local, community based, incorporating quality of loan proposal and performance into staff compensation instead of high production, incentive-based compensation] who have proven their quality underwriting process. Is this possible? Experience rating regulatory oversight?
- While the Fed is working very hard to keep our economy in balance, Congress and the President continue to fail miserably at addressing massive structural deficits, especially in entitlements. At what point will this failure to confront spending and debt issues overcome the ability of the Fed to keep our economy in balance?
- Poll Title: What is your question for Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis? http://www.polleverywhere.com/free_text_polls/SUXg53VUdTEVRrt
- Fed officials and others suggest that the country needs to take certain steps to "get back" to the economic conditions and low unemployment of the mid-2000s. But those conditions were a “house of cards” and attempting to "get back" to those conditions is either impossible, or if it is possible, it just sets us up for another bubble collapse. Are we doomed to repeat the recent past in an attempt to re-establish extremely low unemployment rates, extremely high property value appreciation rates, and so on?
- Conversation about tapering of the Federal Reserve’s U.S. debt purchases has had a large impact on the market. Is this correct or an over-reaction?
- Provided the economy continues to grow at the current slow rate and unemployment continues to improve only slightly at the same rate and inflation is held in check, how long do you foresee the Fed continuing its low interest rate policy?
- Poll Title: What is your question for Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis? http://www.polleverywhere.com/free_text_polls/SUXg53VUdTEVRrt