CMP Associates Regulation Blog: Global Manufacturing Stress, World Inflation Waves, United States Industrial Production, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Commercial Banks, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth, Government Intervention in Globalization, and Global Recession Risk: Part X

Global Manufacturing Stress, World Inflation Waves, United States Industrial Production, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Commercial Banks, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth, Government Intervention in Globalization, and Global Recession Risk

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE Theory and Reality of Economic History, Cyclical Slow Growth Not Secular Stagnation and Monetary Policy Based on Fear of Deflation

IIA United States Industrial Production

IIB Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates

II United States Commercial Banks Assets and Liabilities

IIA Transmission of Monetary Policy

IIB Functions of Banking

IIC United States Commercial Banks Assets and Liabilities

II IB Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

III World Financial Turbulence

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

Table VI-7, updated with every blog comment, provides in the second column the yield at the close of market of the 10-year Treasury note on the date in the first column. The price in the third column is calculated with the coupon of 2.625 percent of the 10-year note current at the time of the second round of quantitative easing after Nov 3, 2010 and the final column “∆% 11/04/10” calculates the percentage change of the price on the date relative to that of 101.2573 at the close of market on Nov 4, 2010, one day after the decision on quantitative easing by the Fed on Nov 3, 2010. Prices with new coupons such as 2.0 percent in recent auctions (http://www.treasurydirect.gov/RI/OFAuctions?form=extended&cusip=912828RR3) are not comparable to prices in Table VI-7. The highest yield in the decade was 5.510 percent on May 1, 2001 that would result in a loss of principal of 22.9 percent relative to the price on Nov 4. Monetary policy has created a “duration trap” of bond prices. Duration is the percentage change in bond price resulting from a percentage change in yield or what economists call the yield elasticity of bond price. Duration is higher the lower the bond coupon and yield, all other things constant. This means that the price loss in a yield rise from low coupons and yields is much higher than with high coupons and yields. Intuitively, the higher coupon payments offset part of the price loss. Prices/yields of Treasury securities were affected by the combination of Fed purchases for its program of quantitative easing and by the flight to dollar-denominated assets because of geopolitical risks in the Middle East, subsequently by the tragic Great East Japan Earthquake and Tsunami and now again by the sovereign risk doubts in Europe and the growth recession in the US and the world. The yield of 2.049 percent at the close of market on Fri Jul 19, 2019 would be equivalent to price of 105.1843 in a hypothetical bond maturing in 10 years with coupon of 2.625 percent for price increase of 3.9 percent relative to the price on Nov 4, 2010, one day after the decision on the second program of quantitative easing, as shown in the last row of Table VI-7. The price loss between Sep 7, 2012 and Sep 14, 2012 would have been 1.7 percent in just five trading days. The price loss between Jun 1, 2012 and Jun 8, 2012 would have been 1.6 percent, in just a week, and much higher with leverage of 10:1 as typical in Treasury positions. The price loss between Mar 9, 2012 and Mar 16, 2012 is 2.3 percent but much higher when using common leverage of 10:1. The price loss between Dec 28, 2012 and Jan 4, 2013 would have been 1.7 percent. These losses defy annualizing. If inflation accelerates, yields of Treasury securities may rise sharply. Yields are not observed without special yield-lowering effects such as the flight into dollars caused by the events in the Middle East, continuing purchases of Treasury securities by the Fed, the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 affecting Japan, recurring fears on European sovereign credit issues and worldwide risk aversion in the week of Sep 30 caused by “let’s twist again” monetary policy. There is a difficult climb from the record federal deficit of 9.8 percent of GDP in 2009 and cumulative deficit of $5090 billion in four consecutive years of deficits exceeding one trillion dollars from 2009 to 2012, which is the worst fiscal performance since World War II (https://cmpassocregulationblog.blogspot.com/2018/10/global-contraction-of-valuations-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/mediocre-cyclical-economic-growth-with.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-reducing.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html and earlier Section IB at http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with.html). There is no subsequent jump of debt in US peacetime history as the one from 39.4 percent of GDP in 2008 to 65.8 percent of GDP in 2011, 70.3 percent in 2012, 72.2 percent in 2013, 73.7 percent in 2014, 72.5 percent in 2015, 76.4 percent in 2016, 76.1 percent in 2017 and 77.8 percent in 2018 (https://www.cbo.gov/about/products/budget-economic-data#6) (https://cmpassocregulationblog.blogspot.com/2018/10/global-contraction-of-valuations-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/mediocre-cyclical-economic-growth-with.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-reducing.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html

On Jul 17, 2019, the line “Reserve Bank credit” in the Fed balance sheet stood at $3,769,117 million, or $3.8 trillion. On October 25, 2017, at the beginning of the FOMC programmed reduction of the balance sheet, the line “Reserve Bank Credit” stood at $4,461,117 million. The line “Reserve Bank Credit” decreased $692,000 million from Oct 25, 2017 to Jul 17, 2019. The line “Securities Held Outright” decreased from $4,243,048 million on Oct 25, 2017 to $3,623,424 on Jul 17, 2019 or $612,624 million. The portfolio of long-term securities (“securities held outright”) for monetary policy consists primarily of $3600 billion, or $3.6 trillion, of which $1955 billion Treasury nominal notes and bonds, $116 billion of notes and bonds inflation-indexed, $2 billion Federal agency debt securities and $1527 billion mortgage-backed securities ($1,527,093 million). Reserve balances deposited with Federal Reserve Banks reached $1515 billion ($1,515,067 million) or $1.5 trillion (https://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1). The rounded values of $1649 billion of reserves deposited at Federal Reserve Banks and mortgage-backed securities are identical on Dec 19, 2018, by pure coincidence. There is no simple exit of this trap created by the highest monetary policy accommodation in US history together with the highest deficits and debt in percent of GDP since World War II. Risk aversion from various sources, discussed in section III World Financial Turbulence, has been affecting financial markets for several months. The risk is that in a reversal of exposures because of increasing risk aversion that has been typical in this cyclical expansion of the economy yields of Treasury securities may back up sharply.

Table VI-7, Yield, Price and Percentage Change to November 4, 2010 of Ten-Year Treasury Note

Date	Yield	Price	∆% 11/04/10
05/01/01	5.510	78.0582	-22.9
06/10/03	3.112	95.8452	-5.3
06/12/07	5.297	79.4747	-21.5
12/19/08	2.213	104.4981	3.2
12/31/08	2.240	103.4295	2.1
03/19/09	2.605	100.1748	-1.1
06/09/09	3.862	89.8257	-11.3
10/07/09	3.182	95.2643	-5.9
11/27/09	3.197	95.1403	-6.0
12/31/09	3.835	90.0347	-11.1
02/09/10	3.646	91.5239	-9.6
03/04/10	3.605	91.8384	-9.3
04/05/10	3.986	88.8726	-12.2
08/31/10	2.473	101.3338	0.08
10/07/10	2.385	102.1224	0.8
10/28/10	2.658	99.7119	-1.5
11/04/10	2.481	101.2573	-
11/15/10	2.964	97.0867	-4.1
11/26/10	2.869	97.8932	-3.3
12/03/10	3.007	96.7241	-4.5
12/10/10	3.324	94.0982	-7.1
12/15/10	3.517	92.5427	-8.6
12/17/10	3.338	93.9842	-7.2
12/23/10	3.397	93.5051	-7.7
12/31/10	3.228	94.3923	-6.7
01/07/11	3.322	94.1146	-7.1
01/14/11	3.323	94.1064	-7.1
01/21/11	3.414	93.4687	-7.7
01/28/11	3.323	94.1064	-7.1
02/04/11	3.640	91.750	-9.4
02/11/11	3.643	91.5319	-9.6
02/18/11	3.582	92.0157	-9.1
02/25/11	3.414	93.3676	-7.8
03/04/11	3.494	92.7235	-8.4
03/11/11	3.401	93.4727	-7.7
03/18/11	3.273	94.5115	-6.7
03/25/11	3.435	93.1935	-7.9
04/01/11	3.445	93.1129	-8.0
04/08/11	3.576	92.0635	-9.1
04/15/11	3.411	93.3874	-7.8
04/22/11	3.402	93.4646	-7.7
04/29/11	3.290	94.3759	-6.8
05/06/11	3.147	95.5542	-5.6
05/13/11	3.173	95.3387	-5.8
05/20/11	3.146	95.5625	-5.6
05/27/11	3.068	96.2089	-4.9
06/03/11	2.990	96.8672	-4.3
06/10/11	2.973	97.0106	-4.2
06/17/11	2.937	97.3134	-3.9
06/24/11	2.872	97.8662	-3.3
07/01/11	3.186	95.2281	-5.9
07/08/11	3.022	96.5957	-4.6
07/15/11	2.905	97.5851	-3.6
07/22/11	2.964	97.0847	-4.1
07/29/11	2.795	98.5258	-2.7
08/05/11	2.566	100.5175	-0.7
08/12/11	2.249	103.3504	2.1
08/19/11	2.066	105.270	3.7
08/26/11	2.202	103.7781	2.5
09/02/11	1.992	105.7137	4.4
09/09/11	1.918	106.4055	5.1
09/16/11	2.053	101.5434	0.3
09/23/11	1.826	107.2727	5.9
09/30/11	1.912	106.4602	5.1
10/07/11	2.078	104.9161	3.6
10/14/11	2.251	103.3323	2.0
10/21/11	2.220	103.6141	2.3
10/28/11	2.326	102.6540	1.4
11/04/11	2.066	105.0270	3.7
11/11/11	2.057	105.1103	3.8
11/18/11	2.003	105.6113	4.3
11/25/11	1.964	105.9749	4.7
12/02/11	2.042	105.2492	3.9
12/09/11	2.065	105.0363	3.7
12/16/11	1.847	107.0741	5.7
12/23/11	2.027	105.3883	4.1
12/30/11	1.871	106.8476	5.5
01/06/12	1.957	106.0403	4.7
01/13/12	1.869	106.8664	5.5
01/20/12	2.026	105.3976	4.1
01/27/12	1.893	106.6404	5.3
02/03/12	1.923	106.3586	5.0
02/10/12	1.974	105.8815	4.6
02/17/12	2.000	105.6392	4.3
02/24/12	1.977	105.8535	4.5
03/02/12	1.977	105.8535	4.5
03/09/12	2.031	105.3512	4.0
03/16/12	2.294	102.9428	1.7
03/23/12	2.234	103.4867	2.2
03/30/12	2.214	103.6687	2.4
04/06/12	2.058	105.1010	3.8
04/13/12	1.987	105.7603	4.4
04/20/12	1.959	106.0216	4.7
04/27/12	1.931	106.2836	5.0
05/04/12	1.876	106.8004	5.5
05/11/12	1.845	107.0930	5.8
05/18/12	1.714	108.3393	7.0
05/25/12	1.738	108.1098	6.8
06/01/12	1.454	110.8618	9.5
06/08/12	1.635	109.0989	7.7
06/15/12	1.584	109.5924	8.2
06/22/12	1.676	108.7039	7.4
06/29/12	1.648	108.9734	7.6
07/06/12	1.548	109.9423	8.6
07/13/12	1.49	110.5086	9.1
07/20/12	1.459	110.8127	9.4
07/27/12	1.544	109.9812	8.6
08/03/12	1.569	109.7380	8.4
08/10/12	1.658	108.8771	7.5
08/17/12	1.814	107.3864	6.1
08/24/12	1.684	108.6270	7.3
08/31/12	1.543	109.9910	8.6
9/7/12	1.668	108.7808	7.4
9/14/12	1.863	106.9230	5.6
9/21/12	1.753	107.9666	6.6
9/28/12	1.631	109.1375	7.8
10/05/12	1.737	108.1193	6.8
10/12/12	1.663	108.8290	7.5
10/19/12	1.766	107.8426	6.5
10/26/12	1.748	108.0143	6.7
11/02/12	1.715	108.3297	7.0
11/09/12	1.614	109.3018	7.9
11/16/12	1.584	109.5924	8.2
11/23/12	1.691	108.5598	7.2
11/30/12	1.612	109.3211	7.9
12/7/12	1.625	109.1954	7.8
12/14/12	1.704	108.4351	7.1
12/21/12	1.770	107.8045	6.5
12/28/12	1.699	108.4831	7.1
1/4/13	1.898	106.5934	5.3
1/11/13	1.862	106.9324	5.6
1/18/13	1.840	107.1403	5.8
1/25/13	1.947	106.1338	4.8
2/1/13	2.024	105.4161	4.1
2/8/13	1.949	106.1151	4.8
2/15/13	2.007	105.5741	4.3
2/22/13	1.967	105.9469	4.6
3/1/13	1.842	107.1213	5.8
3/8/13	2.056	105.1195	3.8
3/15/13	1.992	105.7137	4.4
03/22/13	1.931	106.2836	5.0
03/29/13	1.847	107.0741	5.7
04/05/13	1.706	108.4160	7.1
04/12/13	1.719	108.2914	6.9
04/19/13	1.702	108.4543	7.1
04/26/13	1.663	108.8290	7.5
05/3/13	1.742	108.2436	6.9
05/10/13	1.896	106.6122	5.3
05/17/13	1.952	106.0870	4.8
05/24/13	2.009	105.5555	4.2
05/31/13	2.132	104.5015	3.2
06/07/13	2.174	104.0338	2.7
06/14/13	2.125	104.4831	3.2
06/21/13	2.542	100.7288	-0.5
06/28/13	2.486	101.2240	0.0
07/5/13	2.734	99.0519	-2.2
07/12/13	2.585	100.3505	-0.9
07/19/13	2.480	101.2772	0.0
07/26/13	2.565	100.5263	-0.7
08/2/13	2.597	100.2452	-1.0
8/9/13	2.579	100.4032	-0.8
8/16/13	2.829	98.2339	-3.0
8/23/13	2.818	98.3283	-2.9
8/30/13	2.784	98.6205	-2.6
9/6/13	2.941	97.2795	-3.9
9/13/13	2.890	97.7128	-3.5
9/20/13	2.734	99.0519	-2.2
9/27/13	2.626	99.9913	-1.3
10/4/13	2.645	99.8253	-1.4
10/11/13	2.688	99.4508	-1.8
10/18/13	2.588	100.3242	-0.9
10/25/13	2.507	101.0380	-0.2
11/1/13	2.622	100.0262	-1.2
11/8/13	2.750	98.9136	-2.3
11/15/13	2.704	99.3118	-1.9
11/22/13	2.746	98.9482	-2.3
11/29/13	2.743	98.9741	-2.3
12/6/13	2.858	97.9858	-3.2
12/13/13	2.865	97.9260	-3.3
12/20/13	2.891	97.7043	-3.5
12/27/13	3.004	96.7472	-4.5
1/3/2014	2.999	96.7893	-4.4
1/10/14	2.858	97.9858	-3.2
1/17/14	2.818	98.3283	-2.9
1/24/14	2.720	99.1731	-2.1
1/31/14	2.645	99.8253	-1.4
2/7/14	2.681	99.5116	-1.7
2/14/14	2.743	98.9741	-2.3
2/21/14	2.730	99.0865	-2.1
2/28/14	2.655	99.7380	-1.5
3/7/14	2.792	98.5516	-2.7
3/14/14	2.654	99.7468	-1.5
3/21/14	2.743	98.9741	-2.3
3/28/14	2.721	99.1645	-2.1
4/4/14	2.724	99.1385	-2.1
4/11/14	2.628	99.9738	-1.3
4/18/14	2.724	99.1385	-2.1
4/25/14	2.668	99.6248	-1.6
5/2/14	2.583	100.3681	-0.9
5/9/14	2.624	100.0088	-1.2
5/16/14	2.520	100.9320	-0.3
5/23/14	2.532	100.8171	-0.4
5/30/14	2.473	101.3394	0.1
6/6/2014	2.598	100.2364	-1.0
6/13/14	2.605	100.1751	-1.1
6/20/14	2.609	00.1400	-1.1
6/27/14	2.536	100.7818	-0.05
7/4/14	2.641	99.8602	-1.4
7/11/14	2.516	100.9584	-0.3
7/18/14	2.484	101.2417	0.0
7/25/14	2.464	101.4193	0.2
8/1/14	2.497	101.1265	-0.1
8/8/14	2.420	101.8111	0.5
8/15/14	2.341	102.5190	1.2
8/22/14	2.399	101.9988	0.7
8/29/14	2.342	102.5100	1.2
9/5/14	2.457	101.4815	0.2
9/12/14	2.606	10.1663	-1.1
9/19/14	2.576	100.4296	-0.8
9/26/14	2.527	100.8612	-0.4
10/03/14	2.437	101.6595	0.4
10/10/14	2.292	102.9609	1.7
10/17/14	2.197	103.8237	2.5
10/24/14	2.263	103.2234	1.9
10/31/14	2.332	102.6000	1.3
11/07/14	2.302	102.8705	1.6
11/14/14	2.319	102.7171	1.4
11/21/14	2.307	102.8254	1.5
11/28/14	2.165	104.1162	2.8
12/5/14	2.306	102.8344	1.6
12/12/14	2.086	104.8423	3.5
12/19/14	2.185	103.9333	2.6
12/26/14	2.248	103.3595	2.1
01/02/15	2.126	104.4739	3.2
01/09/15	1.973	105.8909	4.6
01/16/15	1.826	107.2727	5.9
01/23/15	1.804	107.4813	6.1
01/30/15	1.683	108.6367	7.3
02/06/15	1.941	106.1899	4.9
02/13/15	2.043	105.2399	3.9
02/20/15	2.119	104.5383	3.2
02/27/15	2.016	105.4905	4.2
03/06/15	2.238	103.4503	2.2
03/13/15	2.103	104.6856	3.4
03/20/15	1.927	106.3211	5.0
03/27/15	1.951	106.0964	4.8
04/02/15	1.911	106.4712	5.1
04/10/15	1.950	106.1057	4.8
04/17/15	1.864	106.9136	5.6
04/24/15	1.917	106.4149	5.1
05/01/15	2.118	104.5475	3.2
05/08/15	2.153	104.2261	2.9
05/15/15	2.136	104.3821	3.1
05/22/15	2.211	103.6961	2.4
05/29/15	2.092	104.7869	3.5
06/05/15	2.400	101.9898	0.7
06/12/15	2.388	102.0972	0.8
06/19/15	2.270	103.1599	1.9
06/26/15	2.473	101.3394	0.1
07/03/15	2.383	102.1420	0.9
07/10/15	2.414	101.8647	0.6
07/17/15	2.346	102.4740	1.2
07/24/15	2.268	103.1781	1.9
07/31/15	2.207	103.7325	2.4
08/07/15	2.164	104.1254	2.8
08/14/15	2.196	103.8328	2.5
08/21/15	2.052	105.1565	3.9
08/28/15	2.182	103.9607	2.7
09/04/15	2.127	104.4647	3.2
09/11/15	2.181	103.9698	2.7
09/18/15	2.131	104.4280	3.1
09/25/15	2.168	104.0887	2.8
10/02/15	1.988	105.7510	4.4
10/09/15	2.096	104.7501	3.4
10/16/15	2.024	105.4161	4.1
10/23/15	2.083	104.8700	3.6
10/30/15	2.150	104.2536	3.0
11/06/15	2.332	102.6000	1.3
11/13/15	2.278	103.0875	1.8
11/20/15	2.260	103.2506	2.0
11/27/15	2.223	103.5868	2.3
12/04/15	2.276	103.1056	1.8
12/11/15	2.134	104.4004	3.1
12/18/15	2.197	103.8237	2.5
12/25/15	2.242	103.4140	2.1
01/01/16	2.269	103.1690	1.9
01/08/16	2.135	104.3913	3.1
01/15/16	2.036	105.3048	4.0
01/22/15	2.048	105.1936	3.9
01/29/16	1.923	106.3586	5.0
02/05/16	1.848	107.0646	5.7
02/12/16	1.744	108.0525	6.7
02/19/16	1.748	108.0143	6.7
02/26/16	1.766	107.8426	6.5
03/04/16	1.884	106.7251	5.4
03/11/16	1.977	105.8535	4.5
03/18/16	1.871	106.8476	5.5
03/25/16	1.900	106.5746	5.3
04/01/16	1.795	107.5667	6.2
04/08/16	1.722	108.2627	6.9
04/15/16	1.752	107.9761	6.6
04/22/16	1.886	106.7063	5.4
04/29/16	1.820	107.3296	6.0
05/06/16	1.780	107.7094	6.4
05/13/16	1.706	108.4160	7.1
05/20/16	1.849	107.0552	5.7
05/27/16	1.851	107.0363	5.7
06/03/16	1.704	108.4351	7.1
06/10/16	1.638	109.0699	7.7
06/17/16	1.618	109.2631	7.9
06/24/16	1.575	109.6797	8.3
07/01/16	1.443	110.9700	9.6
07/08/16	1.366	111.7306	10.3
07/15/16	1.595	109.4857	8.1
07/22/16	1.567	109.7575	8.4
07/29/16	1.458	110.8225	9.4
08/05/16	1.583	109.6021	8.2
08/12/16	1.514	110.2739	8.9
08/19/16	1.580	109.6312	8.3
08/26/16	1.635	109.0989	7.7
09/02/16	1.597	109.4663	8.1
09/09/16	1.675	108.7135	7.4
09/16/16	1.699	108.4831	7.1
09/23/16	1.614	109.3018	7.9
09/30/16	1.602	109.4179	8.1
10/07/16	1.732	108.1671	6.8
10/14/16	1.791	107.6048	6.3
10/21/16	1.738	108.1098	6.8
10/28/16	1.843	107.1119	5.8
11/04/16	1.784	107.6173	6.3
11/11/16	2.152	104.2353	2.9
11/18/16	2.340	102.5280	1.3
11/25/16	2.358	102.3662	1.1
12/01/16	2.389	102.0883	0.8
12/09/16	2.466	101.4015	0.1
12/16/16	2.597	100.2452	-1.0
12/23/16	2.542	100.7289	-0.5
12/30/16	2.447	101.5705	0.3
01/06/17	2.416	101.8469	0.6
01/13/17	2.381	102.1599	0.9
01/20/17	2.466	101.4015	0.1
01/27/17	2.479	101.2861	0.0
02/03/17	2.488	101.2063	-0.1
02/10/17	2.408	101.9183	0.7
02/17/17	2.425	101.7665	0.5
02/24/17	2.314	102.7622	1.5
03/03/17	2.492	101.1708	-0.1
03/10/17	2.584	100.3593	-0.9
03/17/17	2.502	101.0823	-0.2
03/24/17	2.399	101.9888	0.7
03/31/17	2.396	102.0256	0.8
04/07/17	2.373	102.2316	1.0
04/14/17	2.234	103.4867	2.2
04/21/17	2.233	103.4958	2.2
04/28/17	2.286	103.0151	1.7
05/05/17	2.352	102.4201	1.1
05/12/17	2.333	102.5910	1.3
05/19/17	2.243	103.4049	2.1
05/26/17	2.247	103.3686	2.1
06/02/17	2.161	104.1528	2.9
06/09/17	2.199	103.8055	2.5
06/16/17	2.154	104.2170	2.9
06/23/17	2.144	104.3087	3.0
06/30/17	2.304	102.8525	1.6
07/07/17	2.393	102.0524	0.8
07/14/17	2.323	102.6811	1.4
07/21/17	2.233	103.4985	2.2
07/28/17	2.288	102.9970	1.7
08/04/17	2.268	103.1781	1.9
08/11/17	2.189	103.8968	2.6
08/18/17	2.196	103.8328	2.5
08/25/17	2.171	104.0613	2.8
09/01/17	2.157	101.2573	2.9
09/08/17	2.061	105.0733	3.8
09/15/17	2.201	103.7872	2.5
09/22/17	2.263	103.2234	1.9
09/29/17	2.327	102.6450	1.4
10/06/17	2.368	102.2765	1.0
10/13/17	2.278	103.0875	1.8
10/20/17	2.379	102.1778	0.9
10/27/17	2.423	101.7844	0.5
11/03/17	2.343	102.5010	1.2
11/10/17	2.404	101.9541	0.7
11/17/17	2.354	102.4021	1.1
11/24/17	3.343	102.5010	1.2
12/01/17	2.361	102.3393	1.1
12/08/17	2.383	102.1420	0.9
12/15/17	2.355	102.3932	1.1
12/22/17	2.487	101.2151	0.0
12/29/17	2.411	101.8915	0.6
01/05/18	2.475	101.3216	0.1
01/12/18	2.550	100.6583	-0.6
01/19/18	2.638	99.8864	-1.4
01/26/18	2.661	99.6857	-1.6
02/02/18	2.848	98.0713	-3.1
02/09/18	2.830	98.2254	-3.0
02/16/18	2.877	97.8236	-3.4
02/23/18	2.870	97.8833	-3.3
03/02/18	2.855	98.0114	-3.2
03/09/18	2.893	97.6872	-3.5
03/16/18	2.845	98.0969	-3.1
03/23/18	2.826	98.2597	-3.0
03/30/18	2.739	99.0087	-2.2
04/06/18	2.778	98.6721	-2.6
04/13/18	2.825	98.2682	-3.0
04/20/18	2.953	97.1778	-4.0
04/27/18	2.955	97.1609	-4.1
05/04/18	2.943	97.2625	-3.9
05/11/18	2.970	97.0340	-4.2
05/18/18	3.065	96.2350	-5.0
05/25/18	2.928	97.3897	-3.8
06/01/18	2.889	97.7213	-3.5
06/08/18	2.938	97.3049	-3.9
06/15/18	2.922	97.4406	-3.8
06/22/18	2.902	97.6106	-3.6
06/29/18	2.850	98.0542	-3.2
07/06/18	2.821	98.3025	-2.9
07/13/18	2.830	98.2254	-3.0
07/20/18	2.890	97.7128	-3.5
07/27/18	2.959	97.1270	-4.1
08/03/18	2.952	97.1863	-4.0
08/10/18	2.859	97.9772	-3.2
08/17/18	2.870	97.8833	-3.3
08/24/18	2.823	98.2854	-2.9
08/31/18	2.850	98.0542	-3.2
09/07/18	2.936	97.3218	-3.9
08/14/18	2.987	96.8905	-4.3
09/21/18	3.067	96.2182	-5.0
09/28/18	3.055	96.3187	-4.9
10/05/18	3.231	94.8567	-6.3
10/12/18	3.137	95.6344	-5.6
10/19/18	3.198	95.1289	-6.1
10/26/18	3.077	96.1346	-5.1
11/02/18	3.216	94.9803	-6.2
11/09/18	3.188	95.2115	-6.0
11/16/18	3.075	96.1513	-5.0
11/23/18	3.039	96.4529	-4.7
11/30/18	3.014	96.6630	-4.5
12/07/18	2.848	98.0713	-3.1
12/14/18	2.892	97.6957	-3.5
12/21/18	2.791	98.5602	-2.7
12/28/18	2.736	99.0346	-2.2
01/04/19	2.568	99.7119	-1.5
01/11/19	2.700	99.3466	-1.9
01/18/19	2.780	98.6549	-2.6
01/25/19	2.750	98.9136	-2.3
02/01/19	2.691	99.4247	-1.8
02/08/19	2.636	99.039	-1.3
02/15/19	2.667	99.6335	-1.6
02/22/19	2.652	99.7642	-1.5
03/01/19	2.747	98.9395	-2.3
03/08/19	2.630	99.9563	-1.3
03/15/19	2.593	100.2803	-1.0
03/22/19	2.453	101.5171	0.3
03/29/19	2.416	101.8469	0.6
04/05/19	2.503	101.0734	-0.2
04/12/19	2.557	100.5967	-0.7
04/19/19	2.564	100.5351	-0.7
04/26/19	2.505	101.0557	-0.2
05/03/19	2.526	100.8700	-0.4
05/10/19	2.457	101.4815	0.2
05/17/19	2.398	102.0077	0.7
05/24/19	2.323	102.6811	1.4
05/31/19	2.141	104.3362	3.0
06/07/19	2.082	104.8792	3.6
06/14/19	2.095	104.7593	3.5
06/21/19	2.062	105.0640	3.8
06/28/19	2.006	105.5834	4.3
07/05/19	2.045	105.2214	3.9
07/12/19	2.107	104.6487	3.3
07/19/19	2.049	105.1843	3.9

Note: price is calculated for an artificial 10-year note paying semi-annual coupon and maturing in ten years using the actual yields traded on the dates and the coupon of 2.625% on 11/04/10

Source:

http://professional.wsj.com/mdc/public/page/mdc_bonds.html?mod=mdc_topnav_2_3000

Table VI-7B provides the maturity distribution and average length in months of marketable interest-bearing debt held by private investors from 2007 to Mar 2019. Total debt held by investors increased from $3635 billion in 2007 to $13,682 billion in Mar 2019 (Fiscal Year 2019) or increase by 276.4 percent. There are two concerns with the maturity distribution of US debt. (1) Growth of debt is moving total debt to the point of saturation in investors’ portfolio. In a new environment of risk appetite and nonzero fed funds rates with economic growth at historical trend of around 3 percent, yields on risk financial assets are likely to increase. Placement of new debt may require increasing interest rates in an environment of continuing placement of debt by the US Treasury without strong fiscal constraints. (2) Refinancing of maturing debt is likely to occur in an environment of higher interest rates, exerting pressure on future fiscal budgets. In Mar 2019 (fiscal year 2019), $4109 billion or 30.0 percent of outstanding debt held by investors matures in less than a year and $5500 billion or 40.2 percent of total debt matures in one to five years. Debt maturing in five years or less adds to $9609 billion or 70.2 percent of total outstanding debt held by investors of $13,582 billion. This historical episode may be remembered as one in which the US managed its government debt with short-dated instruments during record low long-dated yields and on the verge of fiscal pressures on all interest rates. This strategy maximizes over time interest payments on government debt by taxpayers that is precisely the opposite of the objective of sound debt management and taxpayer welfare.

Table VI-7B, Maturity Distribution and Average Length in Months of Marketable Interest-Bearing Public Debt Held by Private Investors, Billions of Dollars

End of Fiscal Year or Month	2007	2008	2009	2010	2011	2012
Total*	3635	4745	6229	7676	7951	9040
<1 Year	1176	2042	2605	2480	2504	2897
1-5 Years	1310	1468	2075	2956	3085	3852
5-10 Years	678	719	995	1529	1544	1488
10-20 Years	292	352	351	341	309	271
>20 Years	178	163	204	371	510	533
Average Months	58	49	49	57	60	55

End of Fiscal Year or Month		2013	2014	2015	2016	2017
Total*		9518	9829	10379	11184	11643
<1 Year		2940	2932	2923	3321	3263
1-5 Years		4135	4217	4356	4478	4746
5-10 Years		1648	1814	2084	2219	2321
10-20 Years		231	223	184	168	152
>20 Years		565	644	832	998	1161
Average Months		55	56	61	63	66
End of Fiscal Year or Month	2018	2019 Mar
Total*	12881	13682
<1 Year	3794	4109
1-5 Years	5181	5500
5-10 Years	2445	2529
10-20 Years	121	103
>20 Years	1339	1440
Average Months	65	64

*Amount Outstanding Privately Held

Source: United States Treasury. 2019 Jun. Treasury Bulletin. Washington, Dec

https://www.fiscal.treasury.gov/reports-statements/treasury-bulletin/

Table VI-7C provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2019 fiscal year beginning on Oct 1, 2018 and ending on Sep 30, 2019; federal fiscal data for the years from 2009 to 2018; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2018. Receipts increased 2.7 percent in the cumulative fiscal year 2019 ending in Jun 2019 relative to the cumulative in fiscal year 2018. Individual income taxes decreased 0.3 percent relative to the same fiscal period a year earlier. Outlays increased 6.6 percent relative to a year earlier. There are also receipts, outlays, deficit and debt for fiscal years 2013, 2014, 2015, 2016, 2017 and 2018. In fiscal year 2018, the deficit reached $779 billion or 3.9 percent of GDP. Outlays of 4,108 billion were 20.3 percent of GDP and receipts of $3,329 billion were 16.4 percent of GDP. It is quite difficult for the US to raise receipts above 18 percent of GDP. Total revenues of the US from 2009 to 2012 accumulate to $9022 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,115 billion, or $14.1 trillion, with the deficit accumulating to $5094 billion, or $5.1 trillion. Revenues decreased 6.5 percent from $9653 billion in the four years from 2005 to 2008 to $9022 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and by growth of only 2.3 percent on average in the cyclical expansion from IIIQ2009 to IQ2019. In contrast, the expansion from IQ1983 to IIIQ1992 was at the average annual growth rate of 3.7 percent and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). Because of mediocre GDP growth, there are 19.8 million unemployed or underemployed in the United States for an effective unemployment/underemployment rate of 11.6 percent (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html). Weakness of growth and employment creation is analyzed in II Collapse of United States Dynamism of Income Growth and Employment Creation (Section II and earlier https://cmpassocregulationblog.blogspot.com/2019/06/fomc-outlook-uncertainty-central-bank.html). In contrast with the decline of revenue, outlays or expenditures increased 30.2 percent from $10,839 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,115 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.2 percent while revenue declined by 6.5 percent caused the increase in the federal deficit from $1186 billion in 2005-2008 to $5094 billion in 2009-2012. Federal revenue was 14.9 percent of GDP on average in the years from 2009 to 2012, which is well below 17.4 percent of GDP on average from 1968 to 2017. Federal outlays were 23.3 percent of GDP on average from 2009 to 2012, which is well above 20.3 percent of GDP on average from 1968 to 2017. The lower part of Table VI-7C shows that debt held by the public swelled from $5803 billion in 2008 to $13,117 billion in 2015, by $7314 billion or 126.0 percent. Debt held by the public as percent of GDP or economic activity jumped from 39.4 percent in 2008 to 77.8 percent in 2018, which is well above the average of 40.7 percent from 1968 to 2017. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures.

Table VI-7C, US, Treasury Budget in Fiscal Year to Date Million Dollars

Jun 2019	Fiscal Year 2019	Fiscal Year 2018	∆%
Receipts	2,608,855	2,540,804	2.7
Outlays	3,355,970	3,147,904	6.6
Deficit	-747,115	-607,100
Individual Income Tax	1,301,477	1,305,490	-0.3
Corporation Income Tax	164,355	161,708	1.6
Social Insurance	697,303	645,768	8.0
	Receipts	Outlays	Deficit (-), Surplus (+)
$ Billions
Fiscal Year 2018	3,329	4,108	-779
% GDP	16.4	20.3	3.9
Fiscal Year 2017	3,316	3,982	-665
% GDP	17.2	20.7	-3.5
Fiscal Year 2016	3,268	3,853	-585
% GDP	17.6	20.8	-3.2
Fiscal Year 2015	3,250	3,688	-439
% GDP	18.0	20.4	-2.4
Fiscal Year 2014	3,022	3,506	-485
% GDP	17.4	20.2	2.8
Fiscal Year 2013	2,775	3,455	-680
% GDP	16.7	20.8	-4.1
Fiscal Year 2012	2,450	3,537	-1,087
% GDP	15.3	22.0	-6.8
Fiscal Year 2011	2,304	3,603	-1,300
% GDP	15.0	23.4	-8.4
Fiscal Year 2010	2,163	3,457	-1,294
% GDP	14.6	23.3	-8.7
Fiscal Year 2009	2,105	3,518	-1,413
% GDP	14.6	24.4	-9.8
Total 2009-2012	9,022	14,115	-5,094
Average % GDP 2009-2012	14.9	23.3	-8.5
Fiscal Year 2008	2,524	2,983	-459
% GDP	17.1	20.2	-3.1
Fiscal Year 2007	2,568	2,729	-161
% GDP	18.0	19.1	-1.1
Fiscal Year 2006	2,407	2,655	-248
% GDP	17.6	19.5	-1.8
Fiscal Year 2005	2,154	2,472	-318
% GDP	16.8	19.3	-2.5
Total 2005-2008	9,653	10,839	-1,186
Average % GDP 2005-2008	17.4	19.5	-2.1
Debt Held by the Public	Billions of Dollars	Percent of GDP
2005	4,592	35.8
2006	4,829	35.4
2007	5,035	35.2
2008	5,803	39.4
2009	7,545	52.3
2010	9,019	60.8
2011	10,128	65.8
2012	11,281	70.3
2013	11,983	72.2
2014	12,780	73.7
2015	13,117	72.5
2016	14,168	76.4
2017	14,666	76.1
2018	15,751	77.8

Source: https://www.fiscal.treasury.gov/reports-statements/mts/

https://www.treasury.gov/press-center/press-releases/Pages/sm0184.aspx CBO, The budget and economic outlook: 2018 to 2028. Washington, DC, Apr 9 https://www.cbo.gov/publication/53651

CBO, The budget and economic outlook: 2017-2027. Washington, DC, Jan 24, 2017 https://www.cbo.gov/publication/52370 CBO, An update to the budget and economic outlook: 2016 to 2026. Washington, DC, Aug 23, 2016.

https://www.cbo.gov/about/products/budget-economic-data#6

CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO (2013Aug12). 2013AugHBD. Historical budget data—August 2013. Washington, DC, Congressional Budget Office, Aug. CBO, Historical Budget Data—February 2014, Washington, DC, Congressional Budget Office, Feb. CBO, Historical budget data—April 2014 release. Washington, DC, Congressional Budget Office, Apr. Congressional Budget Office, August 2014 baseline: an update to the budget and economic outlook: 2014 to 2024. Washington, DC, CBO, Aug 27, 2014. CBO, Monthly budget review: summary of fiscal year 2014. Washington, DC, Congressional Budget Office, Nov 10, 2014. CBO, The budget and economic outlook: 2015 to 2025. Washington, DC, Congressional Budget Office, Jan 26, 2015.

https://www.cbo.gov/about/products/budget-economic-data#6

https://www.cbo.gov/about/products/budget_economic_data#3 https://www.cbo.gov/about/products/budget_economic_data#2

Table VI-7E, US, Congressional Budget Office, 40-Year Averages of Revenues and Outlays Before and After Update of the US National Income Accounts by the Bureau of Economic Analysis, % of GDP

	Before Update	After Update
Revenues
Individual Income Taxes	8.2	7.9
Social Insurance Taxes	6.2	6.0
Corporate Income Taxes	1.9	1.9
Other	1.6	1.6
Total Revenues	17.9	17.4
Outlays
Mandatory	10.2	9.9
Discretionary	8.6	8.4
Net Interest	2.2	2.2
Total Outlays	21.0	20.4
Deficit	-3.1	-3.0
Debt Held by the Public	39.2	38.0

Source: CBO (2013Aug12Av). Kim Kowaleski and Amber Marcellino.

Table VI-7F provides the long-term budget outlook of the CBO for 2018, 2028 and 2048. Revenues increase from 16.6 percent of GDP in 2018 to 19.8 percent in 2047. The growing stock of debt raises net interest spending from 1.6 percent of GDP in 2018 to 3.8 percent in 2028 and 6.3 percent 2048. Total spending increases from 20.6 percent of GDP in 2018 to 29.3 percent in 2048. Federal debt held by the public rises to 152.0 percent of GDP in 2048. US fiscal affairs are in an unsustainable path with tough rigidities in spending and revenues.

Table IIA1-9, Congressional Budget Office, Long-term Budget Outlook, % of GDP

	2018	2028	2048
Revenues	16.6	18.5	19.8
Total Noninterest Spending	19.0	20.6	23.1
Social Security	4.9	6.0	6.3
Medicare	2.9	4.2	5.9
Medicaid, CHIP and Exchange Subsidies	2.3	2.5	3.3
Other	8.9	7.9	7.6
Net Interest	1.6	3.1	6.3
Total Spending	20.6	23.6	29.3
Revenues Minus Total Noninterest Spending	-2.4	-2.1	-3.3
Revenues Minus Total Spending	-3.9	-5.1	-9.5
Federal Debt Held by the Public	78.0	96.0	152.0

Source: CBO, The 2018 long-term budget outlook. Washington, DC, Jun 26, 2018 https://www.cbo.gov/publication/53919

Chart IIA1-LTB18 of the CBO illustrates the rigidity of major health care programs and social security with limited upside potential in taxes.

Chart IIA1-LTB18, The extended baseline of CBO 2018-2048,

Source: CBO, The 2018 long-term budget outlook. Washington, DC, Jun 26, 2018 https://www.cbo.gov/publication/53919

Recovery of growth rates of the US economy is critical to resolving fiscal sustainability. The revealing Chart VI-7LTBO of the Congressional Budget Office (CBO) provides alternative paths of the debt/GDP ratio according to assumptions on the growth of productivity, federal borrowing rates and rates of excess cost growth for federal spending on Medicare and Medicaid. The extended baseline projects debt/GDP of 150.0 percent in 2047. With lower rate of growth of productivity, the debt/GDP ratio would increase to 244 percent in 2047. The debt/GDP ratio would be much lower at 85 percent in 2047 with higher rate of productivity growth.

Chart VI-LTBO, Congressional Budget Office, Paths of Federal Debt under Alternative Rates of Productivity Growth, Labor Force Participation and Other Assumptions

Source: Congressional Budget Office, The 2016 long-term budget outlook. Washington, DC, Jul 12 https://www.cbo.gov/publication/51580

Table VI-7G of the Congressional Budget Office (CBO) provides the data in Chart VI-LTBO. Economy policy must focus intensively on stimulating productivity growth that would recover the high rates of economic growth of the US over the long-term.

Table VI-7G, Congressional Budget Office, Long-term Budget Outlook, % of GDP, Alternative Paths of Federal Debt According to the Rate of Productivity Growth

		Given Different Labor Force Participation Rates, Productivity Growth Rates, Federal Borrowing Rates, and Rates of Excess Cost Growth for Federal Spending on Medicare and Medicaid^a
	Extended Baseline	Given Rates That Lower Projected Deficits	Given Rates That Raise Projected Deficits
2000	34
2001	31
2002	33
2003	35
2004	36
2005	36
2006	35
2007	35
2008	39
2009	52
2010	61
2011	66
2012	70
2013	73
2014	74
2015	73
2016	77
2017	77	77	77
2018	77	76	79
2019	78	76	80
2020	79	76	82
2021	80	76	84
2022	81	77	86
2023	83	77	89
2024	84	77	91
2025	85	77	94
2026	87	78	97
2027	89	78	101
2028	91	78	105
2029	93	79	108
2030	95	79	113
2031	97	79	117
2032	99	80	122
2033	102	80	127
2034	105	81	133
2035	107	81	138
2036	110	82	145
2037	113	82	151
2038	116	83	158
2039	120	83	165
2040	123	84	173
2041	127	84	182
2042	130	84	190
2043	134	85	200
2044	138	85	210
2045	142	85	220
2046	146	85	232
2047	150	85	244

Source: CBO, The 2017 Long-term Budget Outlook. Washington, DC, Mar 30, 2017 https://www.cbo.gov/publication/52480 https://www.cbo.gov/about/products/budget-economic-data#1

Chart VI-8 of the Board of Governors of the Federal Reserve System provides the yield of the ten-year constant maturity Treasury and the overnight fed funds rate from Jan 2, 1962 to Jul 18, 2019. The yield of the ten-year constant maturity Treasury stood at 7.67 percent on Feb 16, 1977. A peak was reached at 15.21 percent on Oct 26, 1981 during the inflation control effort by the Fed. There is a second local peak in Chart VI-8 on May 3, 1984 at 13.94 percent followed by another local peak at 8.14 percent on Nov 21, 1994 during another inflation control effort (see Appendix I The Great Inflation). There was sharp reduction of the yields from 5.44 percent on Apr 1, 2002 until they reached a low point of 3.13 percent on Jun 13, 2003. The fed funds rate was 1.18 percent on Jun 23, 2003 and the ten-year yield 3.36 percent. Yields rose again to 4.89 percent on Jun 14, 2004 with the fed funds rate at 1.02 percent and the ten-year yield stood at 5.23 percent on Jul 5, 2006. At the onset of the financial crisis on Sep 17, 2007, the fed funds rate was 5.33 percent and the ten-year yield 4.48 percent. On Dec 26, 2008, the fed funds rate was 0.09 percent and the ten-year yield 2.16 percent. Yields declined sharply during the financial crisis, reaching 2.08 percent on Dec 18, 2008, lowered by higher prices originating in sharply increasing demand in the flight to the US dollar and obligations of the US government. Yields rose again to 4.01 percent on Apr 5, 2010 but collapsed to 2.41 percent on Oct 8, 2010 because of higher demand originating in the flight from the European sovereign risk event. During higher risk appetite, yields rose to 3.75 percent on Feb 8, 2011 and reached 2.04 percent on Jul 18, 2019 with the fed funds rate at 2.41 percent. Chart VI-8A provides the fed funds rate and the yield of the ten-year constant maturity Treasury from Jan 2, 2001 to Jul 11, 2019. The final data point for Jul 11, 2019, shows the fed funds rate at 2.40 percent and the yield of the ten-year constant maturity Treasury at 2.13 percent. There has been a trend of decline of yields with oscillations. During periods of risk aversion investors seek protection in obligations of the US government, causing decline in their yields. In an eventual resolution of international financial risks with higher economic growth, there could be the trauma of rising yields with significant capital losses in portfolios of government securities. The data in Table VI-7 in the text is obtained from closing dates in New York published by the Wall Street Journal (http://professional.wsj.com/mdc/public/page/marketsdata.html?mod=WSJ_PRO_hps_marketdata).

Chart VI-8, US, Overnight Federal Funds Rate and Ten-Year Treasury Constant Maturity Yield, Jan 2, 1962 to Jul 18, 2019

Note: US Recessions in Shaded Areas

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Chart VI-8A, US, Overnight Federal Funds Rate and Ten-Year Treasury Constant Maturity Yield, Jan 2, 2001 to Jul 18, 2019

Note: US Recessions in Shaded Areas

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Chart VI-8A provides the fed funds rate and the yield of the ten-year constant maturity Treasury from Jan 2, 2001 to Jul 18, 2019. The final data point for Jul 18, 2019, shows the fed funds rate at 2.41 percent and the yield of the ten-year constant maturity Treasury at 2.04 percent. There has been a trend of decline of yields with oscillations. During periods of risk aversion investors seek protection in obligations of the US government, causing decline in their yields. In an eventual resolution of international financial risks with higher economic growth, there could be the trauma of rising yields with significant capital losses in portfolios of government securities. The data in Table VI-7 in the text is obtained from closing dates in New York published by the Wall Street Journal (http://professional.wsj.com/mdc/public/page/marketsdata.html?mod=WSJ_PRO_hps_marketdata).

Chart VI-9 of the Board of Governors of the Federal Reserve System provides securities held outright by Federal Reserve banks from 2002 to 2019. The first data point in Chart VI-9 is the level for Dec 18, 2002 of $629,407 million and the final data point in Chart VI-9 is level of $3,623,424 million on Jul 17, 2019. On Jul 17, 2019, the line “Reserve Bank credit” in the Fed balance sheet stood at $3,769,117 million, or $3.8 trillion. On October 25, 2017, at the beginning of the FOMC programmed reduction of the balance sheet, the line “Reserve Bank Credit” stood at $4,461,117 million. The line “Reserve Bank Credit” decreased $692,000 million from Oct 25, 2017 to Jul 17, 2019. The line “Securities Held Outright” decreased from $4,243,048 million on Oct 25, 2017 to $3,623,424 on Jul 17, 2019 or $619,624 million.

Chart VI-9, US, Securities Held Outright by Federal Reserve Banks, Wednesday Level, Dec 18, 2002 to Jul 17, 2019, USD Millions

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/monetarypolicy/bst_fedsbalancesheet.htm

Chart VI-10 of the Board of Governors of the Federal Reserve System provides the overnight Fed funds rate on business days from Jul 1, 1954 at 1.13 percent through Jan 10, 1979, at 9.91 percent per year, to Jul 18, 2019, at 2.41 percent per year. US recessions are in shaded areas according to the reference dates of the NBER (http://www.nber.org/cycles.html). In the Fed effort to control the “Great Inflation” of the 1970s (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html), the fed funds rate increased from 8.34 percent on Jan 3, 1979 to a high in Chart VI-10 of 22.36 percent per year on Jul 22, 1981 with collateral adverse effects in the form of impaired savings and loans associations in the United States, emerging market debt and money-center banks (see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 72-7; Pelaez 1986, 1987). Another episode in Chart VI-10 is the increase in the fed funds rate from 3.15 percent on Jan 3, 1994, to 6.56 percent on Dec 21, 1994, which also had collateral effects in impairing emerging market debt in Mexico and Argentina and bank balance sheets in a world bust of fixed income markets during pursuit by central banks of non-existing inflation (Pelaez and Pelaez, International Financial Architecture (2005), 113-5). Another interesting policy impulse is the reduction of the fed funds rate from 7.03 percent on Jul 3, 2000, to 1.00 percent on Jun 22, 2004, in pursuit of equally non-existing deflation (Pelaez and Pelaez, International Financial Architecture (2005), 18-28, The Global Recession Risk (2007), 83-85), followed by increments of 25 basis points from Jun 2004 to Jun 2006, raising the fed funds rate to 5.25 percent on Jul 3, 2006 in Chart VI-10. Central bank commitment to maintain the fed funds rate at 1.00 percent induced adjustable-rate mortgages (ARMS) linked to the fed funds rate. Lowering the interest rate near the zero bound in 2003-2004 caused the illusion of permanent increases in wealth or net worth in the balance sheets of borrowers and also of lending institutions, securitized banking and every financial institution and investor in the world. The discipline of calculating risks and returns was seriously impaired. The objective of monetary policy was to encourage borrowing, consumption and investment but the exaggerated stimulus resulted in a financial crisis of major proportions as the securitization that had worked for a long period was shocked with policy-induced excessive risk, imprudent credit, high leverage and low liquidity by the incentive to finance everything overnight at interest rates close to zero, from adjustable rate mortgages (ARMS) to asset-backed commercial paper of structured investment vehicles (SIV).

The consequences of inflating liquidity and net worth of borrowers were a global hunt for yields to protect own investments and money under management from the zero interest rates and unattractive long-term yields of Treasuries and other securities. Monetary policy distorted the calculations of risks and returns by households, business and government by providing central bank cheap money. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper with the objective of purchasing default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9). ARMS were created to lower monthly mortgage payments by benefitting from lower short-dated reference rates. Financial institutions economized in liquidity that was penalized with near zero interest rates. There was no perception of risk because the monetary authority guaranteed a minimum or floor price of all assets by maintaining low interest rates forever or equivalent to writing an illusory put option on wealth. Subprime mortgages were part of the put on wealth by an illusory put on house prices. The housing subsidy of $221 billion per year created the impression of ever-increasing house prices. The suspension of auctions of 30-year Treasuries was designed to increase demand for mortgage-backed securities, lowering their yield, which was equivalent to lowering the costs of housing finance and refinancing. Fannie and Freddie purchased or guaranteed $1.6 trillion of nonprime mortgages and worked with leverage of 75:1 under Congress-provided charters and lax oversight. The combination of these policies resulted in high risks because of the put option on wealth by near zero interest rates, excessive leverage because of cheap rates, low liquidity because of the penalty in the form of low interest rates and unsound credit decisions because the put option on wealth by monetary policy created the illusion that nothing could ever go wrong, causing the credit/dollar crisis and global recession (Pelaez and Pelaez, Financial Regulation after the Global Recession, 157-66, Regulation of Banks, and Finance, 217-27, International Financial Architecture, 15-18, The Global Recession Risk, 221-5, Globalization and the State Vol. II, 197-213, Government Intervention in Globalization, 182-4). A final episode in Chart VI-10 is the reduction of the fed funds rate from 5.41 percent on Aug 9, 2007, to 2.97 percent on October 7, 2008, to 0.12 percent on Dec 5, 2008 and close to zero throughout a long period with the final point at 2.41 percent on Jul 18, 2019. Evidently, this behavior of policy would not have occurred had there been theory, measurements and forecasts to avoid these violent oscillations that are clearly detrimental to economic growth and prosperity without inflation. The Chair of the Board of Governors of the Federal Reserve System, Janet L. Yellen, stated on Jul 10, 2015 that (http://www.federalreserve.gov/newsevents/speech/yellen20150710a.htm):

“Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy. But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step. I currently anticipate that the appropriate pace of normalization will be gradual, and that monetary policy will need to be highly supportive of economic activity for quite some time. The projections of most of my FOMC colleagues indicate that they have similar expectations for the likely path of the federal funds rate. But, again, both the course of the economy and inflation are uncertain. If progress toward our employment and inflation goals is more rapid than expected, it may be appropriate to remove monetary policy accommodation more quickly. However, if progress toward our goals is slower than anticipated, then the Committee may move more slowly in normalizing policy.”

There is essentially the same view in the Testimony of Chair Yellen in delivering the Semiannual Monetary Policy Report to the Congress on Jul 15, 2015 (http://www.federalreserve.gov/newsevents/testimony/yellen20150715a.htm). The FOMC (Federal Open Market Committee) raised the fed funds rate to ¼ to ½ percent at its meeting on Dec 16, 2015 (http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm).

and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html and earlier (http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html). There is not a fiscal cliff or debt limit issue ahead but rather free fall into a fiscal abyss. The combination of the fiscal abyss with zero interest rates could trigger the risk premium on Treasury debt or Himalayan hike in interest rates.

Chart VI-10, US, Fed Funds Rate, Business Days, Jul 1, 1954 to Jul 3, 2019, Percent per Year

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Chart VI-11 of the Board of Governors of the Federal Reserve System provides the fed funds rate and the prime bank loan rate in business days from Aug 4, 1955 to Jul 18, 2019. The overnight fed funds rate was 2.0 percent on Aug 4, 1955 and the bank prime rate 3.25 percent. The fed funds overnight rate is the rate charged by a depository institution with idle reserves deposited at a federal reserve bank to exchange its deposits overnight to another depository institution in need of reserves. In a sense, it is the marginal cost of funding for a bank in the United States, or the cost of a unit of additional funding. The fed funds rate is the rate charged by a bank to another bank in an uncollateralized overnight loan. The fed funds rate is the traditional policy rate or rate used to implement policy directives of the Federal Open Market Committee (FOMC). Thus, there should be an association between the fed funds rate or cost of funding of a bank and its prime lending rate. Such an association is verified in Chart VI-11 with the rates moving quite closely over time. On January 10, 1979, the fed funds rate was set at 9.91 percent and banks set their prime lending rate at 11.75 percent. On Dec 16, 2008, the policy determining committee of the Fed decided (http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm): “The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to ¼ percent.” On Dec 14, 2016 (https://www.federalreserve.gov/newsevents/press/monetary/20161214a.htm), “the Committee decided to raise the target level for the federal funds rate to ½ to ¾ percent.” On Mar 15, 2017, “the Committee decided to raise the federal funds rate to ¾ to 1 percent (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170315a.htm). The FOMC raised the fed funds rate to 1 to 1 ¼ percent at its meeting on Jun 14, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170201a.htm). The FOMC increased the fed funds rate to 1¼ to 1½ percent on Dec 13, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20171213a.htm). The FOMC increased the fed funds rate to 1½ to 1¾ percent on Mar 21, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180321a.htm). The FOMC increased the fed fund rate to 1¾ to 2.0 percent on Jun 13, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180613a.htm). The FOMC increased the fed fund rate to 2.0 to 2¼ percent on Sep 26, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180926a.htm). The FOMC increased the fed fund rate to 2¼ to 2½ percent on Dec 19, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a.htm). The final segment of Chart VI-11 shows similar movement of the fed funds rate and the prime bank loan rate following the fixing of the fed funds rate to approximately zero. In the final data point of Chart VI-11 on Jul 18, 2019, the fed funds rate is 2.41 percent and the prime rate 5.50 percent. The causes of the financial crisis and global recession were interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The yields of Treasury securities inverted on Mar 22, 2019 with the ten-year yield at 2.44 percent below those of 2.49 percent for one-month, 2.48 percent for two months, 2.46 percent for three months, 2.48 percent for six months and 2.45 percent for one year (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). The final segment after 2001 shows the effects of unconventional monetary policy of extremely low, below inflation fed funds rate in lowering yields. This was an important cause of the global recession and financial crisis inducing as analyzed by Taylor (2018Oct 19, 2) “search for yield, excessive risk taking, a boom and bust in the housing market, and eventually the financial crisis and recession.” Monetary policy deviated from the Taylor Rule (Taylor 2018Oct19 see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB, 2019Oct19 and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html)). An explanation is in the research of Adrian, Estrella and Shin (2018, 21-22): “Our findings suggest that the monetary tightening of 2004-2006 period ultimately did achieve a slowdown in real activity not because of its impact on the level of longer term interest rates, but rather because of its impact on the slope of the yield curve. In fact, while the level of the 10-year yield only increased 38 basis points between June 2004 and 2006, the term spread declined 325 basis points (from 3.44 to .19 percent). The fact that the slope flattened meant that intermediary profitability was compressed, thus shifting the supply of credit, and hence inducing changes in real activity. The 18 month lag between the end of the tightening cycle, and the beginning of the recession is perfectly compatible with effective monetary tightening.” See (https://www.newyorkfed.org/research/capital_markets/ycfaq.html). A major difference in the current cycle is the balance sheet of the Fed with purchases used to lower interest rates in specific segments and maturities such as mortgage-backed securities and longer terms.

Chart VI-11, US, Fed Funds Rate and Prime Bank Loan Rate, Business Days, Aug 4, 1955 to Jul 18, 2019, Percent per Year

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Lending has become more complex over time. The critical fact of current world financial markets is the combination of “unconventional” monetary policy with intermittent shocks of financial risk aversion. There are two interrelated unconventional monetary policies. First, unconventional monetary policy consists of (1) reducing short-term policy interest rates toward the “zero bound” such as fixing the fed funds rate at 0 to ¼ percent by decision of the Federal Open Market Committee (FOMC) since Dec 16, 2008 (http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm). Second, unconventional monetary policy also includes a battery of measures to also reduce long-term interest rates of government securities and asset-backed securities such as mortgage-backed securities. When inflation is low, the central bank lowers interest rates to stimulate aggregate demand in the economy, which consists of consumption and investment. When inflation is subdued and unemployment high, monetary policy would lower interest rates to stimulate aggregate demand, reducing unemployment. When interest rates decline to zero, unconventional monetary policy would consist of policies such as large-scale purchases of long-term securities to lower their yields. A major portion of credit in the economy is financed with long-term asset-backed securities. Loans for purchasing houses, automobiles and other consumer products are bundled in securities that in turn are sold to investors. Corporations borrow funds for investment by issuing corporate bonds. Loans to small businesses are also financed by bundling them in long-term bonds. Securities markets bridge the needs of higher returns by investors obtaining funds from savers that are channeled to consumers and business for consumption and investment. Lowering the yields of these long-term bonds could lower costs of financing purchases of consumer durables and investment by business. The essential mechanism of transmission from lower interest rates to increases in aggregate demand is portfolio rebalancing. Withdrawal of bonds in a specific maturity segment or directly in a bond category such as currently mortgage-backed securities causes reductions in yield that are equivalent to increases in the prices of the bonds. There can be secondary increases in purchases of those bonds in private portfolios in pursuit of their increasing prices. Lower yields translate into lower costs of buying homes and consumer durables such as automobiles and also lower costs of investment for business.

Monetary policy can lower short-term interest rates quite effectively. Lowering long-term yields is somewhat more difficult. The critical issue is that monetary policy cannot ensure that increasing credit at low interest cost increases consumption and investment. There is a large variety of possible allocation of funds at low interest rates from consumption and investment to multiple risk financial assets. Monetary policy does not control how investors will allocate asset categories. A critical financial practice is to borrow at low short-term interest rates to invest in high-risk, leveraged financial assets. Investors may increase in their portfolios asset categories such as equities, emerging market equities, high-yield bonds, currencies, commodity futures and options and multiple other risk financial assets including structured products. If there is risk appetite, the carry trade from zero interest rates to risk financial assets will consist of short positions at short-term interest rates (or borrowing) and short dollar assets with simultaneous long positions in high-risk, leveraged financial assets such as equities, commodities and high-yield bonds. Low interest rates may induce increases in valuations of risk financial assets that may fluctuate in accordance with perceptions of risk aversion by investors and the public. During periods of muted risk aversion, carry trades from zero interest rates to exposures in risk financial assets cause temporary waves of inflation that may foster instead of preventing financial instability (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/06/fomc-interest-rate-increase-planned.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/dollar-devaluation-world-inflation.html). During periods of risk aversion such as fears of disruption of world financial markets and the global economy resulting from collapse of the European Monetary Union, carry trades are unwound with sharp deterioration of valuations of risk financial assets. More technical discussion is in IA Appendix: Transmission of Unconventional Monetary Policy at http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html.

Chart VI-12 of the Board of Governors of the Federal Reserve System provides the fed funds rate, prime bank loan rate and the yield of a corporate bond rated Baa by Moody’s. On Jan 10, 1979, the fed funds rate was fixed at 9.91 percent and banks fixed the prime loan rate at 11.75 percent. Reflecting differences in risk, the fed funds rate was 8.76 percent on Jan 2, 1986, the prime rate 9.50 percent and the Baa Corporate bond yield 11.38 percent. The yield of the Baa corporate bond collapsed toward the bank prime loan rate after the end of extreme risk aversion in the beginning of 2009. The final data point in Chart VI-12 is for Jul 7, 2016, with the fed funds rate at 0.40 percent, the bank prime rate at 3.50 percent and the yield of the Baa corporate bond at 4.19 percent. Empirical tests of the transmission of unconventional monetary policy to actual increases in consumption and investment or aggregate demand find major hurdles (see IA Appendix: Transmission of Unconventional Monetary Policy at http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html).

Chart VI-12, US, Fed Funds Rate, Prim Bank Loan Rate and Yield of Moody’s Baa Corporate Bond, Business Days, Aug 4, 1955 to Jul 7, 2016, Percent per Year

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Chart VI-12A of the Board of Governors of the Federal Reserve System provides the overnight fed funds rate and the bank prime rate on business days from Jan 5, 2007 to Jun 27, 2019. There is a jump in the rates and yield with the increase in fed funds rates target range from 0 to ½ percent to ¼ to ½ percent on Dec 16, 2015 by the Federal Open Market Committee (http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm), ½ to ¾ percent on Dec 14, 2016 (https://www.federalreserve.gov/newsevents/press/monetary/20161214a.htm) and ¾ to 1 percent on Mar 15, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170315a.htm). The FOMC raised the fed funds rate to 1 to 1¼ percent at its meeting on Jun 14, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170201a.htm). The FOMC increased the fed funds rate to 1¼ to 1½ percent on Dec 13, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20171213a.htm). The FOMC increased the fed funds rate to 1½ to 1¾ percent on Mar 21, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180321a.htm). The FOMC increased the fed fund rate to 1¾ to 2.0 percent on Jun 13, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180613a.htm). The FOMC increased the fed fund rate to 2.0 to 2¼ percent on Sep 26, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180926a.htm). The FOMC increased the fed fund rate to 2¼ to 2½ percent on Dec 19, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a.htm). The final segment of Chart VI-11 shows similar movement of the fed funds rate and the prime bank loan rate following the fixing of the fed funds rate to approximately zero. In the final data point of Chart VI-12A on Jul 18, 2019, the fed funds rate is 2.41 percent and the prime rate 5.50 percent. The causes of the financial crisis and global recession were interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The yields of Treasury securities inverted on Mar 22, 2019 with the ten-year yield at 2.44 percent below those of 2.49 percent for one-month, 2.48 percent for two months, 2.46 percent for three months, 2.48 percent for six months and 2.45 percent for one year (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). Unconventional monetary policy of extremely low interest rates was an important cause of the global recession and financial crisis inducing as analyzed by Taylor (2018Oct 19, 2) “search for yield, excessive risk taking, a boom and bust in the housing market, and eventually the financial crisis and recession.” Monetary policy deviated from the Taylor Rule (Taylor 2018Oct19 see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB, 2019Oct19 and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html)). An explanation is in the research of Adrian, Estrella and Shin (2018, 21-22): “Our findings suggest that the monetary tightening of 2004-2006 period ultimately did achieve a slowdown in real activity not because of its impact on the level of longer term interest rates, but rather because of its impact on the slope of the yield curve. In fact, while the level of the 10-year yield only increased 38 basis points between June 2004 and 2006, the term spread declined 325 basis points (from 3.44 to .19 percent). The fact that the slope flattened meant that intermediary profitability was compressed, thus shifting the supply of credit, and hence inducing changes in real activity. The 18 month lag between the end of the tightening cycle, and the beginning of the recession is perfectly compatible with effective monetary tightening.” See (https://www.newyorkfed.org/research/capital_markets/ycfaq.html). A major difference in the current cycle is the balance sheet of the Fed with purchases used to lower interest rates in specific segments and maturities such as mortgage-backed securities and longer terms.

Chart VI-12A, US, Fed Funds Rate and Prime Bank Loan Rate, Business Days, Jan 5, 2007 to Jul 18, 2019, Percent per Year

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Chart VI-12B of the Board of Governors of the Federal Reserve System provides the fed funds rate and prime bank loan rate on business days from Jan 2, 2001 to Jul 18, 2019. The behavior over time is that of controlled interest rates. Unconventional monetary policy with zero interest rates and quantitative easing is quite difficult to unwind because of the adverse effects of raising interest rates on valuations of risk financial assets and home prices, including the very own valuation of the securities held outright in the Fed balance sheet. Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The final segment shows the repetition of this policy with minute increases in interest rates. The causes of the financial crisis and global recession were interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The yields of Treasury securities inverted on Mar 22, 2019 with the ten-year yield at 2.44 percent below those of 2.49 percent for one-month, 2.48 percent for two months, 2.46 percent for three months, 2.48 percent for six months and 2.45 percent for one year (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). The final segment after 2001 shows the effects of unconventional monetary policy of extremely low, below inflation fed funds rate in lowering yields. This was an important cause of the global recession and financial crisis inducing as analyzed by Taylor (2018Oct 19, 2) “search for yield, excessive risk taking, a boom and bust in the housing market, and eventually the financial crisis and recession.” Monetary policy deviated from the Taylor Rule (Taylor 2018Oct19 see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB, 2019Oct19 and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html)). An explanation is in the research of Adrian, Estrella and Shin (2018, 21-22): “Our findings suggest that the monetary tightening of 2004-2006 period ultimately did achieve a slowdown in real activity not because of its impact on the level of longer term interest rates, but rather because of its impact on the slope of the yield curve. In fact, while the level of the 10-year yield only increased 38 basis points between June 2004 and 2006, the term spread declined 325 basis points (from 3.44 to .19 percent). The fact that the slope flattened meant that intermediary profitability was compressed, thus shifting the supply of credit, and hence inducing changes in real activity. The 18 month lag between the end of the tightening cycle, and the beginning of the recession is perfectly compatible with effective monetary tightening.” See (https://www.newyorkfed.org/research/capital_markets/ycfaq.html). A major difference in the current cycle is the balance sheet of the Fed with purchases used to lower interest rates in specific segments and maturities such as mortgage-backed securities and longer terms.

Chart VI-12B, US, Fed Funds Rate and Prime Bank Loan Rate, Business Days, Jan 2, 2001 to Jul 18, 2019, Percent per Year

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Interest rate risk is increasing in the US with amplifying fluctuations. Chart VI-13 of the Board of Governors provides the conventional mortgage rate for a fixed-rate 30-year mortgage. The rate stood at 5.87 percent on Jan 8, 2004, increasing to 6.79 percent on Jul 6, 2006. The rate bottomed at 3.35 percent on May 2, 2013. Fear of duration risk in longer maturities such as mortgage-backed securities caused continuing increases in the conventional mortgage rate that rose to 4.51 percent on Jul 11, 2013, 4.58 percent on Aug 22, 2013 and 3.42 percent on Oct 6, 2016, which is the last data point in Chart VI-13. The thirty-year mortgage rate was 3.81 percent on Jul 18, 2019 (http://www.freddiemac.com/finance/ http://www.freddiemac.com/pmms/index.html). The current decline of yields is encouraging a surge in mortgage applications that could be reversed in a new increase. Shayndi Raice and Nick Timiraos, writing on “Banks cut as mortgage boom ends,” on Jan 16, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303754404579310940019239208), analyze the drop in mortgage applications to a 13-year low, as measured by the Mortgage Bankers Association. Nick Timiraos, writing on “Demand for home loans plunges,” on Apr 24, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702304788404579522051733228402?mg=reno64-wsj), analyzes data in Inside Mortgage Finance that mortgage lending of $235 billion in IQ2014 is 58 percent lower than a year earlier and 23 percent below IVQ2013. Mortgage lending collapsed to the lowest level in 14 years. In testimony before the Committee on the Budget of the US Senate on May 8, 2004, Chair Yellen provides analysis of the current economic situation and outlook (http://www.federalreserve.gov/newsevents/testimony/yellen20140507a.htm): “One cautionary note, though, is that readings on housing activity--a sector that has been recovering since 2011--have remained disappointing so far this year and will bear watching.”

Chart VI-13, US, Conventional Mortgage Rate, Jan 8, 2004 to Oct 6, 2016

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/h15/update

Table IIB-8, US, Fed Funds Rate, Thirty Year Treasury Bond and Conventional Mortgage Rate, Monthly, Percent per Year, Dec 2012 to Mar 2019

	Fed Funds Rate	Yield of Thirty Year Constant Maturity	Conventional Mortgage Rate
2012-12	0.16	2.88	3.35
2013-01	0.14	3.08	3.41
2013-02	0.15	3.17	3.53
2013-03	0.14	3.16	3.57
2013-04	0.15	2.93	3.45
2013-05	0.11	3.11	3.54
2013-06	0.09	3.40	4.07
2013-07	0.09	3.61	4.37
2013-08	0.08	3.76	4.46
2013-09	0.08	3.79	4.49
2013-10	0.09	3.68	4.19
2013-11	0.08	3.80	4.26
2013-12	0.09	3.89	4.46
2014-01	0.07	3.77	4.43
2014-02	0.07	3.66	4.30
2014-03	0.08	3.62	4.34
2014-04	0.09	3.52	4.34
2014-05	0.09	3.39	4.19
2014-06	0.10	3.42	4.16
2014-07	0.09	3.33	4.13
2014-08	0.09	3.2	4.12
2014-09	0.09	3.26	4.16
2014-10	0.09	3.04	4.04
2014-11	0.09	3.04	4.00
2014-12	0.12	2.83	3.86
2015-01	0.11	2.46	3.67
2015-02	0.11	2.57	3.71
2015-03	0.11	2.63	3.77
2015-04	0.12	2.59	3.67
2015-05	0.12	2.96	3.84
2015-06	0.13	3.11	3.98
2015-07	0.13	3.07	4.05
2015-08	0.14	2.86	3.91
2015-09	0.14	2.95	3.89
2015-10	0.12	2.89	3.80
2015-11	0.12	3.03	3.94
2015-12	0.24	2.97	3.96
2016-01	0.34	2.86	3.87
2016-02	0.38	2.62	3.66
2016-03	0.36	2.68	3.69
2016-04	0.37	2.62	3.61
2016-05	0.37	2.63	3.60
2016-06	0.38	2.45	3.57
2016-07	0.39	2.23	3.44
2016-08	0.40	2.26	3.44
2016-09	0.40	2.35	3.46
2016-10	0.40	2.50	3.47
2016-11	0.41	2.86	3.77
2016-12	0.54	3.11	4.20
2017-01	0.65	3.02	4.15
2017-02	0.66	3.03	4.17
2017-03	0.79	3.08	4.20
2017-04	0.90	2.94	4.05
2017-05	0.91	2.96	4.01
2017-06	1.04	2.80	3.90
2017-07	1.15	2.88	3.97
2017-08	1.16	2.80	3.88
2017-09	1.15	2.78	3.81
2017-10	1.15	2.88	3.90
2017-11	1.16	2.80	3.92
2017-12	1.30	2.77	3.95
2018-01	1.41	2.88	4.03
2018-02	1.42	3.13	4.33
2018-03	1.51	3.09	4.44
2018-04	1.69	3.07	4.47
2018-05	1.70	3.13	4.59
2018-06	1.82	3.05	4.57
2018-07	1.91	3.01	4.53
2018-08	1.91	3.04	4.55
2018-09	1.95	3.15	4.63
2018-10	2.19	3.34	4.83
2018-11	2.20	3.36	4.87
2018-12	2.27	3.10	4.64
2019-01	2.40	3.04	4.46
2019-02	2.40	3.02	4.37
2019-03	2.41	2.98	4.27
2019-04	2.42	2.94	4.14
2019-05	2.39	2.82	4.07
2019-06	2.38	2.57	3.80

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/H15/default.htm

http://www.freddiemac.com/pmms/pmms30.htm

There is a false impression of the existence of a monetary policy “science,” measurements and forecasting with which to steer the economy into “prosperity without inflation.” Market participants are remembering the Great Bond Crash of 1994 shown in Table VI-7G when monetary policy pursued nonexistent inflation, causing trillions of dollars of losses in fixed income worldwide while increasing the fed funds rate from 3 percent in Jan 1994 to 6 percent in Dec. The exercise in Table VI-7G shows a drop of the price of the 30-year bond by 18.1 percent and of the 10-year bond by 14.1 percent. CPI inflation remained almost the same and there is no valid counterfactual that inflation would have been higher without monetary policy tightening because of the long lag in effect of monetary policy on inflation (see Culbertson 1960, 1961, Friedman 1961, Batini and Nelson 2002, Romer and Romer 2004). The pursuit of nonexistent deflation during the past ten years has resulted in the largest monetary policy accommodation in history that created the 2007 financial market crash and global recession and is currently preventing smoother recovery while creating another financial crash in the future. The issue is not whether there should be a central bank and monetary policy but rather whether policy accommodation in doses from zero interest rates to trillions of dollars in the fed balance sheet endangers economic stability.

Table VI-7G, Fed Funds Rates, Thirty and Ten-Year Treasury Yields and Prices, 30-Year Mortgage Rates and 12-month CPI Inflation 1994

1994	FF	30Y	30P	10Y	10P	MOR	CPI
Jan	3.00	6.29	100	5.75	100	7.06	2.52
Feb	3.25	6.49	97.37	5.97	98.36	7.15	2.51
Mar	3.50	6.91	92.19	6.48	94.69	7.68	2.51
Apr	3.75	7.27	88.10	6.97	91.32	8.32	2.36
May	4.25	7.41	86.59	7.18	88.93	8.60	2.29
Jun	4.25	7.40	86.69	7.10	90.45	8.40	2.49
Jul	4.25	7.58	84.81	7.30	89.14	8.61	2.77
Aug	4.75	7.49	85.74	7.24	89.53	8.51	2.69
Sep	4.75	7.71	83.49	7.46	88.10	8.64	2.96
Oct	4.75	7.94	81.23	7.74	86.33	8.93	2.61
Nov	5.50	8.08	79.90	7.96	84.96	9.17	2.67
Dec	6.00	7.87	81.91	7.81	85.89	9.20	2.67

Notes: FF: fed funds rate; 30Y: yield of 30-year Treasury; 30P: price of 30-year Treasury assuming coupon equal to 6.29 percent and maturity in exactly 30 years; 10Y: yield of 10-year Treasury; 10P: price of 10-year Treasury assuming coupon equal to 5.75 percent and maturity in exactly 10 years; MOR: 30-year mortgage; CPI: percent change of CPI in 12 months

Sources: yields and mortgage rates http://www.federalreserve.gov/releases/h15/data.htm CPI ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.t

Chart VI-14 provides the overnight fed funds rate, the yield of the 10-year Treasury constant maturity bond, the yield of the 30-year constant maturity bond and the conventional mortgage rate from Jan 1991 to Dec 1996. In Jan 1991, the fed funds rate was 6.91 percent, the 10-year Treasury yield 8.09 percent, the 30-year Treasury yield 8.27 percent and the conventional mortgage rate 9.64 percent. Before monetary policy tightening in Oct 1993, the rates and yields were 2.99 percent for the fed funds, 5.33 percent for the 10-year Treasury, 5.94 for the 30-year Treasury and 6.83 percent for the conventional mortgage rate. After tightening in Nov 1994, the rates and yields were 5.29 percent for the fed funds rate, 7.96 percent for the 10-year Treasury, 8.08 percent for the 30-year Treasury and 9.17 percent for the conventional mortgage rate.

Chart VI-14, US, Overnight Fed Funds Rate, 10-Year Treasury Constant Maturity, 30-Year Treasury Constant Maturity and Conventional Mortgage Rate, Monthly, Jan 1991 to Dec 1996

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/h15/update/

Chart VI-15 of the Bureau of Labor Statistics provides the all items consumer price index from Jan 1991 to Dec 1996. There does not appear acceleration of consumer prices requiring aggressive tightening.

Chart VI-15, US, Consumer Price Index All Items, Jan 1991 to Dec 1996

Source: Bureau of Labor Statistics

http://www.bls.gov/cpi/data.htm

Chart IV-16 of the Bureau of Labor Statistics provides 12-month percentage changes of the all items consumer price index from Jan 1991 to Dec 1996. Inflation collapsed during the recession from Jul 1990 (III) and Mar 1991 (I) and the end of the Kuwait War on Feb 25, 1991 that stabilized world oil markets. CPI inflation remained almost the same and there is no valid counterfactual that inflation would have been higher without monetary policy tightening because of the long lag in effect of monetary policy on inflation (see Culbertson 1960, 1961, Friedman 1961, Batini and Nelson 2002, Romer and Romer 2004). Policy tightening had adverse collateral effects in the form of emerging market crises in Mexico and Argentina and fixed income markets worldwide.

Chart VI-16, US, Consumer Price Index All Items, Twelve-Month Percentage Change, Jan 1991 to Dec 1996

Source: Bureau of Labor Statistics

http://www.bls.gov/cpi/data.htm

VII Economic Indicators. Crude oil input in refineries changed 0.0 percent to 17,333 thousand

barrels per day on average in the four weeks ending on Jul 12, 2019 from 17,332 thousand barrels per day in the four weeks ending on Jul 5, 2019, as shown in Table VII-1. The rate of capacity utilization in refineries continues at relatively high level of 94.4 percent on Jul 12, 2019, which is lower than 96.4 percent on Jul 13, 2018 and close to 94.3 percent on Jul 5, 2019. Hurricane Harvey reduced capacity utilization with recent recovery. Imports of crude oil increased 1.6 percent from 3,945 thousand barrels per day on average in the four weeks ending on Jul 5, 2019 to 4,008 thousand barrels per day in the week of Jul 12, 2019. The Energy Information Administration (EIA) informs that: “US crude oil imports averaged 6.8 million barrels per day last week, down by 470,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 7.1 million barrels per day, 16.3 percent less than the same four-week period last year” (https://www.eia.gov/petroleum/supply/weekly/). Marginally unchanged utilization in refineries with decreasing imports at the margin in the prior week resulted in decrease of commercial crude oil stocks by 3.1 million barrels from 459.0 million barrels on Jul 5 to 455.9 million barrels on Jul 12. The US Energy Information Administration (EIA) states: “US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.9 million in the previous week. At 490.9 million barrels [on Apr 24, 2015], US crude oil inventories are at the highest level for this time of year in at least 80 years” (https://www.eia.gov/petroleum/supply/weekly/). Motor gasoline production decreased 1.4 percent to 10,183 thousand barrels per day in the week of Jul 12 from 10,325 thousand barrels per day on average in the week of Jul 5. Gasoline stocks increased 3.6 million barrels and stocks of fuel oil increased 5.7 million barrels. Supply of gasoline changed from 9,646 thousand barrels per day on Jul 13, 2018, to 9,482 thousand barrels per day on Jul 12, 2019, or by minus 1.7 percent, while fuel oil supply decreased 4.9 percent. Part of the prior fall in consumption of gasoline had been due to high prices and part to the growth recession. WTI crude oil price traded at $59.99/barrel on Jul 12, 2019, decreasing 15.5 percent relative to $71.03/barrel on Jul 13, 2018. Gasoline prices decreased 3.0 percent from Jul 16, 2018 to Jul 15, 2019. Increases in prices of crude oil and gasoline relative to a year earlier are moderating because year earlier prices are already reflecting the commodity price surge and commodity prices have been weakening.

Table VII-1, US, Energy Information Administration Weekly Petroleum Status Report

Four Weeks Ending Thousand Barrels/Day	07/12/19	07/05/19	07/13/18
Crude Oil Refineries Input	17,333 Week ∆%: 0.0%	17,332	17,590
Refinery Capacity Utilization %	94.4	94.3	96.4
Motor Gasoline Production	10,183 Week ∆%: -1.4%	10,325	10,361
Distillate Fuel Oil Production	5,340 Week ∆%: 0.0%	5,342	5,369
Crude Oil Imports	4,008 Week ∆%: 1.6%	3,945	6,271
Motor Gasoline Supplied	9,482 ∆% 2019/2018 = -1.7%	9,660	9,646
Distillate Fuel Oil Supplied	3,728 ∆% 2019/2018 = -4.9%	3,852	3,921
	07/12/19	07/05/19	07/13/18
Crude Oil Stocks Million B	455.9 ∆= -3.1 MB	459.0	411.1
Motor Gasoline Million B	232.8 ∆= 3.6 MB	229.2	235.8
Distillate Fuel Oil Million B	136.2 ∆= 5.7 MB	130.5	121.3
WTI Crude Oil Price $/B	59.99 ∆% 2019/2018 = -15.5	58.20 06/21/19	71.03
	07/15/19	07/08/19	07/16/18
Regular Motor Gasoline $/G	2.779 ∆% 2019/2018 = -3.0	2.743	2.865

B: barrels; G: gallon

Source: US Energy Information Administration

http://www.eia.gov/petroleum/supply/weekly/

Chart VII-1 of the US Energy Information Administration (EIA) shows commercial stocks of crude oil in the US. There have been fluctuations around an upward trend since 2005. Crude oil stocks trended downwardly during a few weeks but with fluctuations followed by sharp increases alternating with declines. Stocks reached 455,876 thousand barrels in the week of Jul 12, 2019.

Chart VII-1, US, Weekly Crude Oil Ending Stocks

Source: US Energy Information Administration

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCESTUS1&f=W

Chart VII-2 of the US Energy Information Administration provides US average retail prices of regular gasoline. The US average was $2.779/gallon on Jul 15, 2019, decreasing $0.086 relative to the price a year earlier on a comparable day.

Chart VII-2, US, Regular Gasoline Prices

Source: US Energy Information Administration

http://www.eia.gov/petroleum/

There is no explanation for the jump of oil prices to $149/barrel in 2008 during a sharp global recession other than carry trades from zero interest rates to commodity futures. The peak in Chart VII-3 is $145.18/barrel on Jul 14, 2008 in the midst of deep global recession, falling to $33.87/barrel on Dec 19, 2008 (data for US Energy Information Administration http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D). Prices collapsed in the flight to government obligations caused by proposals of withdrawing “toxic assets” in the Troubled Asset Relief Program (TARP), as analyzed by Cochrane and Zingales (2009). Risk appetite with zero interest rates after stress tests of US banks resulted in another upward trend of commodity prices after 2009 with fluctuations during periods of risk aversion. The price of the crude oil contract was $57.62/barrel on Jul 16, 2019.

Chart VII-3, US, Crude Oil Futures Contract

Source: US Energy Information Administration

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D

There is typically significant difference between initial claims for unemployment insurance adjusted and not adjusted for seasonality provided in Table VII-2. Seasonally adjusted claims increased 8,000 from 208,000 on Jul 6, 2019 to 216,000 on Jul 13, 2019. Claims not adjusted for seasonality increased 11,520 from 231,993 on Jul 6, 2019 to 243,513 on Jul 13, 2019.

Table VII-2, US, Initial Claims for Unemployment Insurance

	SA	NSA	4-week MA SA
Jul 13, 2019	216,000	243,513	218,750
Jul 06, 2019	208,000	231,993	219,000
Change	+8,000	+11,520	-250
Jun 29, 2019	222,000	224,565	222,500
Prior Year	212,000	232,238	219,000

Note: SA: seasonally adjusted; NSA: not seasonally adjusted; MA: moving average

Source: https://www.dol.gov/ui/data.pdf

Table VII-3 provides seasonally adjusted and not seasonally adjusted claims in the comparable week for the years from 2001 to 2019. Data for earlier years are less comparable because of population and labor force growth. Seasonally adjusted claims typically are lower than claims not adjusted for seasonality. Claims not seasonally adjusted decreased from 677,038 on Jul 11, 2009 to 257,763 on Jul 15, 2017, 232,238 on Jul 14, 2018 and 243,513 on Jul 13, 2019. There is strong indication of significant decline in the level of layoffs in the US. Hiring has not recovered (https://cmpassocregulationblog.blogspot.com/2019/07/fomc-uncertain-outlook-frank-h-knights.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/recovery-without-hiring-ten-million.html). There is continuing unemployment and underemployment of 19.8 million or 11.6 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html).

Table VII-3, US, Unemployment Insurance Weekly Claims

	Not Seasonally Adjusted Claims	Seasonally Adjusted Claims
Jul 14, 2001	524,139	405,000
Jul 13, 2002	506,718	384,000
Jul 12, 2003	552,621	412,000
Jul 17, 2004	394,372	355,000
Jul 16, 2005	374,665	323,000
Jul 15, 2006	377,115	318,000
Jul 14, 2007	383,839	317,000
Jul 12, 2008	476,071	385,000
Jul 11, 2009	677,038	546,000
Jul 17, 2010	502,065	462,000
Jul 16, 2011	470,086	420,000
Jul 14, 2012	455,260	390,000
Jul 13, 2013	410,974	344,000
Jul 12, 2014	370,559	308,000
Jul 11, 2015	344,471	284,000
Jul 16, 2016	268,526	260,000
Jul 15, 2017	257,763	241,000
Jul 14, 2018	232,238	212,000
Jul 13, 2019	243,513	216,000

Source: https://oui.doleta.gov/unemploy/claims.asp

VIII Interest Rates. It is quite difficult to measure inflationary expectations because they tend to break abruptly from past inflation. There could still be an influence of past and current inflation in the calculation of future inflation by economic agents. Table VIII-1 provides inflation of the CPI. In the three months from Apr 2019 to Jun 2019, CPI inflation for all items seasonally adjusted was 2.0 percent in annual equivalent, obtained by calculating accumulated inflation from Apr 2019 to Jun 2019 and compounding for a full year. In the 12 months ending in Jun 2019, CPI inflation of all items not seasonally adjusted was 1.6 percent. Inflation in Jun 2019 seasonally adjusted was 0.1 percent relative to May 2019, or 1.2 percent annual equivalent (https://www.bls.gov/cpi/). The second row provides the same measurements for the CPI of all items excluding food and energy: 2.1 percent in 12 months, 2.0 percent in annual equivalent Apr 2019-Jun 2019 and 0.3 percent in Jun 2019 or 3.7 percent in annual equivalent. The Wall Street Journal provides the yield curve of US Treasury securities (http://professional.wsj.com/mdc/public/page/mdc_bonds.html?mod=mdc_topnav_2_3000). The shortest term is 2.113 percent for one month, 2.074 percent for three months, 2.036 percent for six months, 1.954 percent for one year, 1.826 percent for two years, 1.790 percent for three years, 1.816 percent for five years, 1.930 percent for seven years, 2.057 percent for ten years and 2.581 percent for 30 years. The Irving Fisher (1930) definition of real interest rates is approximately the difference between nominal interest rates, which are those estimated by the Wall Street Journal, and the rate of inflation expected in the term of the security, which could behave as in Table VIII-1. Inflation in Jun 2017 is low in 12 months because of the unwinding of carry trades from zero interest rates to commodity futures prices but could ignite again with subdued risk aversion. Real interest rates in the US have been negative during substantial periods in the past decade while monetary policy pursues a policy of attaining its “dual mandate” of (https://www.federalreserve.gov/aboutthefed.htm):

“Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates”

Negative real rates of interest distort calculations of risk and returns from capital budgeting by firms, through lending by financial intermediaries to decisions on savings, housing and purchases of households. Inflation on near zero interest rates misallocates resources away from their most productive uses and creates uncertainty of the future path of adjustment to higher interest rates that inhibit sound decisions.

Table VIII-1, US, Consumer Price Index Percentage Changes 12 months NSA and Annual Equivalent ∆%

	% RI	∆% 12 Months Jun 2019/Jun 2018 NSA	∆% Annual Equivalent Apr 2019 to Jun 2019 SA	∆% Jun 2019/May 2019 SA
CPI All Items	100.000	1.6	2.0	0.1
CPI ex Food and Energy	78.860	2.1	2.0	0.3

Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/

Professionals use a variety of techniques in measuring interest rate risk (Fabozzi, Buestow and Johnson, 2006, Chapter Nine, 183-226):

Full valuation approach in which securities and portfolios are shocked by 50, 100, 200 and 300 basis points to measure their impact on asset values
Stress tests requiring more complex analysis and translation of possible events with high impact even if with low probability of occurrence into effects on actual positions and capital
Value at Risk (VaR) analysis of maximum losses that are likely in a time horizon
Duration and convexity that are short-hand convenient measurement of changes in prices resulting from changes in yield captured by duration and convexity
Yield volatility

Analysis of these methods is in Pelaez and Pelaez (International Financial Architecture (2005), 101-162) and Pelaez and Pelaez, Globalization and the State, Vol. (I) (2008a), 78-100). Frederick R. Macaulay (1938) introduced the concept of duration in contrast with maturity for analyzing bonds. Duration is the sensitivity of bond prices to changes in yields. In economic jargon, duration is the yield elasticity of bond price to changes in yield, or the percentage change in price after a percentage change in yield, typically expressed as the change in price resulting from change of 100 basis points in yield. The mathematical formula is the negative of the yield elasticity of the bond price or –[dB/d(1+y)]((1+y)/B), where d is the derivative operator of calculus, B the bond price, y the yield and the elasticity does not have dimension (Hallerbach 2001). The duration trap of unconventional monetary policy is that duration is higher the lower the coupon and higher the lower the yield, other things being constant. Coupons and yields are historically low because of unconventional monetary policy. Duration dumping during a rate increase may trigger the same crossfire selling of high duration positions that magnified the credit crisis. Traders reduced positions because capital losses in one segment, such as mortgage-backed securities, triggered haircuts and margin increases that reduced capital available for positioning in all segments, causing fire sales in multiple segments (Brunnermeier and Pedersen 2009; see Pelaez and Pelaez, Regulation of Banks and Finance (2008b), 217-24). Financial markets are currently experiencing fear of duration and riskier asset classes resulting from the debate within and outside the Fed on increasing interest rates. Table VIII-2 provides the yield curve of Treasury securities on Jul 19, 2019, Dec 31, 2013, May 3, 2013, Jul 19, 2018 and Jul 19, 2006. There is oscillating steepening of the yield curve for longer maturities, which are also the ones with highest duration. The 10-year yield increased from 1.45 percent on Jul 26, 2012 to 3.04 percent on Dec 31, 2013 and 2.05 percent on Jul 12, 2019, as measured by the United States Treasury. Assume that a bond with maturity in 10 years were issued on Dec 31, 2013, at par or price of 100 with coupon of 1.45 percent. The price of that bond would be 86.3778 with instantaneous increase of the yield to 3.04 percent for loss of 13.6 percent and far more with leverage. Assume that the yield of a bond with exactly ten years to maturity and coupon of 2.05 percent would jump instantaneously from yield of 2.05 percent on Jul 19, 2019 to 5.06 percent as occurred on Jul 19, 2006 when the economy was closer to full employment. The price of the hypothetical bond issued with coupon of 2.05 percent would drop from 100 to 76.6047 after an instantaneous increase of the yield to 5.06 percent. The price loss would be 23.4 percent. Losses absorb capital available for positioning triggering crossfire sales in multiple asset classes (Brunnermeier and Pedersen 2009). What is the path of adjustment of zero interest rates on fed funds and artificially low bond yields? There is no painless exit from unconventional monetary policy. Chris Dieterich, writing on “Bond investors turn to cash,” on Jul 25, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323971204578625900935618178.html), uses data of the Investment Company Institute (https://www.ici.org/) in showing withdrawals of $43 billion in taxable mutual funds in Jun, which is the largest in history, with flows into cash investments such as $8.5 billion in the week of Jul 17 into money-market funds.

Table VIII-2, United States, Treasury Yields

	07/19/19	12/31/13	05/01/13	07/19/18	07/19/06
1 M	2.11	0.01	0.03	1.89	4.91
2M	2.16	NA	NA	NA	NA
3 M	2.06	0.07	0.06	2.00	5.11
6 M	2.03	0.10	0.08	2.16	5.28
1 Y	1.94	0.13	0.11	2.40	5.22
2 Y	1.80	0.38	0.20	2.60	5.12
3 Y	1.77	0.78	0.30	2.67	5.06
5 Y	1.80	1.75	0.65	2.74	5.02
7 Y	1.91	2.45	1.07	2.81	5.02
10 Y	2.05	3.04	1.66	2.84	5.06
20 Y	2.35	3.72	2.44	2.90	5.22
30 Y	2.57	3.96	2.83	2.96	5.10

M: Months; Y: Years

Source: United States Treasury

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

There are collateral effects of unconventional monetary policy. Chart VIII-1 of the Board of Governors of the Federal Reserve System provides the rate on the overnight fed funds rate and the yields of the 10-year constant maturity Treasury and the Baa seasoned corporate bond. Table VIII-3 provides the data for selected points in Chart VIII-1. There are two important economic and financial events, illustrating the ease of inducing carry trade with extremely low interest rates and the resulting financial crash and recession of abandoning extremely low interest rates.

The Federal Open Market Committee (FOMC) lowered the target of the fed funds rate from 7.03 percent on Jul 3, 2000, to 1.00 percent on Jun 22, 2004, in pursuit of non-existing deflation (Pelaez and Pelaez, International Financial Architecture (2005), 18-28, The Global Recession Risk (2007), 83-85). Central bank commitment to maintain the fed funds rate at 1.00 percent induced adjustable-rate mortgages (ARMS) linked to the fed funds rate. Lowering the interest rate near the zero bound in 2003-2004 caused the illusion of permanent increases in wealth or net worth in the balance sheets of borrowers and also of lending institutions, securitized banking and every financial institution and investor in the world. The discipline of calculating risks and returns was seriously impaired. The objective of monetary policy was to encourage borrowing, consumption and investment. The exaggerated stimulus resulted in a financial crisis of major proportions as the securitization that had worked for a long period was shocked with policy-induced excessive risk, imprudent credit, high leverage and low liquidity by the incentive to finance everything overnight at interest rates close to zero, from adjustable rate mortgages (ARMS) to asset-backed commercial paper of structured investment vehicles (SIV). The consequences of inflating liquidity and net worth of borrowers were a global hunt for yields to protect own investments and money under management from the zero interest rates and unattractive long-term yields of Treasuries and other securities. Monetary policy distorted the calculations of risks and returns by households, business and government by providing central bank cheap money. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper with the objective of purchasing default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9). ARMS were created to lower monthly mortgage payments by benefitting from lower short-dated reference rates. Financial institutions economized in liquidity that was penalized with near zero interest rates. There was no perception of risk because the monetary authority guaranteed a minimum or floor price of all assets by maintaining low interest rates forever or equivalent to writing an illusory put option on wealth. Subprime mortgages were part of the put on wealth by an illusory put on house prices. The housing subsidy of $221 billion per year created the impression of ever-increasing house prices. The suspension of auctions of 30-year Treasuries was designed to increase demand for mortgage-backed securities, lowering their yield, which was equivalent to lowering the costs of housing finance and refinancing. Fannie and Freddie purchased or guaranteed $1.6 trillion of nonprime mortgages and worked with leverage of 75:1 under Congress-provided charters and lax oversight. The combination of these policies resulted in high risks because of the put option on wealth by near zero interest rates, excessive leverage because of cheap rates, low liquidity by the penalty in the form of low interest rates and unsound credit decisions. The put option on wealth by monetary policy created the illusion that nothing could ever go wrong, causing the credit/dollar crisis and global recession (Pelaez and Pelaez, Financial Regulation after the Global Recession, 157-66, Regulation of Banks, and Finance, 217-27, International Financial Architecture, 15-18, The Global Recession Risk, 221-5, Globalization and the State Vol. II, 197-213, Government Intervention in Globalization, 182-4). The FOMC implemented increments of 25 basis points of the fed funds target from Jun 2004 to Jun 2006, raising the fed funds rate to 5.25 percent on Jul 3, 2006, as shown in Chart VIII-1. The gradual exit from the first round of unconventional monetary policy from 1.00 percent in Jun 2004 (http://www.federalreserve.gov/boarddocs/press/monetary/2004/20040630/default.htm) to 5.25 percent in Jun 2006 (http://www.federalreserve.gov/newsevents/press/monetary/20060629a.htm) caused the financial crisis and global recession.
On Dec 16, 2008, the policy determining committee of the Fed decided (http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm): “The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.” Policymakers emphasize frequently that there are tools to exit unconventional monetary policy at the right time. At the confirmation hearing on nomination for Chair of the Board of Governors of the Federal Reserve System, Vice Chair Yellen (2013Nov14 http://www.federalreserve.gov/newsevents/testimony/yellen20131114a.htm), states that: “The Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.” Perception of withdrawal of $2671 billion, or $2.7 trillion, of bank reserves (http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1), would cause Himalayan increase in interest rates that would provoke another recession. There is no painless gradual or sudden exit from zero interest rates because reversal of exposures created on the commitment of zero interest rates forever.

In his classic restatement of the Keynesian demand function in terms of “liquidity preference as behavior toward risk,” James Tobin (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1981/tobin-bio.html) identifies the risks of low interest rates in terms of portfolio allocation (Tobin 1958, 86):

“The assumption that investors expect on balance no change in the rate of interest has been adopted for the theoretical reasons explained in section 2.6 rather than for reasons of realism. Clearly investors do form expectations of changes in interest rates and differ from each other in their expectations. For the purposes of dynamic theory and of analysis of specific market situations, the theories of sections 2 and 3 are complementary rather than competitive. The formal apparatus of section 3 will serve just as well for a non-zero expected capital gain or loss as for a zero expected value of g. Stickiness of interest rate expectations would mean that the expected value of g is a function of the rate of interest r, going down when r goes down and rising when r goes up. In addition to the rotation of the opportunity locus due to a change in r itself, there would be a further rotation in the same direction due to the accompanying change in the expected capital gain or loss. At low interest rates expectation of capital loss may push the opportunity locus into the negative quadrant, so that the optimal position is clearly no consols, all cash. At the other extreme, expectation of capital gain at high interest rates would increase sharply the slope of the opportunity locus and the frequency of no cash, all consols positions, like that of Figure 3.3. The stickier the investor's expectations, the more sensitive his demand for cash will be to changes in the rate of interest (emphasis added).”

Tobin (1969) provides more elegant, complete analysis of portfolio allocation in a general equilibrium model. The major point is equally clear in a portfolio consisting of only cash balances and a perpetuity or consol. Let g be the capital gain, r the rate of interest on the consol and r^e the expected rate of interest. The rates are expressed as proportions. The price of the consol is the inverse of the interest rate, (1+r^e). Thus, g = [(r/r^e) – 1]. The critical analysis of Tobin is that at extremely low interest rates there is only expectation of interest rate increases, that is, dr^e>0, such that there is expectation of capital losses on the consol, dg<0. Investors move into positions combining only cash and no consols. Valuations of risk financial assets would collapse in reversal of long positions in carry trades with short exposures in a flight to cash. There is no exit from a central bank created liquidity trap without risks of financial crash and another global recession. The net worth of the economy depends on interest rates. In theory, “income is generally defined as the amount a consumer unit could consume (or believe that it could) while maintaining its wealth intact” (Friedman 1957, 10). Income, Y, is a flow that is obtained by applying a rate of return, r, to a stock of wealth, W, or Y = rW (Friedman 1957). According to a subsequent statement: “The basic idea is simply that individuals live for many years and that therefore the appropriate constraint for consumption is the long-run expected yield from wealth r*W. This yield was named permanent income: Y* = r*W” (Darby 1974, 229), where * denotes permanent. The simplified relation of income and wealth can be restated as:

W = Y/r (1)

Equation (1) shows that as r goes to zero, r→0, W grows without bound, W→∞. Unconventional monetary policy lowers interest rates to increase the present value of cash flows derived from projects of firms, creating the impression of long-term increase in net worth. An attempt to reverse unconventional monetary policy necessarily causes increases in interest rates, creating the opposite perception of declining net worth. As r→∞, W = Y/r →0. There is no exit from unconventional monetary policy without increasing interest rates with resulting pain of financial crisis and adverse effects on production, investment and employment.

Dan Strumpf and Pedro Nicolaci da Costa, writing on “Fed’s Yellen: Stock Valuations ‘Generally are Quite High,’” on May 6, 2015, published in the Wall Street Journal (http://www.wsj.com/articles/feds-yellen-cites-progress-on-bank-regulation-1430918155?tesla=y ), quote Chair Yellen at open conversation with Christine Lagarde, Managing Director of the IMF, finding “equity-market valuations” as “quite high” with “potential dangers” in bond valuations. The DJIA fell 0.5 percent on May 6, 2015, after the comments and then increased 0.5 percent on May 7, 2015 and 1.5 percent on May 8, 2015.

Fri May 1

Mon 4

Tue 5

Wed 6

Thu 7

Fri 8

DJIA

18024.06

-0.3%

1.0%

18070.40

0.3%

17928.20

-0.5%

-0.8%

17841.98

-1.0%

-0.5%

17924.06

-0.6%

0.5%

18191.11

0.9%

1.5%

There are two approaches in theory considered by Bordo (2012Nov20) and Bordo and Lane (2013). The first approach is in the classical works of Milton Friedman and Anna Jacobson Schwartz (1963a, 1987) and Karl Brunner and Allan H. Meltzer (1973). There is a similar approach in Tobin (1969). Friedman and Schwartz (1963a, 66) trace the effects of expansionary monetary policy into increasing initially financial asset prices: “It seems plausible that both nonbank and bank holders of redundant balances will turn first to securities comparable to those they have sold, say, fixed-interest coupon, low-risk obligations. But as they seek to purchase these they will tend to bid up the prices of those issues. Hence they, and also other holders not involved in the initial central bank open-market transactions, will look farther afield: the banks, to their loans; the nonbank holders, to other categories of securities-higher risk fixed-coupon obligations, equities, real property, and so forth.”

The second approach is by the Austrian School arguing that increases in asset prices can become bubbles if monetary policy allows their financing with bank credit. Professor Michael D. Bordo provides clear thought and empirical evidence on the role of “expansionary monetary policy” in inflating asset prices (Bordo2012Nov20, Bordo and Lane 2013). Bordo and Lane (2013) provide revealing narrative of historical episodes of expansionary monetary policy. Bordo and Lane (2013) conclude that policies of depressing interest rates below the target rate or growth of money above the target influences higher asset prices, using a panel of 18 OECD countries from 1920 to 2011. Bordo (2012Nov20) concludes: “that expansionary money is a significant trigger” and “central banks should follow stable monetary policies…based on well understood and credible monetary rules.” Taylor (2007, 2009) explains the housing boom and financial crisis in terms of expansionary monetary policy. Professor Martin Feldstein (2016), at Harvard University, writing on “A Federal Reserve oblivious to its effects on financial markets,” on Jan 13, 2016, published in the Wall Street Journal (http://www.wsj.com/articles/a-federal-reserve-oblivious-to-its-effect-on-financial-markets-1452729166), analyzes how unconventional monetary policy drove values of risk financial assets to high levels. Quantitative easing and zero interest rates distorted calculation of risks with resulting vulnerabilities in financial markets.

Another hurdle of exit from zero interest rates is “competitive easing” that Professor Raghuram Rajan, governor of the Reserve Bank of India, characterizes as disguised “competitive devaluation” (http://www.centralbanking.com/central-banking-journal/interview/2358995/raghuram-rajan-on-the-dangers-of-asset-prices-policy-spillovers-and-finance-in-india). The fed has been considering increasing interest rates. The European Central Bank (ECB) announced, on Mar 5, 2015, the beginning on Mar 9, 2015 of its quantitative easing program denominated as Public Sector Purchase Program (PSPP), consisting of “combined monthly purchases of EUR 60 bn [billion] in public and private sector securities” (http://www.ecb.europa.eu/mopo/liq/html/pspp.en.html). Expectation of increasing interest rates in the US together with euro rates close to zero or negative cause revaluation of the dollar (or devaluation of the euro and of most currencies worldwide). US corporations suffer currency translation losses of their foreign transactions and investments (http://www.fasb.org/jsp/FASB/Pronouncement_C/SummaryPage&cid=900000010318) while the US becomes less competitive in world trade (Pelaez and Pelaez, Globalization and the State, Vol. I (2008a), Government Intervention in Globalization (2008c)). The DJIA fell 1.5 percent on Mar 6, 2015 and the dollar revalued 2.2 percent from Mar 5 to Mar 6, 2015. The euro has devalued 41.7 percent relative to the dollar from the high on Jul 15, 2008 to Jul 19, 2019.

Fri 27 Feb

Mon 3/2

Tue 3/3

Wed 3/4

Thu 3/5

Fri 3/6

USD/ EUR

1.1197

1.6%

0.0%

1.1185

0.1%

1.1176

0.2%

0.1%

1.1081

1.0%

0.9%

1.1030

1.5%

0.5%

1.0843

3.2%

1.7%

Chair Yellen explained the removal of the word “patience” from the advanced guidance at the press conference following the FOMC meeting on Mar 18, 2015 (http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20150318.pdf):

“In other words, just because we removed the word “patient” from the statement doesn’t mean we are going to be impatient. Moreover, even after the initial increase in the target funds rate, our policy is likely to remain highly accommodative to support continued progress toward our objectives of maximum employment and 2 percent inflation.”

Exchange rate volatility is increasing in response of “impatience” in financial markets with monetary policy guidance and measures:

Fri Mar 6

Mon 9

Tue 10

Wed 11

Thu 12

Fri 13

USD/ EUR

1.0843

3.2%

1.7%

1.0853

-0.1%

1.0700

1.3%

1.4%

1.0548

2.7%

1.4%

1.0637

1.9%

-0.8%

1.0497

3.2%

1.3%

Fri Mar 13

Mon 16

Tue 17

Wed 18

Thu 19

Fri 20

USD/ EUR

1.0497

3.2%

1.3%

1.0570

-0.7%

1.0598

-1.0%

-0.3%

1.0864

-3.5%

-2.5%

1.0661

-1.6%

1.9%

1.0821

-3.1%

-1.5%

Fri Apr 24

Mon 27

Tue 28

Wed 29

Thu 30

May Fri 1

USD/ EUR

1.0874

-0.6%

-0.4%

1.0891

-0.2%

1.0983

-1.0%

-0.8%

1.1130

-2.4%

-1.3%

1.1223

-3.2%

-0.8%

1.1199

-3.0%

0.2%

In a speech at Brown University on May 22, 2015, Chair Yellen stated (http://www.federalreserve.gov/newsevents/speech/yellen20150522a.htm):

“For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy. To support taking this step, however, I will need to see continued improvement in labor market conditions, and I will need to be reasonably confident that inflation will move back to 2 percent over the medium term. After we begin raising the federal funds rate, I anticipate that the pace of normalization is likely to be gradual. The various headwinds that are still restraining the economy, as I said, will likely take some time to fully abate, and the pace of that improvement is highly uncertain.”

The US dollar appreciated 3.8 percent relative to the euro in the week of May 22, 2015:

Fri May 15

Mon 18

Tue 19

Wed 20

Thu 21

Fri 22

USD/ EUR

1.1449

-2.2%

-0.3%

1.1317

1.2%

1.1150

2.6%

1.5%

1.1096

3.1%

0.5%

1.1113

2.9%

-0.2%

1.1015

3.8%

0.9%

The Managing Director of the International Monetary Fund (IMF), Christine Lagarde, warned on Jun 4, 2015, that: (http://blog-imfdirect.imf.org/2015/06/04/u-s-economy-returning-to-growth-but-pockets-of-vulnerability/):

“The Fed’s first rate increase in almost 9 years is being carefully prepared and telegraphed. Nevertheless, regardless of the timing, higher US policy rates could still result in significant market volatility with financial stability consequences that go well beyond US borders. I weighing these risks, we think there is a case for waiting to raise rates until there are more tangible signs of wage or price inflation than are currently evident. Even after the first rate increase, a gradual rise in the federal fund rates will likely be appropriate.”

The President of the European Central Bank (ECB), Mario Draghi, warned on Jun 3, 2015 that (http://www.ecb.europa.eu/press/pressconf/2015/html/is150603.en.html):

“But certainly one lesson is that we should get used to periods of higher volatility. At very low levels of interest rates, asset prices tend to show higher volatility…the Governing Council was unanimous in its assessment that we should look through these developments and maintain a steady monetary policy stance.”

The Chair of the Board of Governors of the Federal Reserve System, Janet L. Yellen, stated on Jul 10, 2015 that (http://www.federalreserve.gov/newsevents/speech/yellen20150710a.htm):

At the press conference after the meeting of the FOMC on Sep 17, 2015, Chair Yellen states (http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20150917.pdf 4):

“The outlook abroad appears to have become more uncertain of late, and heightened concerns about growth in China and other emerging market economies have led to notable volatility in financial markets. Developments since our July meeting, including the drop in equity prices, the further appreciation of the dollar, and a widening in risk spreads, have tightened overall financial conditions to some extent. These developments may restrain U.S. economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Given the significant economic and financial interconnections between the United States and the rest of the world, the situation abroad bears close watching.”

Some equity markets fell on Fri Sep 18, 2015:

Fri Sep 11

Mon 14

Tue 15

Wed 16

Thu 17

Fri 18

DJIA

16433.09

2.1%

0.6%

16370.96

-0.4%

16599.85

1.0%

1.4%

16739.95

1.9%

0.8%

16674.74

1.5%

-0.4%

16384.58

-0.3%

-1.7%

Nikkei 225

18264.22

2.7%

-0.2%

17965.70

-1.6%

18026.48

-1.3%

0.3%

18171.60

-0.5%

0.8%

18432.27

0.9%

1.4%

18070.21

-1.1%

-2.0%

DAX

10123.56

0.9%

-0.9%

10131.74

0.1%

10188.13

0.6%

10227.21

1.0%

0.4%

10229.58

1.0%

0.0%

9916.16

-2.0%

-3.1%

Frank H. Knight (1963, 233), in Risk, uncertainty and profit, distinguishes between measurable risk and unmeasurable uncertainty. Chair Yellen, in a lecture on “Inflation dynamics and monetary policy,” on Sep 24, 2015 (http://www.federalreserve.gov/newsevents/speech/yellen20150924a.htm), states that (emphasis added):

· “The economic outlook, of course, is highly uncertain”

· “Considerable uncertainties also surround the outlook for economic activity”

· “Given the highly uncertain nature of the outlook…”

Is there a “science” or even “art” of central banking under this extreme uncertainty in which policy does not generate higher volatility of money, income, prices and values of financial assets?

Lingling Wei, writing on Oct 23, 2015, on China’s central bank moves to spur economic growth,” published in the Wall Street Journal (http://www.wsj.com/articles/chinas-central-bank-cuts-rates-1445601495), analyzes the reduction by the People’s Bank of China (http://www.pbc.gov.cn/ http://www.pbc.gov.cn/english/130437/index.html) of borrowing and lending rates of banks by 50 basis points and reserve requirements of banks by 50 basis points. Paul Vigna, writing on Oct 23, 2015, on “Stocks rally out of correction territory on latest central bank boost,” published in the Wall Street Journal (http://blogs.wsj.com/moneybeat/2015/10/23/stocks-rally-out-of-correction-territory-on-latest-central-bank-boost/), analyzes the rally in financial markets following the statement on Oct 22, 2015, by the President of the European Central Bank (ECB) Mario Draghi of consideration of new quantitative measures in Dec 2015 (https://www.youtube.com/watch?v=0814riKW25k&rel=0) and the reduction of bank lending/deposit rates and reserve requirements of banks by the People’s Bank of China on Oct 23, 2015. The dollar revalued 2.8 percent from Oct 21 to Oct 23, 2015, following the intended easing of the European Central Bank. The DJIA rose 2.8 percent from Oct 21 to Oct 23 and the DAX index of German equities rose 5.4 percent from Oct 21 to Oct 23, 2015.

Fri Oct 16

Mon 19

Tue 20

Wed 21

Thu 22

Fri 23

USD/ EUR

1.1350

0.1%

0.3%

1.1327

0.2%

1.1348

0.0%

-0.2%

1.1340

0.1%

1.1110

2.1%

2.0%

1.1018

2.9%

0.8%

DJIA

17215.97

0.8%

0.4%

17230.54

0.1%

17217.11

0.0%

-0.1%

17168.61

-0.3%

17489.16

1.6%

1.9%

17646.70

2.5%

0.9%

Dow Global

2421.58

0.3%

0.6%

2414.33

-0.3%

2411.03

-0.4%

-0.1%

2411.27

-0.4%

0.0%

2434.79

0.5%

1.0%

2458.13

1.5%

1.0%

DJ Asia Pacific

1402.31

1.1%

0.3%

1398.80

-0.3%

1395.06

-0.5%

-0.3%

1402.68

0.0%

0.5%

1396.03

-0.4%

-0.5%

1415.50

0.9%

1.4%

Nikkei 225

18291.80

-0.8%

1.1%

18131.23

-0.9%

18207.15

-0.5%

0.4%

18554.28

1.4%

1.9%

18435.87

0.8%

-0.6%

18825.30

2.9%

2.1%

Shanghai

3391.35

6.5%

1.6%

3386.70

-0.1%

3425.33

1.0%

1.1%

3320.68

-2.1%

-3.1%

3368.74

-0.7%

1.4%

3412.43

0.6%

1.3%

DAX

10104.43

0.1%

0.4%

10164.31

0.6%

10147.68

0.4%

-0.2%

10238.10

1.3%

0.9%

10491.97

3.8%

2.5%

10794.54

6.8%

2.9%

Ben Leubsdorf, writing on “Fed’s Yellen: December is “Live Possibility” for First Rate Increase,” on Nov 4, 2015, published in the Wall Street Journal (http://www.wsj.com/articles/feds-yellen-december-is-live-possibility-for-first-rate-increase-1446654282) quotes Chair Yellen that a rate increase in “December would be a live possibility.” The remark of Chair Yellen was during a hearing on supervision and regulation before the Committee on Financial Services, US House of Representatives (http://www.federalreserve.gov/newsevents/testimony/yellen20151104a.htm) and a day before the release of the employment situation report for Oct 2015 (Section I). The dollar revalued 2.4 percent during the week. The euro has devalued 41.7 percent relative to the dollar from the high on Jul 15, 2008 to Jul 19, 2019.

Fri Oct 30

Mon 2

Tue 3

Wed 4

Thu 5

Fri 6

USD/ EUR

1.1007

0.1%

-0.3%

1.1016

-0.1%

1.0965

0.4%

0.5%

1.0867

1.3%

0.9%

1.0884

1.1%

-0.2%

1.0742

2.4%

1.3%

The release on Nov 18, 2015 of the minutes of the FOMC (Federal Open Market Committee) meeting held on Oct 28, 2015 (http://www.federalreserve.gov/monetarypolicy/fomcminutes20151028.htm) states:

“Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions [for interest rate increase] could well be met by the time of the next meeting. Nonetheless, they emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period… It was noted that beginning the normalization process relatively soon would make it more likely that the policy trajectory after liftoff could be shallow.”

Markets could have interpreted a symbolic increase in the fed funds rate at the meeting of the FOMC on Dec 15-16, 2015 (http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm) followed by “shallow” increases, explaining the sharp increase in stock market values and appreciation of the dollar after the release of the minutes on Nov 18, 2015:

Fri Nov 13

Mon 16

Tue 17

Wed 18

Thu 19

Fri 20

USD/ EUR

1.0774

-0.3%

0.4%

1.0686

0.8%

1.0644

1.2%

0.4%

1.0660

1.1%

-0.2%

1.0735

0.4%

-0.7%

1.0647

1.2%

0.8%

DJIA

17245.24

-3.7%

-1.2%

17483.01

1.4%

17489.50

1.4%

0.0%

17737.16

2.9%

1.4%

17732.75

2.8%

0.0%

17823.81

3.4%

0.5%

DAX

10708.40

-2.5%

-0.7%

10713.23

0.0%

10971.04

2.5%

2.4%

10959.95

2.3%

-0.1%

11085.44

3.5%

1.1%

11119.83

3.8%

0.3%

In testimony before The Joint Economic Committee of Congress on Dec 3, 2015 (http://www.federalreserve.gov/newsevents/testimony/yellen20151203a.htm), Chair Yellen reiterated that the FOMC (Federal Open Market Committee) “anticipates that even after employment and inflation are near mandate-consistent levels, economic condition may, for some time, warrant keeping the target federal funds rate below the Committee views as normal in the longer run.” Todd Buell and Katy Burne, writing on “Draghi says ECB could step up stimulus efforts if necessary,” on Dec 4, 2015, published in the Wall Street Journal (http://www.wsj.com/articles/draghi-says-ecb-could-step-up-stimulus-efforts-if-necessary-1449252934), analyze that the President of the European Central Bank (ECB), Mario Draghi, reassured financial markets that the ECB will increase stimulus if required to raise inflation the euro area to targets. The USD depreciated 3.1 percent on Thu Dec 3, 2015 after weaker than expected measures by the European Central Bank. DJIA fell 1.4 percent on Dec 3 and increased 2.1 percent on Dec 4. DAX fell 3.6 percent on Dec 3.

Fri Nov 27

Mon 30

Tue 1

Wed 2

Thu 3

Fri 4

USD/ EUR

1.0594

0.5%

0.2%

1.0565

0.3%

1.0634

-0.4%

-0.7%

1.0616

-0.2%

0.2%

1.0941

-3.3%

-3.1%

1.0885

-2.7%

0.5%

DJIA

17798.49

-0.1%

17719.92

-0.4%

17888.35

0.5%

1.0%

17729.68

-0.4%

-0.9%

17477.67

-1.8%

-1.4%

17847.63

0.3%

2.1%

DAX

11293.76

1.6%

-0.2%

11382.23

0.8%

11261.24

-0.3%

-1.1%

11190.02

-0.9%

-0.6%

10789.24

-4.5%

-3.6%

10752.10

-4.8%

-0.3%

At the press conference following the meeting of the FOMC on Dec 16, 2015, Chair Yellen states (http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20151216.pdf page 8):

“And we recognize that monetary policy operates with lags. We would like to be able to move in a prudent, and as we've emphasized, gradual manner. It's been a long time since the Federal Reserve has raised interest rates, and I think it's prudent to be able to watch what the impact is on financial conditions and spending in the economy and moving in a timely fashion enables us to do this.”

The implication of this statement is that the state of the art is not accurate in analyzing the effects of monetary policy on financial markets and economic activity. The US dollar appreciated and equities fluctuated:

Fri Dec 11

Mon 14

Tue 15

Wed 16

Thu 17

Fri 18

USD/ EUR

1.0991

-1.0%

-0.4%

1.0993

0.0%

1.0932

0.5%

0.6%

1.0913

0.7%

0.2%

1.0827

1.5%

0.8%

1.0868

1.1%

-0.4%

DJIA

17265.21

-3.3%

-1.8%

17368.50

0.6%

17524.91

1.5%

0.9%

17749.09

2.8%

1.3%

17495.84

1.3%

-1.4%

17128.55

-0.8%

-2.1%

DAX

10340.06

-3.8%

-2.4%

10139.34

-1.9%

10450.38

-1.1%

3.1%

10469.26

1.2%

0.2%

10738.12

3.8%

2.6%

10608.19

2.6%

-1.2%

On January 29, 2016, the Policy Board of the Bank of Japan introduced a new policy to attain the “price stability target of 2 percent at the earliest possible time” (https://www.boj.or.jp/en/announcements/release_2016/k160129a.pdf). The new framework consists of three dimensions: quantity, quality and interest rate. The interest rate dimension consists of rates paid to current accounts that financial institutions hold at the Bank of Japan of three tiers zero, positive and minus 0.1 percent. The quantitative dimension consists of increasing the monetary base at the annual rate of 80 trillion yen. The qualitative dimension consists of purchases by the Bank of Japan of Japanese government bonds (JGBs), exchange traded funds (ETFs) and Japan real estate investment trusts (J-REITS). The yen devalued sharply relative to the dollar and world equity markets soared after the new policy announced on Jan 29, 2016:

Fri 22

Mon 25

Tue 26

Wed 27

Thu 28

Fri 29

JPY/ USD

118.77

-1.5%

-0.9%

118.30

0.4%

118.42

0.3%

-0.1%

118.68

0.1%

-0.2%

118.82

0.0%

-0.1%

121.13

-2.0%

-1.9%

DJIA

16093.51

0.7%

1.3%

15885.22

-1.3%

16167.23

0.5%

1.8%

15944.46

-0.9%

-1.4%

16069.64

-0.1%

0.8%

16466.30

2.3%

2.5%

Nikkei

16958.53

-1.1%

5.9%

17110.91

0.9%

16708.90

-1.5%

-2.3%

17163.92

1.2%

2.7%

17041.45

0.5%

-0.7%

17518.30

3.3%

2.8%

Shanghai

2916.56

0.5%

1.3

2938.51

0.8%

2749.79

-5.7%

-6.4%

2735.56

-6.2%

-0.5%

2655.66

-8.9%

-2.9%

2737.60

-6.1%

3.1%

DAX

9764.88

2.3%

2.0%

9736.15

-0.3%

9822.75

0.6%

0.9%

9880.82

1.2%

0.6%

9639.59

-1.3%

-2.4%

9798.11

0.3%

1.6%

In testimony on the Semiannual Monetary Policy Report to the Congress on Feb 10-11, 2016, Chair Yellen (http://www.federalreserve.gov/newsevents/testimony/yellen20160210a.htm) states: “U.S. real gross domestic product is estimated to have increased about 1-3/4 percent in 2015. Over the course of the year, subdued foreign growth and the appreciation of the dollar restrained net exports. In the fourth quarter of last year, growth in the gross domestic product is reported to have slowed more sharply, to an annual rate of just 3/4 percent; again, growth was held back by weak net exports as well as by a negative contribution from inventory investment.”

Jon Hilsenrath, writing on “Yellen Says Fed Should Be Prepared to Use Negative Rates if Needed,” on Feb 11, 2016, published in the Wall Street Journal (http://www.wsj.com/articles/yellen-reiterates-concerns-about-risks-to-economy-in-senate-testimony-1455203865), analyzes the statement of Chair Yellen in Congress that the FOMC (Federal Open Market Committee) is considering negative interest rates on bank reserves. The Wall Street Journal provides yields of two and ten-year sovereign bonds with negative interest rates on shorter maturities where central banks pay negative interest rates on excess bank reserves:

Sovereign Yields 2/12/16	Japan	Germany	USA
2 Year	-0.168	-0.498	0.694
10 Year	0.076	0.262	1.744

On Mar 10, 2016, the European Central Bank (ECB) announced (1) reduction of the refinancing rate by 5 basis points to 0.00 percent; decrease the marginal lending rate to 0.25 percent; reduction of the deposit facility rate to 0,40 percent; increase of the monthly purchase of assets to €80 billion; include nonbank corporate bonds in assets eligible for purchases; and new long-term refinancing operations (https://www.ecb.europa.eu/press/pr/date/2016/html/pr160310.en.html). The President of the ECB, Mario Draghi, stated in the press conference (https://www.ecb.europa.eu/press/pressconf/2016/html/is160310.en.html): “How low can we go? Let me say that rates will stay low, very low, for a long period of time, and well past the horizon of our purchases…We don’t anticipate that it will be necessary to reduce rates further. Of course, new facts can change the situation and the outlook.”

The dollar devalued relative to the euro and open stock markets traded lower after the announcement on Mar 10, 2016, but stocks rebounded on Mar 11:

Fri 4

Mon 7

Tue 8

Wed 9

Thu10

Fri 11

USD/ EUR

1.1006

-0.7%

-0.4%

1.1012

-0.1%

1.1013

-0.1%

0.0%

1.0999

0.1%

1.1182

-1.6%

-1.7%

1.1151

-1.3%

0.3%

DJIA

17006.77

2.2%

0.4%

17073.95

0.4%

16964.10

-0.3%

-0.6%

17000.36

0.0%

0.2%

16995.13

-0.1%

0.0%

17213.31

1.2%

1.3%

DAX

9824.17

3.3%

0.7%

9778.93

-0.5%

0.5%

9692.82

-1.3%

-0.9%

9723.09

-1.0%

0.3%

9498.15

-3.3%

-2.3%

9831.13

0.1%

3.5%

At the press conference after the FOMC meeting on Sep 21, 2016, Chair Yellen states (http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20160921.pdf ): “However, the economic outlook is inherently uncertain.” In the address to the Jackson Hole symposium on Aug 26, 2016, Chair Yellen states: “I believe the case for an increase in in federal funds rate has strengthened in recent months…And, as ever, the economic outlook is uncertain, and so monetary policy is not on a preset course” (http://www.federalreserve.gov/newsevents/speech/yellen20160826a.htm). In a speech at the World Affairs Council of Philadelphia, on Jun 6, 2016 (http://www.federalreserve.gov/newsevents/speech/yellen20160606a.htm), Chair Yellen finds that “there is considerable uncertainty about the economic outlook.” There are fifteen references to this uncertainty in the text of 18 pages double-spaced. In the Semiannual Monetary Policy Report to the Congress on Jun 21, 2016, Chair Yellen states (http://www.federalreserve.gov/newsevents/testimony/yellen20160621a.htm), “Of course, considerable uncertainty about the economic outlook remains.” Frank H. Knight (1963, 233), in Risk, uncertainty and profit, distinguishes between measurable risk and unmeasurable uncertainty. Is there a “science” or even “art” of central banking under this extreme uncertainty in which policy does not generate higher volatility of money, income, prices and values of financial assets?

What is truly important is the fixing of the overnight fed funds at 2¼ to 2½ percent with all measures depending on “a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments” (https://www.federalreserve.gov/newsevents/pressreleases/monetary20190320a.htm): “In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments” (emphasis added). In the Opening Remarks to the Press Conference on Jan 30, 2019, the Chairman of the Federal Reserve Board, Jerome H. Powell, stated (https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20190130.pdf): “Today, the FOMC decided that the cumulative effects of those developments over the last several months warrant a patient, wait-and-see approach regarding future policy changes. In particular, our statement today says, “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.” This change was not driven by a major shift in the baseline outlook for the economy. Like many forecasters, we still see “sustained expansion of economic activity, strong labor market conditions, and inflation near … 2 percent” as the likeliest case. But the cross-currents I mentioned suggest the risk of a less-favorable outlook. In addition, the case for raising rates has weakened somewhat. The traditional case for rate increases is to protect the economy from risks that arise when rates are too low for too long, particularly the risk of too-high inflation. Over the past few months, that risk appears to have diminished. Inflation readings have been muted, and the recent drop in oil prices is likely to Page 3 of 5 push headline inflation lower still in coming months. Further, as we noted in our post-meeting statement, while survey-based measures of inflation expectations have been stable, financial market measures of inflation compensation have moved lower. Similarly, the risk of financial imbalances appears to have receded, as a number of indicators that showed elevated levels of financial risk appetite last fall have moved closer to historical norms. In this environment, we believe we can best support the economy by being patient in evaluating the outlook before making any future adjustment to policy.” The FOMC is initiating the “normalization” or reduction of the balance sheet of securities held outright for monetary policy (https://www.federalreserve.gov/newsevents/pressreleases/monetary20190130c.htm) with significant changes (https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20190320.pdf). In the opening remarks to the Mar 20, 2019, the Chairman of the Federal Reserve Board, Jerome H. Powell, stated (https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20190320.pdf): “In discussing the Committee’s projections, it is useful to note what those projections are, as well as what they are not. The SEP includes participants’ individual projections of the most likely economic scenario along with their views of the appropriate path of the federal funds rate in that scenario. Views about the most likely scenario form one input into our policy discussions. We also discuss other plausible scenarios, including the risk of more worrisome outcomes. These and other scenarios and many other considerations go into policy, but are not reflected in projections of the most likely case. Thus, we always emphasize that the interest rate projections in the SEP are not a Committee decision. They are not a Committee plan. As Chair Yellen noted some years ago, the FOMC statement, rather than the dot plot, is the device that the Committee uses to express its opinions about the likely path of rates.”

In presenting the Semiannual Monetary Policy Report to Congress on Jul 17, 2018, the Chairman of the Board of Governors of the Federal Reserve System, Jerome H. Powell, stated (https://www.federalreserve.gov/newsevents/testimony/powell20180717a.htm): “With a strong job market, inflation close to our objective, and the risks to the outlook roughly balanced, the FOMC believes that--for now--the best way forward is to keep gradually raising the federal funds rate. We are aware that, on the one hand, raising interest rates too slowly may lead to high inflation or financial market excesses. On the other hand, if we raise rates too rapidly, the economy could weaken and inflation could run persistently below our objective. The Committee will continue to weigh a wide range of relevant information when deciding what monetary policy will be appropriate. As always, our actions will depend on the economic outlook, which may change as we receive new data.”

The decisions of the FOMC (Federal Open Market Committee) depend on incoming data. There are unexpected swings in valuations of risk financial assets by “carry trades” from interest rates below inflation to exposures in stocks, commodities and their derivatives. Another issue is the unexpected “data surprises” such as the sharp decline in 12 months rates of increase of real disposable income, or what is left after taxes and inflation, and the price indicator of the FOMC, prices of personal consumption expenditures (PCE) excluding food and energy. There is no science or art of monetary policy that can deal with this uncertainty.

Real Disposable Personal Income	Real Personal Consumption Expenditures	Prices of Personal Consumption Expenditures	PCE Prices Excluding Food and Energy
∆%12M	∆%12M	∆%12M	∆%12M
6/2017	6/2017	6/2017	6/2017
1.2	2.4	1.4	1.5

At an address to The Clearing House and The Bank Policy Institute Annual Conference (https://www.federalreserve.gov/newsevents/speech/clarida20181127a.htm), in New York City, on Nov 27, 2018, the Vice Chairman of the Fed, Richard H. Clarida, analyzes the data dependence of monetary policy. An important hurdle is critical unobserved parameters of monetary policy (https://www.federalreserve.gov/newsevents/speech/clarida20181127a.htm): “But what if key parameters that describe the long-run destination of the economy are unknown? This is indeed the relevant case that the FOMC and other monetary policymakers face in practice. The two most important unknown parameters needed to conduct‑‑and communicate‑‑monetary policy are the rate of unemployment consistent with maximum employment, u*, and the riskless real rate of interest consistent with price stability, r*. As a result, in the real world, monetary policy should, I believe, be data dependent in a second sense: that incoming data can reveal at each FOMC meeting signals that will enable it to update its estimates of r* and u* in order to obtain its best estimate of where the economy is heading.” Current robust economic growth, employment creation and inflation close to the Fed’s 2 percent objective suggest continuing “gradual policy normalization.” Incoming data can be used to update u^* and r^* in designing monetary policy that attains price stability and maximum employment. Clarida also finds that the current expansion will be the longest in history if it continues into 2019. In an address at The Economic Club of New York, New York City, Nov 28, 2018 (https://www.federalreserve.gov/newsevents/speech/powell20181128a.htm), the Chairman of the Fed, Jerome H. Powell, stated (https://www.federalreserve.gov/newsevents/speech/powell20181128a.htm): “For seven years during the crisis and its painful aftermath, the Federal Open Market Committee (FOMC) kept our policy interest rate unprecedentedly low--in fact, near zero--to support the economy as it struggled to recover. The health of the economy gradually but steadily improved, and about three years ago the FOMC judged that the interests of households and businesses, of savers and borrowers, were no longer best served by such extraordinarily low rates. We therefore began to raise our policy rate gradually toward levels that are more normal in a healthy economy. Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth. My FOMC colleagues and I, as well as many private-sector economists, are forecasting continued solid growth, low unemployment, and inflation near 2 percent.” The market focused on policy rates “just below the broad range of estimates of the level that would be neutral for the economy—that is, neither speeding up nor slowing down growth.” There was a relief rally in the stock market of the United States:

Fri 23

Mon 26

Tue 27

Wed 28

Thu 29

Fri 30

USD/EUR

1.1339

0.7%

0.6%

1.1328

0.1%

1.1293

0.4%

0.3%

1.1368

-0.3%

-0.7%

1.1394

-0.5%

-0.2%

1.1320

0.2%

0.6%

DJIA

24285.95

-4.4%

-0.7%

24640.24

1.5%

24748.73

1.9%

0.4%

25366.43

4.4%

2.5%

25338.84

4.3%

-0.1%

25538.46

5.2%

0.8%

At a meeting of the American Economic Association in Atlanta on Friday, January 4, 2019, the Chairman of the Fed, Jerome H. Powell, stated that the Fed would be “patient” with interest rate increases, adjusting policy “quickly and flexibly” if required (https://www.aeaweb.org/webcasts/2019/us-federal-reserve-joint-interview). Treasury yields declined and stocks jumped.

Fri 28	Mon 31	Tue 1	Wed 2	Thu 3	Fri 4
10Y Note 2.736	2.683	2.683	2.663	2.560	2.658
2Y Note 2.528	2.500	2.500	2.488	2.387	2.480
DJIA 23062.40 2.7% -0.3%	23327.46 1.1% 1.1%	23327.46 1.1% 0.0%	23346.24 1.2% 0.1%	22686.22 -1.6% -2.8%	23433.16 1.6% 3.3%
Dow Global 2718.19 1.3% 0.8%	2734.40 0.6% 0.6%	2734.40 0.6% 0.0%	2729.74 0.4% -0.2%	2707.29 -0.4% -0.8%	2773.12 2.0% 2.4%

Frank H. Knight (1963, 233), in Risk, uncertainty and profit, distinguishes between measurable risk and unmeasurable uncertainty. The FOMC statement on Jun 19, 2019 analyzes uncertainty in the outlook (https://www.federalreserve.gov/newsevents/pressreleases/monetary20190619a.htm): “The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased. In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.” In the Semiannual Monetary Policy Report to the Congress, on Jul 10, 2019, Chair Jerome H. Powell states (https://www.federalreserve.gov/newsevents/testimony/powell20190710a.htm): “Since our May meeting, however, these crosscurrents have reemerged, creating greater uncertainty. Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture report heightened concerns over trade developments. Growth indicators from around the world have disappointed on net, raising concerns that weakness in the global economy will continue to affect the U.S. economy. These concerns may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data.

”(emphasis added). European Central Bank President, Mario Draghi, stated at a meeting on “Twenty Years of the ECB’s Monetary Policy,” in Sintra, Portugal, on Jun 18, 2019, that (https://www.ecb.europa.eu/press/key/date/2019/html/ecb.sp190618~ec4cd2443b.en.html): “In this environment, what matters is that monetary policy remains committed to its objective and does not resign itself to too-low inflation. And, as I emphasised at our last monetary policy meeting, we are committed, and are not resigned to having a low rate of inflation forever or even for now. In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required. In our recent deliberations, the members of the Governing Council expressed their conviction in pursuing our aim of inflation close to 2% in a symmetric fashion. Just as our policy framework has evolved in the past to counter new challenges, so it can again. In the coming weeks, the Governing Council will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability.” The harmonized index of consumer prices of the euro zone increased 1.2 percent in the 12 months ending in May 2019 and the PCE inflation excluding food and energy increased 1.6 percent in the 12 months ending in Apr 2019. Inflation below 2 percent with symmetric targets in both the United States and the euro zone together with apparently weakening economic activity could lead to interest rate cuts. Stock markets jumped worldwide in renewed risk appetite during the week of Jun 19, 2019 in part because of anticipation of major central bank rate cuts and also because of domestic factors:

Fri 14

Mon 17

Tue 18

Wed 19

Thu 20

Fri 21

DJIA

26089.61

0.4%

-0.1%

26112.53

0.1%

26465.54

1.4%

26504.00

1.6%

0.1%

26753.17

2.5%

0.9%

26719.13

2.4%

-0.1%

Dow Global

2998.79

0.2%

-0.4%

2999.93

0.0%

3034.59

1.2%

3050.80

1.7%

0.5%

3077.81

2.6%

0.9%

3081.62

2.8%

0.1%

DJ Asia Pacific

Nikkei

21116.89

1.1%

0.4%

21124.00

0.0%

20972.71

-0.7%

21333.87

1.0%

1.7%

21462.86

1.6%

0.6%

21258.64

0.7%

-1.0%

Shanghai

2881.97

1.9%

-1.0%

2887.62

0.2%

2890.16

0.3%

0.1%

2917.80

1.2%

1.0%

2987.12

3.6%

2.4%

3001.98

4.2%

0.5%

DAX

12096.40

0.4%

-0.6%

12085.82

-0.1%

12331.75

1.9%

2.0%

12308.53

1.8%

-0.2%

12355.39

2.1%

0.4%

12339.92

2.0%

-0.1%

BOVESPA

98040.06

0.2%

-0.7%

97623.25

-0.4%

99404.39

1.4%

1.8%

100303.41

2.3%

0.9%

100303.41

2.3%

0.0%

102012.64

4.1%

1.7%

Chart VIII-1, Fed Funds Rate and Yields of Ten-year Treasury Constant Maturity and Baa Seasoned Corporate Bond, Jan 2, 2001 to Oct 6, 2016

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/h15/

Chart VIII-1A, Fed Funds Rate and Yield of Ten-year Treasury Constant Maturity, Jan 2, 2001 to Jul 18, 2019

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/h15/

Table VIII-3, Selected Data Points in Chart VIII-1, % per Year

	Fed Funds Overnight Rate	10-Year Treasury Constant Maturity	Seasoned Baa Corporate Bond
1/2/2001	6.67	4.92	7.91
10/1/2002	1.85	3.72	7.46
7/3/2003	0.96	3.67	6.39
6/22/2004	1.00	4.72	6.77
6/28/2006	5.06	5.25	6.94
9/17/2008	2.80	3.41	7.25
10/26/2008	0.09	2.16	8.00
10/31/2008	0.22	4.01	9.54
4/6/2009	0.14	2.95	8.63
4/5/2010	0.20	4.01	6.44
2/4/2011	0.17	3.68	6.25
7/25/2012	0.15	1.43	4.73
5/1/13	0.14	1.66	4.48
9/5/13	0.089	2.98	5.53
11/21/2013	0.09	2.79	5.44
11/26/13	0.09	2.74	5.34 (11/26/13)
12/5/13	0.09	2.88	5.47
12/11/13	0.09	2.89	5.42
12/18/13	0.09	2.94	5.36
12/26/13	0.08	3.00	5.37
1/1/2014	0.08	3.00	5.34
1/8/2014	0.07	2.97	5.28
1/15/2014	0.07	2.86	5.18
1/22/2014	0.07	2.79	5.11
1/30/2014	0.07	2.72	5.08
2/6/2014	0.07	2.73	5.13
2/13/2014	0.06	2.73	5.12
2/20/14	0.07	2.76	5.15
2/27/14	0.07	2.65	5.01
3/6/14	0.08	2.74	5.11
3/13/14	0.08	2.66	5.05
3/20/14	0.08	2.79	5.13
3/27/14	0.08	2.69	4.95
4/3/14	0.08	2.80	5.04
4/10/14	0.08	2.65	4.89
4/17/14	0.09	2.73	4.89
4/24/14	0.10	2.70	4.84
5/1/14	0.09	2.63	4.77
5/8/14	0.08	2.61	4.79
5/15/14	0.09	2.50	4.72
5/22/14	0.09	2.56	4.81
5/29/14	0.09	2.45	4.69
6/05/14	0.09	2.59	4.83
6/12/14	0.09	2.58	4.79
6/19/14	0.10	2.64	4.83
6/26/14	0.10	2.53	4.71
7/2/14	0.10	2.64	4.84
7/10/14	0.09	2.55	4.75
7/17/14	0.09	2.47	4.69
7/24/14	0.09	2.52	4.72
7/31/14	0.08	2.58	4.75
8/7/14	0.09	2.43	4.71
8/14/14	0.09	2.40	4.69
8/21/14	0.09	2.41	4.69
8/28/14	0.09	2.34	4.57
9/04/14	0.09	2.45	4.70
9/11/14	0.09	2.54	4.79
9/18/14	0.09	2.63	4.91
9/25/14	0.09	2.52	4.79
10/02/14	0.09	2.44	4.76
10/09/14	0.08	2.34	4.68
10/16/14	0.09	2.17	4.64
10/23/14	0.09	2.29	4.71
11/13/14	0.09	2.35	4.82
11/20/14	0.10	2.34	4.86
11/26/14	0.10	2.24	4.73
12/04/14	0.12	2.25	4.78
12/11/14	0.12	2.19	4.72
12/18/14	0.13	2.22	4.78
12/23/14	0.13	2.26	4.79
12/30/14	0.06	2.20	4.69
1/8/15	0.12	2.03	4.57
1/15/15	0.12	1.77	4.42
1/22/15	0.12	1.90	4.49
1/29/15	0.11	1.77	4.35
2/05/15	0.12	1.83	4.43
2/12/15	0.12	1.99	4.53
2/19/15	0.12	2.11	4.64
2/26/15	0.11	2.03	4.47
3/5/215	0.11	2.11	4.58
3/12/15	0.11	2.10	4.56
3/19/15	0.12	1.98	4.48
3/26/15	0.11	2.01	4.56
4/03/15	0.12	1.92	4.47
4/9/15	0.12	1.97	4.50
4/16/15	0.13	1.90	4.45
4/23/15	0.13	1.96	4.50
5/1/15	0.08	2.05	4.65
5/7/15	0.13	2.18	4.82
5/14/15	0.13	2.23	4.97
5/21/15	0.12	2.19	4.94
5/28/15	0.12	2.13	4.88
6/04/15	0.13	2.31	5.03
6/11/15	0.13	2.39	5.10
6/18/15	0.14	2.35	5.17
6/25/15	0.13	2.40	5.20
7/1/15	0.13	2.43	5.26
7/9/15	0.13	2.32	5.20
7/16/15	0.14	2.36	5.24
7/23/15	0.13	2.28	5.13
7/30/15	0.14	2.28	5.16
8/06/15	0.14	2.23	5.15
8/20/15	0.15	2.09	5.13
8/27/15	0.14	2.18	5.33
9/03/15	0.14	2.18	5.35
9/10/15	0.14	2.23	5.35
9/17/15	0.14	2.21	5.39
9/25/15	0.14	2.13	5.29
10/01/15	0.13	2.05	5.36
10/08/15	0.13	2.12	5.40
10/15/15	0.13	2.04	5.33
10/22/15	0.12	2.04	5.30
10/29/15	0.12	2.19	5.40
11/05/15	0.12	2.26	5.44
11/12/15	0.12	2.32	5.51
11/19/15	0.12	2.24	5.44
11/25/15	0.12	2.23	5.44
12/03/15	0.13	2.33	5.51
12/10/15	0.14	2.24	5.43
12/17/15	0.37	2.24	5.45
12/23/15	0.36	2.27	5.53
12/30/15	0.35	2.31	5.54
1/07/2016	0.36	2.16	5.44
01/14/16	0.36	2.10	5.46
01/20/16	0.37	2.01	5.41
01/29/16	0.38	2.00	5.48
02/04/16	0.38	1.87	5.40
02/11/16	0.38	1.63	5.26
02/18/16	0.38	1.75	5.37
02/25/16	0.37	1.71	5.27
03/03/16	0.37	1.83	5.30
03/10/16	0.36	1.93	5.23
03/17/16	0.37	1.91	5.11
03/24/16	0.37	1.91	4.97
03/31/16	0.25	1.78	4.90
04/07/16	0.37	1.70	4.76
04/14/16	0.37	1.80	4.79
04/21/16	0.37	1.88	4.79
04/28/16	0.37	1.84	4.73
05/05/16	0.37	1.76	4.62
05/12/16	0.37	1.75	4.66
05/19/16	0.37	1.85	4.70
05/26/16	0.37	1.83	4.69
06/02/16	0.37	1.81	4.64
06/09/16	0.37	1.68	4.53
06/16/16	0.38	1.57	4.47
06/23/16	0.39	1.74	4.60
06/30/16	0.36	1.49	4.41
07/07/16	0.40	1.40	4.19
07/14/16	0.40	1.53	4.23
07/21/16	0.40	1.57	4.25
07/28/16	0.40	1.52	4.20
08/04/16	0.40	1.51	4.27
08/11/16	0.40	1.57	4.27
08/18/16	0.40	1.53	4.23
08/25/16	0.40	1.58	4.21
09/01/16	0.40	1.57	4.19
09/08/16	0.40	1.61	4.28
09/15/16	0.40	1.71	4.43
09/22/16	0.40	1.63	4.32
09/29/16	0.40	1.56	4.23
10/06/16	0.40	1.75	4.36
10/13/16	0.40	1.75	NA*
10/20/16	0.41	1.76	NA*
10/27/16	0.41	1.85	NA*
11/03/16	0.41	1.82	NA*
11/09/16	0.41	2.07	NA*
11/17/16	0.41	2.29	NA*
11/23/16	0.40	2.36	NA*
12/01/16	0.40	2.45	NA*
12/08/16	0.41	2.40	NA*
12/15/16	0.66	2.60	NA*
12/22/16	0.66	2.55	NA*
12/29/16	0.66	2.49	NA*
01/05/17	0.66	2.37	NA*
01/12/17	0.66	2.36	NA*
01/19/17	0.66	2.42	NA*
01/26/17	0.66	2.51	NA*
02/02/17	0.66	2.48	NA*
02/09/17	0.66	2.40	NA*
02/16/17	0.66	2.45	NA*
02/23/17	0.66	2.38	NA*
03/02/17	0.66	2.49	NA*
03/09/17	0.66	2.60	NA*
03/16/17	0.91	2.53	NA*
03/23/17	0.91	2.41	NA*
03/30/17	0.91	2.42	NA*
04/06/17	0.91	2.34	NA*
04/13/17	0.91	2.24	NA*
04/21/17	0.91	2.24	NA*
04/27/17	0.91	2.30	NA*
05/04/17	0.91	2.36	NA*
05/11/17	0.91	2.39	NA*
05/18/17	0.91	2.23	NA*
05/25/17	0.91	2.25	NA*
06/01/17	0.90	2.21	NA*
06/08/17	0.91	2.19	NA*
06/15/17	1.16	2.16	NA*
06/22/17	1.16	2.15	NA*
06/29/17	1.16	2.27	NA*
07/06/17	1.16	2.37	NA*
07/13/17	1.16	2.35	NA*
07/20/17	1.16	2.27	NA*
07/27/17	1.16	2.32	NA*
08/03/17	1.16	2.24	NA*
08/10/17	1.16	2.20	NA*
08/17/17	1.16	2.19	NA*
08/24/17	1.16	2.19	NA*
08/31/17	1.07	2.12	NA*
09/07/17	1.16	2.05	NA*
09/14/17	1.16	2.20	NA*
09/21/17	1.16	2.27	NA*
09/28/17	1.16	2.31	NA*
10/05/17	1.16	2.35	NA*
10/12/17	1.16	2.33	NA*
10/19/17	1.16	2.33	NA*
10/26/17	1.16	2.46	NA*
11/02/17	1.16	2.35	NA*
11/09/17	1.16	2.32	NA*
11/16/17	1.16	2.37	NA*
11/22/17	1.16	2.32	NA*
11/30/17	1.16	2.42	NA*
12/07/17	1.16	2.37	NA*
12/14/17	1.41	2.35	NA*
12/21/17	1.42	2.48	NA*
12/28/17	1.42	2.43	NA*
01/04/18	1.42	2.46	NA*
01/11/18	1.42	2.54	NA*
01/18/18	1.42	2.62	NA*
01/25/18	1.42	2.63	NA*
02/01/18	1.42	2.78	NA*
02/08/18	1.42	2.85	NA*
02/15/18	1.42	2.90	NA*
02/22/18	1.42	2.92	NA*
03/01/18	1.42	2.81	NA*
03/08/18	1.42	2.86	NA*
03/15/18	1.43	2.82	NA*
03/22/18	1.68	2.83	NA*
03/29/18	1.68	2.74	NA*
04/05/18	1.69	2.83	NA*
04/12/18	1.69	2.83	NA*
04/19/18	1.69	2.92	NA*
04/26/18	1.70	3.00	NA*
05/03/18	1.70	2.94	NA*
05/10/18	1.70	2.97	NA*
05/17/18	1.70	3.11	NA*
05/24/18	1.70	2.98	NA*
05/31/18	1.70	2.83	NA*
06/07/18	1.70	2.93	NA*
06/14/18	1.90	2.94	NA*
06/21/18	1.92	2.90	NA*
06/28/18	1.91	2.84	NA*
07/05/18	1.91	2.84	NA*
07/12/18	1.91	2.85	NA*
07/19/18	1.91	2.84	NA*
07/26/18	1.91	2.98	NA*
08/02/18	1.91	2.98	NA*
08/09/18	1.91	2.93	NA*
08/16/18	1.92	2.87	NA*
08/23/18	1.92	2.82	NA*
08/30/18	1.92	2.86	NA*
09/06/18	1.92	2.88	NA*
09/13/18	1.92	2.97	NA*
09/20/18	1.92	3.07	NA*
09/27/18	2.18	3.06	NA*
10/04/18	2.18	3.19	NA*
10/11/18	2.18	3.14	NA*
10/18/18	2.19	3.17	NA*
10/25/18	2.20	3.14	NA*
11/01/18	2.20	3.14	NA*
11/08/18	2.20	3.24	NA*
11/15/18	2.20	3.11	NA*
11/21/18	2.20	3.06	NA*
11/29/18	2.20	3.03	NA*
12/06/18	2.20	2.87	NA*
12/13/18	2.19	2.91	NA*
12/20/18	2.40	2.79	NA*
12/27/18	2.40	2.77	NA*
01/03/19	2.40	2.56	NA*
01/10/19	2.40	2.74	NA*
01/17/19	2.40	2.75	NA*
01/24/19	2.40	2.72	NA*
01/31/19	2.40	2.63	NA*
02/07/19	2.40	2.63	NA*
02/14/19	2.40	2.66	NA*
02/21/19	2.40	2.69	NA*
02/28/19	2.40	2.73	NA*
03/07/19	2.40	2.64	NA*
03/14/19	2.40	2.63	NA*
03/21/19	2.41	2.54	NA*
03/28/19	2.41	2.39	NA*
04/04/19	2.41	2.51	NA*
04/11/19	2.41	2.51	NA*
04/18/19	2.43	2.57	NA*
04/25/19	2.44	2.54	NA*
05/02/19	2.41	2.55	NA*
05/09/19	2.38	2.45	NA*
05/16/19	2.39	2.40	NA*
05/23/19	2.38	2.31	NA*
05/30/19	2.39	2.22	NA*
06/06/19	2.37	2.12	NA*
06/13/19	2.37	2.10	NA*
06/20/19	2.37	2.01	NA*
06/27/19	2.38	2.01	NA*
07/03/19	2.41	1.96	NA
07/11/19	2.40	1.85	NA*
07/18/19	2.41	2.04	NA*

*Note: The Board of Governors of the Federal Reserve System discontinued the publication of the BAA bond yield.

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/h15/

Chart VIII-2 of the Board of Governors of the Federal Reserve System provides the rate of US dollars (USD) per euro (EUR), USD/EUR. The rate appreciated from USD 1.1692/EUR on Jul 12, 2018 to USD 1.1254/EUR on Jul 12, 2019 or 3.7 percent. The euro has devalued 41.7 percent relative to the dollar from the high on Jul 15, 2008 to Jul 19, 2019. US corporations with foreign transactions and net worth experience losses in their balance sheets in converting revenues from depreciated currencies to the dollar. Corporate profits increased at $65.0 billion in IIQ2018. Corporate profits increased at $78.2 billion in IIIQ2018. Corporate profits decreased at $9.7 billion in IVQ2018. Corporate profits decreased at $59.3 billion in IQ2019. Profits after tax with IVA and CCA increased at $42.2 billion in IIQ2018. Profits after tax with IVA and CCA increased at $69.3 billion in IIIQ2018. Profits after tax with IVA and CCA decreased at $0.6 billion in IVQ2018. Profits after tax with IVA and CCA decreased at $63.9 billion in IQ2019. Net dividends increased at $9.8 billion in IIQ2018. Net dividends increased at $27.6 billion in IIIQ2018. Net dividends increased at $28.9 billion in IVQ2018. Net dividends decreased at $40.0 billion in IQ2019. Undistributed corporate profits increased at $32.4 billion in IIQ2018. Undistributed corporate profits increased at 41.7 billion in IIIQ2018. Undistributed corporate profits decreased at $29.5 billion in IVQ2018. Undistributed corporate profits decreased at $23.8 billion in IQ2019. Undistributed corporate profits swelled 231.7 percent from $138.0 billion in IQ2007 to $457.8 billion in IQ2019 and changed signs from minus $4.3 billion in current dollars in IVQ2007. The investment decision of United States corporations has been fractured in the current economic cycle in preference of cash. There is increase in corporate profits from devaluing the dollar with unconventional monetary policy of zero interest rates and decrease of corporate profits in revaluing the dollar with attempts at “normalization” or increases in interest rates. Conflicts arise while other central banks differ in their adjustment process. The current account deficit of the US not seasonally adjusted increased from $116.2 billion in IVQ2017 to $138.4 billion in IVQ2018. The current account deficit seasonally adjusted at annual rate increased from 2.3 percent of GDP in IVQ2017 to 2.5 percent of GDP in IIIQ2018, increasing to 2.6 percent of GDP in IVQ2018. The current account deficit seasonally adjusted at 2.3 percent in IVQ2017 increases to 2.5 percent in IQ2018. The current account deficit decreased to 2.0 percent in IIQ2018. The current account deficit increased to 2.5 percent in IIIQ2018. The current account deficit increases to 2.6 percent in IVQ2018. The absolute value of the net international investment position stabilizes from minus $7.7 trillion in IVQ2017 to minus $7.7 trillion in IQ2018. The absolute value of the net international investment position increased to $8.8 trillion in IIQ2018. The absolute value of the net international investment position increased at $7.7 trillion in IQ2018. The absolute value of the net international investment position deteriorates to $9.6 trillion in IIIQ2018. The absolute value of the net international investment position deteriorates to $9.7 trillion in IVQ2018. The BEA explains as follows (https://www.bea.gov/system/files/2019-01/intinv318.pdf):

“The U.S. net international investment position decreased to −$9,627.2 billion (preliminary) at the end of the third quarter of 2018 from −$8,845.1 billion (revised) at the end of the second quarter, according to statistics released by the Bureau of Economic Analysis (BEA). The $782.1 billion decrease reflected a $135.5 billion increase in U.S. assets and a $917.6 billion increase in U.S. liabilities (table 1).”

The BEA explains further (https://www.bea.gov/system/files/2019-03/intinv418.pdf):

“U.S. assets decreased $1,695.4 billion to $25,398.6 billion at the end of the fourth quarter, reflecting decreases in portfolio investment and direct investment assets that were partly offset by increases in financial derivatives, other investment, and reserve assets.

Assets excluding financial derivatives decreased $1,942.1 billion to $23,652.6 billion. The decrease resulted from financial transactions of $136.5 billion and other changes in position of −$2,078.6 billion (table A).
- Financial transactions reflected net U.S. acquisition of other investment deposit and loan assets and of direct investment equity assets that were partly offset by net U.S. sales of foreign securities.
- Other changes in position were driven by foreign stock price decreases that lowered the equity value of portfolio investment and direct investment assets.
Financial derivatives increased $246.7 billion to $1,746.0 billion, reflecting increases in single-currency interest rate contracts.”

Chart VIII-2, Exchange Rate of US Dollars (USD) per Euro (EUR), Jul 12, 2018 to Jul 12, 2019

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/H10/default.htm

Chart VIII-3 of the Board of Governors of the Federal Reserve System provides the yield of the 10-year Treasury constant maturity note from 2.54 percent on Apr 25, 2019 to 2.04 percent on Jul 18, 2019. There is turbulence in financial markets originating in a combination of intentions of normalizing or increasing US policy fed funds rate, quantitative easing in Europe and Japan and increasing perception of financial/economic risks.

Chart VIII-3, Yield of Ten-year Constant Maturity Treasury, Apr 25, 2019 to Jul 18, 2019

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/h15

IX Conclusion. The departing theoretical framework of Bordo and Haubrich (2012DR) is the plucking model of Friedman (1964, 1988). Friedman (1988, 1) recalls, “I was led to the model in the course of investigating the direction of influence between money and income. Did the common cyclical fluctuation in money and income reflect primarily the influence of money on income or of income on money?” Friedman (1964, 1988) finds useful for this purpose to analyze the relation between expansions and contractions. Analyzing the business cycle in the United States between 1870 and 1961, Friedman (1964, 15) found that “a large contraction in output tends to be followed on the average by a large business expansion; a mild contraction, by a mild expansion.” The depth of the contraction opens up more room in the movement toward full employment (Friedman 1964, 17):

“Output is viewed as bumping along the ceiling of maximum feasible output except that every now and then it is plucked down by a cyclical contraction. Given institutional rigidities and prices, the contraction takes in considerable measure the form of a decline in output. Since there is no physical limit to the decline short of zero output, the size of the decline in output can vary widely. When subsequent recovery sets in, it tends to return output to the ceiling; it cannot go beyond, so there is an upper limit to output and the amplitude of the expansion tends to be correlated with the amplitude of the contraction.”

Kim and Nelson (1999) test the asymmetric plucking model of Friedman (1964, 1988) relative to a symmetric model using reference cycles of the NBER and find evidence supporting the Friedman model. Bordo and Haubrich (2012DR) analyze 27 cycles beginning in 1872, using various measures of financial crises while considering different regulatory and monetary regimes. The revealing conclusion of Bordo and Haubrich (2012DR, 2) is that:

“Our analysis of the data shows that steep expansions tend to follow deep contractions, though this depends heavily on when the recovery is measured. In contrast to much conventional wisdom, the stylized fact that deep contractions breed strong recoveries is particularly true when there is a financial crisis. In fact, on average, it is cycles without a financial crisis that show the weakest relation between contraction depth and recovery strength. For many configurations, the evidence for a robust bounce-back is stronger for cycles with financial crises than those without.”

The average rate of growth of real GDP in expansions after recessions with financial crises was 8 percent but only 6.9 percent on average for recessions without financial crises (Bordo 2012Sep27). Real GDP declined 12 percent in the Panic of 1907 and increased 13 percent in the recovery, consistent with the plucking model of Friedman (Bordo 2012Sep27). Bordo (2012Sep27) finds two probable explanations for the weak recovery during the current economic cycle: (1) collapse of United States housing; and (2) uncertainty originating in fiscal policy, regulation and structural changes. There are serious doubts if monetary policy is adequate to recover the economy under these conditions.

Lucas (2011May) estimates US economic growth in the long-term at 3 percent per year and about 2 percent per year in per capita terms. There are displacements from this trend caused by events such as wars and recessions but the economy grows much faster during the expansion, compensating for the contraction and maintaining trend growth over the entire cycle. Historical US GDP data exhibit remarkable growth: Lucas (2011May) estimates an increase of US real income per person by a factor of 12 in the period from 1870 to 2010. The explanation by Lucas (2011May) of this remarkable growth experience is that government provided stability and education while elements of “free-market capitalism” were an important driver of long-term growth and prosperity. Lucas sharpens this analysis by comparison with the long-term growth experience of G7 countries (US, UK, France, Germany, Canada, Italy and Japan) and Spain from 1870 to 2010. Countries benefitted from “common civilization” and “technology” to “catch up” with the early growth leaders of the US and UK, eventually growing at a faster rate. Significant part of this catch up occurred after World War II. Lucas (2011May) finds that the catch up stalled in the 1970s. The analysis of Lucas (2011May) is that the 20-40 percent gap that developed originated in differences in relative taxation and regulation that discouraged savings and work incentives in comparison with the US. A larger welfare and regulatory state, according to Lucas (2011May), could be the cause of the 20-40 percent gap. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in USD fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in Japan and France within the G7 in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. The key indicator of growth of real income per capita, which is what a person earns after inflation, measures long-term economic growth and prosperity. A refined concept would include real disposable income per capita, which is what a person earns after inflation and taxes.

Table IB-1 provides the data required for broader comparison of long-term and cyclical performance of the United States economy. Revisions and enhancements of United States GDP and personal income accounts by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) provide valuable information on long-term growth and cyclical behavior. First, Long-term performance. Using annual data, US GDP grew at the average rate of 3.2 percent per year from 1929 to 2018 and at 3.2 percent per year from 1947 to 2018. Real disposable income grew at the average yearly rate of 3.2 percent from 1929 to 2018 and at 3.7 percent from 1947 to 1999. Real disposable income per capita grew at the average yearly rate of 2.0 percent from 1929 to 2018 and at 2.3 percent from 1947 to 1999. US economic growth was much faster during expansions, compensating contractions in maintaining trend growth for whole cycles. Using annual data, US real disposable income grew at the average yearly rate of 3.5 percent from 1980 to 1989 and real disposable income per capita at 2.6 percent. The US economy has lost its dynamism in the current cycle: real disposable income grew at the yearly average rate of 2.1 percent from 2006 to 2018 and real disposable income per capita at 1.3 percent. Real disposable income grew at the average rate of 2.0 percent from 2007 to 2018 and real disposable income per capita at 1.3 percent. Table IB-1 illustrates the contradiction of long-term growth with the proposition of secular stagnation (Hansen 1938, 1938, 1941 with early critique by Simons (1942). Secular stagnation would occur over long periods. Table IB-1 also provides the corresponding rates of population growth that is only marginally lower at 0.8 to 0.9 percent recently from 1.1 percent over the long-term. GDP growth fell abruptly from 2.6 percent on average from 2000 to 2006 to 1.6 percent from 2006 to 2018 and 1.6 percent from 2007 to 2018 and real disposable income growth fell from 2.9 percent on average from 2000 to 2006 to 2.1 percent from 2006 to 2018 and 2.0 percent from 2007 to 2018. The decline of growth of real per capita disposable income is even sharper from average 1.9 percent from 2000 to 2006 to 1.3 percent from 2006 to 2018 and 1.3 percent from 2007 to 2018 while population growth was 0.8 percent on average. Lazear and Spletzer (2012JHJul122) provide theory and measurements showing that cyclic factors explain currently depressed labor markets. This is also the case of the overall economy. Second, first four quarters of expansion. Growth in the first four quarters of expansion is critical in recovering loss of output and employment occurring during the contraction. In the first four quarters of expansion from IQ1983 to IVQ1983: GDP increased 7.9 percent, real disposable personal income 5.5 percent and real disposable income per capita 4.5 percent. In the first four quarters of expansion from IIIQ2009 to IIQ2010: GDP increased 2.8 percent, real disposable personal income 1.0 percent and real disposable income per capita 0.2 percent. Third, first 39 quarters of expansion. In the expansion from IQ1983 to IIIQ1992: GDP grew 43.1 percent at the annual equivalent rate of 3.7 percent; real disposable income grew 38.9 percent at the annual equivalent rate of 3.4 percent; and real disposable income per capita grew 25.8 percent at the annual equivalent rate of 2.4 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm).

In the expansion from IIIQ2009 to IQ2019: GDP grew 25.0 percent at the annual equivalent rate of 2.3 percent; real disposable income grew 24.6 percent at the annual equivalent rate of 2.3 percent; and real disposable personal income per capita grew 16.3 percent at the annual equivalent rate of 1.6 percent. Fourth, entire quarterly cycle. In the entire cycle combining contraction and expansion from IQ1980 to IIIQ1992: GDP grew 42.8 percent at the annual equivalent rate of 2.8 percent; real disposable personal income grew 47.2 percent at the annual equivalent rate of 3.0 percent; and real disposable personal income per capita 29.3 percent at the annual equivalent rate of 2.0 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). In the entire cycle combining contraction and expansion from IVQ2007 to IQ2019: GDP grew 20.0 percent at the annual equivalent rate of 1.6 percent; real disposable personal income increased 26.4 percent at the annual equivalent rate of 2.1 percent; and real disposable personal income per capita grew 16.5 percent at the annual equivalent rate of 1.4 percent. The United States grew during its history at high rates of per capita income that made its economy the largest in the world. That dynamism is disappearing. Bordo (2012 Sep27) and Bordo and Haubrich (2012DR) provide convincing evidence that recoveries have been faster after deeper recessions and recessions with financial crises, casting serious doubts on the conventional explanation of weak growth during the current expansion allegedly because of the depth of the contraction of 4.0 percent from IVQ2007 to IIQ2009 and the financial crisis. The proposition of secular stagnation should explain a long-term process of decay and not the actual abrupt collapse of the economy and labor markets currently.

Table IB-1, US, GDP, Real Disposable Personal Income, Real Disposable Income per Capita and Population Long-term and in 1983-92 and 2007-2018, %

Long-term Average ∆% per Year	GDP	Population
1929-2018	3.2	1.1
1947-2018	3.2	1.2
1947-1999	3.6	1.3
1980-1989	3.4	0.9
2000-2018	1.9	0.8
2000-2006	2.6	0.9
2006-2018	1.6	0.8
2007-2018	1.6	0.7
Long-term Average ∆% per Year	Real Disposable Income	Real Disposable Income per Capita	Population
1929-2018	3.2	2.0	1.1
1947-1999	3.7	2.3	1.3
2000-2018	2.3	1.5	0.8
2000-2006	2.9	1.9	0.9
2006-2018	2.1	1.3	0.8
2007-2018	2.0	1.3	0.7
Whole Cycles Average ∆% per Year
1980-1989	3.5	2.6	0.9
2006-2018	2.1	1.3	0.8
2007-2018	2.0	1.3	0.7
Comparison of Cycles	# Quarters	∆%	∆% Annual Equivalent
GDP
I83 to IV83 I83 to IQ87 I83 to II87 I83 to III87 I83 to IV87 I83 to I88 I83 to II88 I83 to III88 I83 to IV88 I83 to I89 I83 to II89 I83 to III89 I83 to IV89 I83 to I90 I83 to II90 I83 to III90 I83 to IV90 I83 to I91 I83 to II91 I83 to III91 I83 to IV91 I83 to I92 I83 to II92 I83 to III92	4 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39	7.9 23.0 24.4 25.4 27.6 28.3 29.9 30.7 32.5 33.8 34.8 35.8 36.1 37.6 38.1 38.2 36.9 36.3 37.3 38.0 38.5 40.2 41.7 43.1	7.9 5.0 5.0 4.9 5.0 4.9 4.9 4.8 4.8 4.8 4.7 4.6 4.5 4.5 4.4 4.3 4.0 3.8 3.8 3.8 3.7 3.7 3.7 3.7
RDPI
I83 to IV83 I83 to I87 I83 to III87 I83 to IV87 I83 to I88 I83 to II88 I83 to III88 I83 to IV88 I83 to I89 I83 to II89 I83 to III89 I83 to IV89 I83 to I90 I83 to II90 I83 to III90 I83 to IV90 I83 to I91 I83 to II91 I83 to III91 I83 to IV91 I83 to I92 I83 to II92 I83 to III92	4 17 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39	5.5 19.4 20.4 22.1 23.9 25.1 26.3 27.5 29.0 28.6 29.5 30.5 31.5 32.5 32.4 31.2 31.6 32.6 33.1 34.2 36.9 38.3 38.9	5.5 4.3 4.0 4.1 4.2 4.2 4.1 4.1 4.2 3.9 3.9 3.9 3.9 3.8 3.7 3.5 3.4 3.4 3.3 3.3 3.5 3.5 3.4
RDPI Per Capita
I83 to IV83 I83 to I87 I83 to III87 I83 to IV87 I83 to I88 I83 to II88 I83 to III88 I83 to IV88 I83 to I89 I83 to II89 I83 to III89 I83 to IV89 I83 to I90 I83 to II90 I83 to III90 I83 to IV90 I83 to I91 I83 to II91 I83 to III91 I83 to IV91 I83 to I92 I83 to II92 I83 to III92	4 17 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39	4.5 15.0 15.5 16.7 18.2 19.2 20.0 20.8 22.0 21.3 21.8 22.5 23.2 23.6 23.2 21.7 21.6 22.1 22.2 22.8 24.9 25.7 25.8	4.5 3.3 3.1 3.1 3.2 3.2 3.2 3.2 3.2 3.0 3.0 2.9 2.9 2.9 2.7 2.5 2.4 2.4 2.3 2.3 2.4 2.4 2.4
Whole Cycle IQ1980 to IIIQ1992
GDP	52	42.8	2.8
RDPI	52	47.2	3.0
RDPI per Capita	52	29.3	2.0
Population	52	13.8	1.0
GDP
III09 to II10 III09 to I19	4 39	2.8 25.0	2.8 2.3
RDPI
III09 to II10 III09 to I19	4 39	1.0 24.6	1.0 2.3
RDPI per Capita
III09 to II10 III09 to I19	4 39	0.2 16.3	0.2 1.6
Population
III09 to II10 III09 to I19	4 39	0.8 7.1	0.8 0.7
IVQ2007 to IQ2019	45
GDP	45	20.0	1.6
RDPI	45	26.4	2.1
RDPI per Capita	45	16.5	1.4
Population	45	8.5	0.7

RDPI: Real Disposable Personal Income

Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

There are seven basic facts illustrating the current economic disaster of the United States:

GDP maintained trend growth in the entire business cycle from IQ1980 to IIIQ1992, including contractions and expansions. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). GDP is well below trend in the entire business cycle from IVQ2007 to IQ2019, including contractions and expansions
Per capita real disposable income exceeded trend growth in the 1980s but is substantially below trend in IQ2019
Level of employed persons increased in the 1980s but declined/stagnated cyclically into IQ2019 with recent recovery
Level of full-time employed persons increased in the 1980s but declined/stagnated cyclically into IQ2019 with recent recovery
Level unemployed, unemployment rate and employed part-time for economic reasons fell in the recovery from the recessions in the 1980s but not substantially in relative cyclical terms in the recovery since IIQ2009
Wealth of households and nonprofit organizations soared in the 1980s but stagnated in historically relative real terms into IQ2019
Gross private domestic investment increased sharply from IQ1980 to IIIQ1992 but gross private domestic investment stagnated and private fixed investment stagnated in relative cyclical terms from IVQ2007 into IQ2019 with recent recovery

There are references to adverse periods as “lost decades.” There is a more prolonged and adverse period in Table V-3A: the lost economic cycle of the Global Recession with economic growth underperforming below trend worldwide. Economic contractions were relatively high but not comparable to the decline of GDP during the Great Depression. In fact, during the Great Depression in the four years of 1930 to 1933, US GDP in constant dollars fell 26.3 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7 and revisions in http://bea.gov/iTable/index_nipa.cfm). Data are available for the 1930s only on a yearly basis. The contraction of GDP in the current cycle of the Global Recession was much lower, 4.0 percent (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). Contractions were deeper in Japan, 8.7 percent, the euro area (19 members), 5.7 percent, Germany 6.9 percent and the UK 6.3 percent. The contraction in France was 3.9 percent. There is adversity in low rates of growth during the expansion that did not compensate for the contraction such that for the whole cycle performance is disappointingly low. As a result, GDP is substantially below what it would have been in trend growth in all countries and regions in the world. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.3 percent on average in the cyclical expansion in the 39 quarters from IIIQ2009 to IQ2019. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the third estimate of GDP for IQ2019 (https://www.bea.gov/system/files/2019-06/gdp1q19_3rd_0.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.8 percent obtained by dividing GDP of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009 {[($15,557.3/$15,134.1) -1]100 = 2.8%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.3 percent from IQ1983 to IIIQ1986, 5.1 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.6 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991, 3.8 percent from IQ1983 to IIIQ1991, 3.7 percent from IQ1983 to IVQ1991, 3.7 percent from IQ1983 to IQ1992, 3.7 percent from IQ1983 to IIQ1992, 3.7 percent from IQ1983 to IIIQ2019 and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2019 would have accumulated to 39.5 percent. GDP in IQ2019 would be $21,988.0 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $3077.7 billion than actual $18,910.3 billion. There are more than three trillion dollars of GDP less than at trend, explaining the 19.8 million unemployed or underemployed equivalent to actual unemployment/underemployment of 11.6 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html). US GDP in IQ2019 is 14.0 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $18,910.3 billion in IQ2019 or 20.0 percent at the average annual equivalent rate of 1.6 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Jun 1919 to Jun 2019. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2987 in Dec 2007 to 153.8501 in Jun 2019. The actual index NSA in Jun 2019 is 107.3417, which is 30.2 percent below trend. Manufacturing grew at the average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 108.2987 in Dec 2007 to 157.3175 in Jun 2019. The actual index NSA in Jun 2019 is 107.3417, which is 31.8 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Jun 2019. Using trend growth of 2.0 percent per year, the index would increase to 135.9957 in Jun 2019. The output of manufacturing at 107.3417 in Jun 2019 is 21.1 percent below trend under this alternative calculation.

Table V-3A, Cycle 2007-2018, Percentage Contraction, Average Growth Rate in Expansion, Average Growth Rate in Whole Cycle and GDP Percent Below Trend

	Contraction ∆%	Expansion AV ∆%	Whole Cycle AV ∆%	Below Trend Percent
USA	4.0	2.3	1.6	14.0
Japan	8.7	1.5	0.6	NA
Euro Area (19)	5.7	1.4	0.7	16.1
France	3.9	1.4	0.8	9.8
Germany	6.9	2.0	1.1	NA
UK	6.3	1.9	1.1	16.9

Note: AV: Average. Expansion and Whole Cycle AV ∆% calculated with quarterly growth, seasonally adjusted and quarterly adjusted when applicable, rates and converted into annual equivalent.

Data reported periodically in this blog.

Source: Country Statistical Agencies http://www.bls.gov/bls/other.htm https://www.census.gov/programs-surveys/international-programs/about/related-sites.html

There is a critical issue of the United States economy will be able in the future to attain again the level of activity and prosperity of projected trend growth. Growth at trend during the entire business cycles built the largest economy in the world but there may be an adverse, permanent weakness in United States economic performance and prosperity. Table IB-2 provides data for analysis of these seven basic facts. The seven blocks of Table IB-2 are separated initially after individual discussion of each one followed by the full Table IB-2.

1. Trend Growth.

i. As shown in Table IB-2, actual GDP grew cumulatively 42.3 percent from IQ1980 to IIIQ1992, which is relatively close to what trend growth would have been at 46.9 percent. Real GDP grew 42.8 percent from IVQ1979 to IIIQ1992. Rapid growth at the average annual rate of 3.7 percent per quarter during the expansion from IQ1983 to IIIQ1992 erased the loss of GDP of 4.7 percent during the contractions and maintained relatively close trend growth at 2.8 percent for GDP and 3.0 percent for real disposable personal income over the entire cycle. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://www.bea.gov/iTable/index_nipa.cfm).

ii. In contrast, cumulative growth from IVQ2007 to IQ2019 was 20.0 percent while trend growth would have been 39.5 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2019 would have accumulated to 39.5 percent. GDP in IQ2019 would be $21,988.0 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $3077.7 billion than actual $18,910.3 billion. There are more than three trillion dollars of GDP less than at trend, explaining the 19.8 million unemployed or underemployed equivalent to actual unemployment/underemployment of 11.6 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html). US GDP in IQ2019 is 14.0 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $18,910.3 billion in IQ2019 or 20.0 percent at the average annual equivalent rate of 1.6 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Jun 1919 to Jun 2019. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2987 in Dec 2007 to 153.8501 in Jun 2019. The actual index NSA in Jun 2019 is 107.3417, which is 30.2 percent below trend. Manufacturing grew at the average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 108.2987 in Dec 2007 to 157.3175 in Jun 2019. The actual index NSA in Jun 2019 is 107.3417, which is 31.8 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Jun 2019. Using trend growth of 2.0 percent per year, the index would increase to 135.9957 in Jun 2019. The output of manufacturing at 107.3417 in Jun 2019 is 21.1 percent below trend under this alternative calculation.

Period IQ1980 to IIIQ1992
GDP SAAR USD Billions
IQ1980	6,837.6
IIIQ1992	9,733.0
∆% IQ1980 to IIIQ1992 (42.8 percent from IVQ1979 $6816.2 billion)	42.3
∆% Trend Growth IQ1980 to IIIQ1992	46.9

Period IVQ2007 to IQ2019
GDP SAAR USD Billions
IVQ2007	15,762.0
IQ2019	18,910.3
∆% IVQ2007 to IQ2019	20.0
∆% IVQ2007 to IQ2019 Trend Growth	39.5

2. Real Disposable Income

i. In the entire business cycle from IQ1980 to IIIQ1992, as shown in Table IB-2, per capita real disposable income, or what is left per person after inflation and taxes, grew cumulatively 29.3 percent, which is close to what would have been trend growth of 29.4 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm).

ii. In contrast, in the entire business cycle from IVQ2007 to IQ2019, per capita real disposable income increased 16.5 percent while trend growth would have been 25.0 percent. Income available after inflation and taxes is about the same as before the contraction after 39 consecutive quarters of GDP growth at mediocre rates relative to those prevailing during historical cyclical expansions. Growth of personal income during the expansion has been tepid even with the new revisions. In IVQ2014, personal income grew at 5.0 percent in nominal terms while nominal disposable income grew at 4.6 percent in nominal terms and at 5.0 percent in real terms (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IQ2015, nominal personal income grew at 4.5 percent while nominal disposable income grew at 3.2 percent and at 5.0 percent in real terms (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IIQ2015, nominal personal income grew at 5.6 percent while nominal disposable income grew at 5.1 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IIIQ2015, nominal personal income grew at 2.9 percent while nominal disposable income grew at 4.7 percent and real disposable income grew at 3.4 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IVQ2015, nominal personal income grew at 1.0 percent while nominal disposable income grew at 0.7 percent and real disposable income at 0.9 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IQ2016, personal income grew at 1.6 percent and fell at 2.1 percent excluding transfer receipts while nominal disposable income grew at 3.0 percent and real disposable income grew at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IIQ2016, personal income grew at 2.2 percent and at 2.2 percent excluding transfer receipts while nominal disposable income grew at 1.7 percent and real disposable income fell at 0.6 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IIIQ2016, personal income grew at 3.5 percent and at 1.3 percent excluding transfer receipts while nominal disposable income grew at 3.3 percent and real disposable income grew at 1.5 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IVQ2016, nominal personal income grew at 4.6 percent, decreasing at 2.6 percent excluding current transfers while disposable income grew at 4.7 percent and real disposable income increased at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf). In IQ2017, nominal personal income grew at 6.3 percent and 4.7 percent excluding transfer receipts while nominal disposable income grew at 6.6 percent and real disposable income at 4.5 percent (Table 6 at https://www.bea.gov/system/files/2018-09/pi0818.pdf). In IIQ2017, nominal personal income grew at 2.8 percent and 2.4 percent excluding transfer receipts while nominal disposable income grew at 3.0 percent and real disposable income at 2.2 percent (Table 6 at https://www.bea.gov/system/files/2018-12/pi1118.pdf). In IIIQ2017, nominal personal income grew at 4.2 percent and at 2.5 percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable personal income grew at 2.2 percent (Table 6 at https://www.bea.gov/system/files/2019-03/pi0219.pdf). In IVQ2017, nominal personal income grew at 5.0 percent and at 2.9 percent excluding transfer receipts while nominal disposable income grew at 5.1 percent and real disposable personal income grew at 2.3 percent (Table 6 at https://www.bea.gov/system/files/2019-05/pi0419_0.pdf). In IQ2018, nominal personal income grew at 5.2 percent and at 2.3 percent excluding transfer receipts while nominal disposable income grew at 7.0 percent and real disposable income grew at 4.4 percent (Table 6 at https://www.bea.gov/system/files/2019-05/pi0419_0.pdf). In IIQ2018, nominal personal income grew at 3.5 percent and at 1.2 percent excluding transfer receipts while nominal disposable income grew at 3.8 percent and real disposable income grew at 1.8 percent (Table 6 at https://www.bea.gov/system/files/2019-05/pi0419_0.pdf). In IIIQ2018, nominal personal income grew at 4.4 percent and at 2.8 percent excluding transfer receipts while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/system/files/2019-05/pi0419_0.pdf). In IVQ2018, nominal personal income grew at 4.1 percent and at 2.6 percent excluding transfer receipts while nominal disposable income grew at 4.7 percent and real disposable income grew at 3.2 percent (Table 6 at https://www.bea.gov/system/files/2019-05/pi0419_0.pdf). In IQ2019, nominal personal income grew at 3.3 percent and at 0.5 percent excluding transfer receipts while nominal disposable income grew at 2.6 percent and real disposable income grew at 2.2 percent (Table 6 at https://www.bea.gov/system/files/2019-05/pi0419_0.pdf).

Period IQ1980 to IIIQ1992
Real Disposable Personal Income per Capita IQ1980 Chained 2012 USD	21,579
Real Disposable Personal Income per Capita IIIQ1992 Chained 2012 USD	27,892
∆% IQ1980 to IIIQ1992 (29.3 percent from IVQ1979 $21,565 billion)	29.3
∆% Trend Growth	29.4

Period IVQ2007 to IQ2019
Real Disposable Personal Income per Capita IVQ2007 Chained 2012 USD	38,037
Real Disposable Personal Income per Capita IQ2019 Chained 2012 USD	44,301
∆% IVQ2007 to IQ2019	16.5
∆% Trend Growth	25.0

3. Number of Employed Persons

i. As shown in Table IB-2, the number of employed persons increased over the entire business cycle from 98.527 million not seasonally adjusted (NSA) in IQ1980 to 118.880 million NSA in IIIQ1992 or by 20.7 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm).

ii. In contrast, during the entire business cycle the number employed nearly stagnated from 146.334 million in IVQ2007 to 156.441 million in IQ2019 or by 6.9 percent higher. There are 19.8 million unemployed or underemployed equivalent to actual unemployment/underemployment of 11.6 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html). The number employed in Jun 2019 was 157.828 million (NSA) or 10.513 million more people with jobs relative to the peak of 147.315 million in Aug 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 259.037 million in Jun 2019 or by 27.079 million. The number employed increased 7.1 percent from Jul 2007 to Jun 2019 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 11.7 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employed as percent of population of 231.958 million). The same ratio in Jun 2019 would result in 164.489 million jobs (0.635 multiplied by noninstitutional civilian population of 259.037 million). There are effectively 6.661 million fewer jobs in Jun 2019 than in Jul 2007, or 164.489 million minus 157.828 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

Period IQ1980 to IIIQ1992
Employed Millions IQ1980 NSA End of Quarter	98.527
Employed Millions IIIQ1992 NSA End of Quarter	118.880
∆% Employed IQ1980 to IIIQ1992	20.7

Period IVQ2007 to IQ2019
Employed Millions IVQ2007 NSA End of Quarter	146.334
Employed Millions IQ2019 NSA End of Quarter	156.441
∆% Employed IVQ2007 to IQ2019	6.9

4. Number of Full-Time Employed Persons

i. As shown in Table IB-2, during the entire business cycle in the 1980s, including contractions and expansion, the number of employed full-time rose from 81.280 million NSA in IQ1980 to 97.845 million NSA in IIIQ1992 or 20.4 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm).

ii. In contrast, during the entire current business cycle, including contraction and expansion, the number of persons employed full-time increased from 121.042 million in IVQ2007 to 128.819 million in IQ2019 or 6.4 percent. The magnitude of the stress in US labor markets is magnified by the increase in the civilian noninstitutional population of the United States from 231.958 million in Jul 2007 to 259.037 million in Jun 2019 or by 27.079 million (http://www.bls.gov/data/). The number with full-time jobs in Jun 2019 is 131.542 million, which is higher by 8.323 million relative to the peak of 123.219 million in Jul 2007. The ratio of full-time jobs of 123.219 million in Jul 2007 to civilian noninstitutional population of 231.958 million was 53.1 percent. If that ratio had remained the same, there would be 137.549 million full-time jobs with population of 259.037 million in Jun 2019 (0.531 x 259.037) or 6.007 million fewer full-time jobs relative to actual 131.542 million. There appear to be around 10 million fewer full-time jobs in the US than before the global recession while population increased around 20 million. Mediocre GDP growth is the main culprit of the fractured US labor market.

Period IQ1980 to IIIQ1992
Employed Full-time Millions IQ1980 NSA End of Quarter	81.280
Employed Full-time Millions IIIQ1992 NSA End of Quarter	97.845
∆% Full-time Employed IQ1980 to IIIQ1992	20.4

Period IVQ2007 to IQ2019
Employed Full-time Millions IVQ2007 NSA End of Quarter	121.042
Employed Full-time Millions IQ2019 NSA End of Quarter	128.819
∆% Full-time Employed IVQ2007 to IQ2019	6.4

5. Unemployed, Unemployment Rate and Employed Part-time for Economic Reasons.

i. As shown in Table IB-2 and in the following block, in the cycle from IQ1980 to IIIQ1992: (a) The rate of unemployment was higher at 7.3 percent in IIIQ1992 relative to 6.6 percent in IQ1980. (b) The number unemployed increased from 6.983 million in IQ1980 to 9.316 million in IIIQ1992 or 33.4 percent. (c) The number employed part-time for economic reasons increased 64.7 percent from 3.624 million in IQ1980 to 6.004 million in IIIQ1992. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm).

ii. In contrast, in the economic cycle from IVQ2007 to IQ2019: (a) The rate of unemployment decreased from 4.8 percent in IVQ2007 to 3.9 percent in IQ2019. (b) The number unemployed decreased 13.4 percent from 7.371 million in IVQ2007 to 6.382 million in IQ2019. (c) The number employed part-time for economic reasons because they could not find any other job decreased 2.7 percent from 4.750 million in IVQ2007 to 4.621 million in IQ2019. (d) U6 Total Unemployed plus all marginally attached workers plus total employed part time for economic reasons as percent of all civilian labor force plus all marginally attached workers NSA decreased from 8.7 percent in IVQ2007 to 7.5 percent in IQ2019.

Period IQ1980 to IIIQ1992
Unemployment Rate IQ1980 NSA End of Quarter	6.6
Unemployment Rate IIIQ1992 NSA End of Quarter	7.3
Unemployed IQ1980 Millions NSA End of Quarter	6.983
Unemployed IIIQ1992 Millions NSA End of Quarter	9.316
∆%	33.4
Employed Part-time Economic Reasons IQ1980 Millions NSA End of Quarter	3.624
Employed Part-time Economic Reasons Millions IIIQ1992 NSA End of Quarter	6.004
∆%	65.7

Period IVQ2007 to IQ2019
Unemployment Rate IVQ2007 NSA End of Quarter	4.8
Unemployment Rate IQ2019 NSA End of Quarter	3.9
Unemployed IVQ2007 Millions NSA End of Quarter	7.371
Unemployed IQ2019 Millions NSA End of Quarter	6.382
∆%	-13.4
Employed Part-time Economic Reasons IVQ2007 Millions NSA End of Quarter	4.750
Employed Part-time Economic Reasons Millions IQ2019 NSA End of Quarter	4.621
∆%	-2.7
U6 Total Unemployed plus all marginally attached workers plus total employed part time for economic reasons as percent of all civilian labor force plus all marginally attached workers NSA
IVQ2007	8.7
IQ2019	7.5

6. Wealth of Households and Nonprofit Organizations.

The comparison of net worth of households and nonprofit organizations in the entire economic cycle from IQ1980 (and from IVQ1979) to IIIQ1992 and from IVQ2007 to IQ2019 is in Table IIA-5. The data reveal the following facts for the cycles in the 1980s:

IVQ1979 to IIIQ1992. Net worth increased 166.3 percent from IVQ1979 to IIIQ1992, the all items CPI index increased 84.2 percent from 76.7 in Dec 1979 to 141.3 in Sep 1992 and real net worth increased 44.6 percent.
IQ1980 to IVQ1985. Net worth increased 65.2 percent, the all items CPI index increased 36.5 percent from 80.1 in Mar 1980 to 109.3 in Dec 1985 and real net worth increased 21.1 percent.
IVQ1979 to IVQ1985. Net worth increased 68.7 percent, the all items CPI index increased 42.5 percent from 76.7 in Dec 1979 to 109.3 in Dec 1985 and real net worth increased 18.4 percent.
IQ1980 to IQ1989. Net worth increased 118.0 percent, the all items CPI index increased 52.7 percent from 80.1 in Mar 1980 to 122.3 in Mar 1989 and real net worth increased 42.8 percent.
IQ1980 to IIQ1989. Net worth increased 122.4 percent, the all items CPI index increased 54.9 percent from 80.1 in Mar 1980 to 124.1 in Jun 1989 and real net worth increased 43.6 percent.
IQ1980 to IIIQ1989. Net worth increased 128.2 percent, the all items CPI index increased 56.1 percent from 80.1 in Mar 1980 to 125.0 in Sep 1989 and real net worth increased 46.2 percent.
IQ1980 to IVQ1989. Net worth increased 132.4 percent, the all items CPI index increased 57.4 from 80.1 in Mar 1980 to 126.1 in Dec 1989 and real net worth increased 47.7 percent.
IQ1980 to IQ1990. Net worth increased 133.8 percent, the all items CPI index increased 60.7 percent from 80.1 in Mar 1980 to 128.7 in Mar 1990 and real net worth increased 45.5 percent.
IQ1980 to IIQ1990. Net worth increased 136.4 percent, the all items CPI index increased 62.2 percent from 80.1 in Mar 1980 to 129.9 in Jun 1990 and real net worth increased 45.8 percent
IQ1980 to IIIQ1990. Net worth increased 134.5 percent, the all items CPI index increased 65.7 percent from 80.1 in Mar 1980 to 132.7 in Jun 1990 and real net worth increased 41.6 percent.
IQ1980 to IVQ1990. Net worth increased 139.2 percent, the all items CPI index increased 67.0 percent from 80.1 in Mar 1980 to 133.8 in Dec 1990 and real net worth increased 43.2 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). This new cyclical contraction explains the contraction of net worth in IIIQ1990
IQ1980 to IQ1991. Net worth increased 145.5 percent, the all items CPI index increased 68.5 percent from 80.1 in Mar 1980 to 135.0 in Mar 1991 and real net worth increased 45.7 percent.
IQ1980 to IIQ1991. Net worth increased 146.0 percent, the all items CPI index increased 69.8 percent from 80.1 in Mar 1980 to 136.0 in Jun 1991 and real net worth increased 44.9 percent.
IQ1980 to IIIIQ1991. Net worth increased 149.0 percent, the all items CPI index increased 71.3 percent from 80.1 in Mar 1980 to 137.2 in Sep 1991 and real net worth increased 45.4 percent.
IQ1980 to IVQ1991. Net worth increased 155.2 percent, the all items CPI index increased 72.2 percent from 80.1 in Mar 1980 to 137.9 in Dec 1991 and real net worth increased 48.3 percent.
IQ1980 to IQ1992. Net worth increased 156.2 percent, the all items CPI index increased 73.9 percent from 80.1 in Mar 1980 to 139.3 in Mar 1992 and real net worth increased 47.3 percent.
IQ1980 to IIQ1992. Net worth increased 157.1 percent, the all items CPI index increased 75.0 percent from 80.1 in Mar 1980 to 140.2 in Jun 1992 and real net worth increased 46.9 percent.
IQ1980 to IIIQ1992. Net worth increased 160.8 percent, the all items CPI index increased 76.4 percent from 80.1 in Mar 1980 to 141.3 in Sep 1992 and real net worth increased 47.9 percent.

There is disastrous performance in the current economic cycle:

IVQ2007 to IQ2019. Net worth increased 59.5 percent, the all items CPI increased 21.0 percent from 210.036 in Dec 2007 to 254.202 in Mar 2019 and real or inflation adjusted net worth increased 31.8 percent. Real estate assets adjusted for inflation increased 5.2 percent. Growth of real net worth at the long-term average of 3.1 percent per year from IVQ1945 to IQ2019 would have accumulated to 41.0 percent in the entire cycle from IVQ2007 to IQ2019, much higher than actual 31.8 percent.

The explanation is partly in the sharp decline of wealth of households and nonprofit organizations and partly in the mediocre growth rates of the cyclical expansion beginning in IIIQ2009. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.3 percent on average in the cyclical expansion in the 39 quarters from IIIQ2009 to IQ2019. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the third estimate of GDP for IQ2019 (https://www.bea.gov/system/files/2019-06/gdp1q19_3rd_0.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.8 percent obtained by dividing GDP of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009 {[($15,557.3/$15,134.1) -1]100 = 2.8%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.3 percent from IQ1983 to IIIQ1986, 5.1 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.6 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991, 3.8 percent from IQ1983 to IIIQ1991, 3.7 percent from IQ1983 to IVQ1991, 3.7 percent from IQ1983 to IQ1992, 3.7 percent from IQ1983 to IIQ1992, 3.7 percent from IQ1983 to IIIQ2019 and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2019 would have accumulated to 39.5 percent. GDP in IQ2019 would be $21,988.0 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $3077.7 billion than actual $18,910.3 billion. There are more than three trillion dollars of GDP less than at trend, explaining the 19.8 million unemployed or underemployed equivalent to actual unemployment/underemployment of 11.6 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html). US GDP in IQ2019 is 14.0 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $18,910.3 billion in IQ2019 or 20.0 percent at the average annual equivalent rate of 1.6 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Jun 1919 to Jun 2019. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2987 in Dec 2007 to 153.8501 in Jun 2019. The actual index NSA in Jun 2019 is 107.3417, which is 30.2 percent below trend. Manufacturing grew at the average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 108.2987 in Dec 2007 to 157.3175 in Jun 2019. The actual index NSA in Jun 2019 is 107.3417, which is 31.8 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Jun 2019. Using trend growth of 2.0 percent per year, the index would increase to 135.9957 in Jun 2019. The output of manufacturing at 107.3417 in Jun 2019 is 21.1 percent below trend under this alternative calculation.

Table IIA-5, Net Worth of Households and Nonprofit Organizations in Billions of Dollars, IVQ1979 to IIIQ1992 and IVQ2007 to IQ2019

Period IQ1980 to IIIQ1992
Net Worth of Households and Nonprofit Organizations USD Millions
IVQ1979 IQ1980	9,107.8 9,300.5
IVQ1985 IIIQ1986 IVQ1986 IQ1987 IIQ1987 IIIQ1987 IVQ1987 IQ1988 IIQ1988 IIIQ1988 IVQ1988 IQ1989 IIQ1989 IIIQ1989 IVQ1989 IQ1990 IIQ1990	15,363.6 16,371.5 16,924.4 17,528.9 17,801.2 18,194.0 18,122.4 18,611.7 19,026.6 19,342.2 19,844.8 20,272.0 20,687.9 21,220.0 21,618.9 21,746.3 21,983.5
III1990	21,813.5
IV1990	22,247.1
I1991	22,835.6
IIQ1991	22,880.9
IIIQ1991	23,155.1
IVQ1991	23,739.0
IQ1992	23,824.6
IIQ1992	23,909.7
IIIQ1992	24,258.0
∆ USD Billions IVQ1985 IVQ1979 to IIIQ1992 IQ1980-IVQ1985 IQ1980-IIIQ1986 IQ1980-IVQ1986 IQ1980-IQ1987 IQ1980-IIQ1987 IQ1980-IIIQ1987 IQ1980-IVQ1987 IQ1980-IQ1988 IQ1980-IIQ1988 IQ1980-IIIQ1988 IQ1980-IVQ1988 IQ1980-IQ1989 IQ1980-IIQ1989 IQ1980-IIIQ1989 IQ1980-IVQ1989 IQ1980-IQ1990 IQ1980-IIQ1990	+6,255.8 ∆%68.7 R∆18.4 +15,150.2 ∆%166.3R∆%44.6 +6,063.1.0∆%65.2 R∆%21.1 +7,071.0 ∆%76.0 R∆%27.9 +7,623.9 ∆%82.0 R∆%31.9 +8,228.4 ∆%88.5 R∆%34.7 +8,500.7 ∆%91.4 R∆%35.1 +8,893.5 ∆%95.6 R∆%36.3 +8821.9 ∆%94.9 R∆%35.2 +9311.2 ∆%100.1 R∆%37.6 +9726.1 ∆%104.6 R∆%38.9 +10,041.7 ∆%108.0 R∆%39.1 +10,544.3 ∆%113.4 R∆%41.8 +10,971.5 ∆%118.0 R∆%42.8 +11,387.4 ∆%122.4 R∆% 43.6 +11,919.5 ∆%128.2 R∆% 46.2 +12,318.4 ∆%132.4 R∆%47.7 +12,445.8 ∆%133.8 R∆%45.5 +12,683.0 ∆%136.4 R∆%45.8
IQ1980-IIIQ1990	+12,513.0 ∆%134.5 R∆%41.6
IQ1980-IVQ1990	+12,946.6 ∆%139.2 R∆%43.2
IQ1980-IQ1991	+13,535.1 ∆%145.5 R∆%45.7
IQ1980-IIQ1991	+13,580.4 ∆%146.0 R∆%44.9
IQ1980-IIIQ1991	+13,854.6 ∆%149.0 R∆%45.4
IQ1980-IVQ1991	+14,438.5 ∆%155.2 R∆%48.3
IQ1980-IQ1992	+14,524.1 ∆%156.2 R∆%47.3
IQ1980-IIQ1992	+14,609.2 ∆%157.1 R∆%46.9
IQ1980-IIIQ1992	+14,957.5 ∆%160.8 R∆%47.9
Period IVQ2007 to IQ2019
Net Worth of Households and Nonprofit Organizations USD Millions
IVQ2007	68,105.1
IQ2019	108,643.0
∆ USD Billions	+40,538.0 ∆%59.5 R∆%31.8

Net Worth = Assets – Liabilities. R∆% real percentage change or adjusted for CPI percentage change.

Source: Source: Board of Governors of the Federal Reserve System. 2019. Flow of funds, balance sheets and integrated macroeconomic accounts: first quarter 2019. Washington, DC, Federal Reserve System, Jun 6. https://www.federalreserve.gov/releases/z1/current/default.htm

7. Gross Private Domestic Investment.

i. The comparison of gross private domestic investment in the entire economic cycles from IQ1980 to IIIQ1992 and from IVQ2007 to IQ2019 is in the following block and in Table IB-2. Gross private domestic investment increased from $933.1 billion in IQ1980 to $1,237.2 billion in IIIQ1992 or by 32.6 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm).

ii In the current cycle, gross private domestic investment increased from $2,653.1 billion in IVQ2007 to $3,518.5 billion in IQ2019, or 32.6 percent. Private fixed investment edged from $2,630.0 billion in IVQ2007 to $3,382.6 billion in IQ2019 or increase by 28.6 percent.

Period IQ1980-IIIQ1992
Gross Private Domestic Investment USD 2009 Billions
IQ1980	933.1
IIIQ1992	1237.2
∆%	32.6

Period IVQ2007 to IQ2019
Gross Private Domestic Investment USD 2012 Billions
IVQ2007	2,653.1
IQ2019	3,518.5
∆%	32.6
Private Fixed Investment USD 2012 Billions
IVQ2007	2,630.0
IQ2019	3,382.6
∆%	28.6

Table IB-2, US, GDP and Real Disposable Personal Income Per capita Actual and Trend Growth and Employment, 1980-1992 and 2007-2019, SAAR USD Billions, Millions of Persons and ∆%


Period IQ1980 to IIIQ1992
GDP SAAR USD Billions
IQ1980	6,837.6
IIIQ1992	9,733.0
∆% IQ1980 to IIIQ1992 (42.8 percent from IVQ1979 $6816.2 billion)	42.3
∆% Trend Growth IQ1980 to IIIQ1992	46.9
Real Disposable Personal Income per Capita IQ1980 Chained 2012 USD	21,579
Real Disposable Personal Income per Capita IIIQ1992 Chained 2012 USD	27,892
∆% IQ1980 to IIIQ1992 (29.3 percent from IVQ1979 $21,565 billion)	29.3
∆% Trend Growth	29.4
Employed Millions IQ1980 NSA End of Quarter	98.527
Employed Millions IIIQ1992 NSA End of Quarter	118.880
∆% Employed IQ1980 to IIIQ1992	20.7
Employed Full-time Millions IQ1980 NSA End of Quarter	81.280
Employed Full-time Millions IIIQ1992 NSA End of Quarter	97.845
∆% Full-time Employed IQ1980 to IIIQ1992	20.4
Unemployment Rate IQ1980 NSA End of Quarter	6.6
Unemployment Rate IIIQ1992 NSA End of Quarter	7.3
Unemployed IQ1980 Millions NSA End of Quarter	6.983
Unemployed IIIQ992 Millions NSA End of Quarter	9.316
∆%	33.4
Employed Part-time Economic Reasons IQ1980 Millions NSA End of Quarter	3.624
Employed Part-time Economic Reasons Millions IIIQ1992 NSA End of Quarter	6.004
∆%	65.7
Net Worth of Households and Nonprofit Organizations USD Billions
IVQ1979	9,107.8
IIIQ1992	24,258.0
∆ USD Billions	+15,150.2
∆% CPI Adjusted	44.6
Gross Private Domestic Investment USD 2012 Billions
IQ1980	933.1
IIIQ1992	1237.2
∆%	32.6
Period IVQ2007 to IQ2019
GDP SAAR USD Billions
IVQ2007	15,762.0
IQ2019	18,910.3
∆% IVQ2007 to IQ2019	20.0
∆% IVQ2007 to IQ2019 Trend Growth	39.5
Real Disposable Personal Income per Capita IVQ2007 Chained 2012 USD	38,037
Real Disposable Personal Income per Capita IQ2019 Chained 2012 USD	44,301
∆% IVQ2007 to IQ2019	16.5
∆% Trend Growth	25.0
Employed Millions IVQ2007 NSA End of Quarter	146.334
Employed Millions IQ2019 NSA End of Quarter	156.441
∆% Employed IVQ2007 to IQ2019	6.9
Employed Full-time Millions IVQ2007 NSA End of Quarter	121.042
Employed Full-time Millions IQ2019 NSA End of Quarter	128.819
∆% Full-time Employed IVQ2007 to IQ2019	6.4
Unemployment Rate IVQ2007 NSA End of Quarter	4.8
Unemployment Rate IQ2019 NSA End of Quarter	3.9
Unemployed IVQ2007 Millions NSA End of Quarter	7.371
Unemployed IQ2019 Millions NSA End of Quarter	6.382
∆%	-13.4
Employed Part-time Economic Reasons IVQ2007 Millions NSA End of Quarter	4.750
Employed Part-time Economic Reasons Millions IQ2019 NSA End of Quarter	4.621
∆%	-2.7
U6 Total Unemployed plus all marginally attached workers plus total employed part time for economic reasons as percent of all civilian labor force plus all marginally attached workers NSA
IVQ2007	8.7
IQ2019	7.5
Net Worth of Households and Nonprofit Organizations USD Billions
IVQ2007	68,105.1
IQ2019	108,643.0
∆ USD Billions	+40,537.9 ∆%59.5 R∆%31.8
Gross Private Domestic Investment USD Billions
IVQ2007	2,653.1
IQ2019	3,518.5
∆%	32.6
Private Fixed Investment USD 2009 Billions
IVQ2007	2,630.0
IQ2019	3,382.6
∆%	28.6

Note: GDP trend growth used is 3.0 percent per year and GDP per capita is 2.0 percent per year as estimated by Lucas (2011May) on data from 1870 to 2010.

Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm Source: Board of Governors of the Federal Reserve System. 2019. Flow of funds, balance sheets and integrated macroeconomic accounts: first quarter 2019. Washington, DC, Federal Reserve System, Jun 6. https://www.federalreserve.gov/releases/z1/current/default.htm

The Congressional Budget Office estimates potential GDP, potential labor force and potential labor productivity provided in Table IB-3. The CBO estimates average rate of growth of potential GDP from 1950 to 2017 at 3.2 percent per year. The projected path is significantly lower at 1.4 percent per year from 2018 to 2028. The legacy of the economic cycle expansion from IIIQ2009 to IQ2019 at 2.3 percent on average is in contrast with 3.7 percent on average in the expansion from IQ1983 to IIIQ1992 (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). Subpar economic growth may perpetuate unemployment and underemployment estimated at 19.8 million or 11.6 percent of the effective labor force in Jun 2019 (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html) with much lower hiring than in the period before the current cycle (https://cmpassocregulationblog.blogspot.com/2019/07/fomc-uncertain-outlook-frank-h-knights.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/recovery-without-hiring-ten-million.html).

Table IB-3, US, Congressional Budget Office History and Projections of Potential GDP of US Overall Economy, ∆%

	Potential GDP	Potential Labor Force	Potential Labor Productivity*
Average Annual ∆%
1950-1973	4.0	1.6	2.4
1974-1981	3.2	2.5	0.7
1982-1990	3.4	1.7	1.7
1991-2001	3.2	1.2	2.0
2002-2007	2.5	1.0	1.5
2008-2017	1.5	0.5	0.9
Total 1950-2017	3.2	1.4	1.7
Projected Average Annual ∆%
2018-2022	2.0	0.6	1.4
2023-2028	1.8	0.4	1.4
2018-2028	1.9	0.5	1.4

*Ratio of potential GDP to potential labor force

Source: CBO, The budget and economic outlook: 2018-2028. Washington, DC, Apr 9, 2018 https://www.cbo.gov/publication/53651 CBO (2014BEOFeb4), CBO, Key assumptions in projecting potential GDP—February 2014 baseline. Washington, DC, Congressional Budget Office, Feb 4, 2014. CBO, The budget and economic outlook: 2015 to 2025. Washington, DC, Congressional Budget Office, Jan 26, 2015. Aug 2016

Chart IB1-BEO2818 of the Congressional Budget Office provides historical and projected annual growth of United States potential GDP. The projection is of faster growth of real potential GDP.

Chart IB1-BEO2818, CBO Economic Forecast

Source: CBO, The budget and economic outlook: 2018-2028. Washington, DC, Apr 9, 2018 https://www.cbo.gov/publication/53651 CBO (2014BEOFeb4).

Chart IB1-A1 of the Congressional Budget Office provides historical and projected annual growth of United States potential GDP. There is sharp decline of growth of United States potential GDP.

Chart IB-1A1, Congressional Budget Office, Projections of Annual Growth of United States Potential GDP

Source: CBO, The budget and economic outlook: 2017-2027. Washington, DC, Jan 24, 2017 https://www.cbo.gov/publication/52370

https://www.cbo.gov/about/products/budget-economic-data#6

Chart IB-1A of the Congressional Budget Office provides historical and projected potential and actual US GDP. The gap between actual and potential output closes by 2017. Potential output expands at a lower rate than historically. Growth is even weaker relative to trend.

Chart IB-1A, Congressional Budget Office, Estimate of Potential GDP and Gap

Source: Congressional Budget Office

https://www.cbo.gov/publication/49890

Chart IB-1 of the Congressional Budget Office (CBO 2013BEOFeb5) provides actual and potential GDP of the United States from 2000 to 2011 and projected to 2024. Lucas (2011May) estimates trend of United States real GDP of 3.0 percent from 1870 to 2010 and 2.2 percent for per capita GDP. The United States successfully returned to trend growth of GDP by higher rates of growth during cyclical expansion as analyzed by Bordo (2012Sep27, 2012Oct21) and Bordo and Haubrich (2012DR). Growth in expansions following deeper contractions and financial crises was much higher in agreement with the plucking model of Friedman (1964, 1988). The Congressional Budget Office estimates potential GDP, potential labor force and potential labor productivity provided in Table IB-3. The CBO estimates average rate of growth of potential GDP from 1950 to 2017 at 3.2 percent per year. The projected path is significantly lower at 1.4 percent per year from 2018 to 2028. The legacy of the economic cycle expansion from IIIQ2009 to IQ2019 at 2.3 percent on average is in contrast with 3.7 percent on average in the expansion from IQ1983 to IIIQ1992 (https://cmpassocregulationblog.blogspot.com/2019/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/contraction-of-risk-financial-assets.html). Subpar economic growth may perpetuate unemployment and underemployment estimated at 19.8 million or 11.6 percent of the effective labor force in Jun 2019 (https://cmpassocregulationblog.blogspot.com/2019/07/twenty-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/increase-of-valuations-of-risk.html) with much lower hiring than in the period before the current cycle (https://cmpassocregulationblog.blogspot.com/2019/07/fomc-uncertain-outlook-frank-h-knights.html and earlier https://cmpassocregulationblog.blogspot.com/2019/06/recovery-without-hiring-ten-million.html). The US economy and labor markets collapsed without recovery. Abrupt collapse of economic conditions can be explained only with cyclic factors (Lazear and Spletzer 2012Jul22) and not by secular stagnation (Hansen 1938, 1939, 1941 with early dissent by Simons 1942).

Chart IB-1, US, Congressional Budget Office, Actual and Projections of Potential GDP, 2000-2024, Trillions of Dollars

Source: Congressional Budget Office, CBO (2013BEOFeb5). The last year in common in both projections is 2017. The revision lowers potential output in 2017 by 7.3 percent relative to the projection in 2007.

Chart IB-2 provides differences in the projections of potential output by the CBO in 2007 and more recently on Feb 4, 2014, which the CBO explains in CBO (2014Feb28).

Chart IB-2, Congressional Budget Office, Revisions of Potential GDP

Source: Congressional Budget Office, 2014Feb 28. Revisions to CBO’s Projection of Potential Output since 2007. Washington, DC, CBO, Feb 28, 2014.

Chart IB-3 provides actual and projected potential GDP from 2000 to 2024. The gap between actual and potential GDP disappears at the end of 2017 (CBO2014Feb4). GDP increases in the projection at 2.5 percent per year.

Chart IB-3, Congressional Budget Office, GDP and Potential GDP

Source: CBO (2013BEOFeb5), CBO, Key assumptions in projecting potential GDP—February 2014 baseline. Washington, DC, Congressional Budget Office, Feb 4, 2014.

References

Abraham, Katharine G., John C. Haltiwanger, Kristin Sandusky and James Spletzer. 2009. Exploring differences in employment between household and establishment data. Cambridge, MA, National Bureau of Economic Research, Mar 2009.

Adrian, Tobias, Arturo Estrella, Hyun Song Shin. 2018. Risk-taking channel of monetary policy. Center for Economic Policy Research, Discussion Paper DP12677, Feb https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12677

Allen, William R. 1993. Irving Fisher and the 100 percent reserve proposal. Journal of Law and Economics 36 (2, Oct): 703-17.

Andrés, Javier, J. David López-Salido and Edward Nelson. 2004. Tobin’s imperfect asset substitution in optimizing equilibrium. Journal of Money, Credit and Banking 36 (4, Aug): 665-90.

Asso, Pier Francesco, George A. Kahn and Robert Leeson. 2007. The Taylor Rule and the transformation of monetary policy. Kansas City: Federal Reserve Bank of Kansas City RWP 07-II, Dec.

Asso, Pier Francesco, George A. Kahn and Robert Leeson. 2010. The Taylor Rule and the practice of central banking. Kansas City: Federal Reserve Bank of Kansas City, RWP 10-05, Feb.

Atkeson, Andrew and Patrick J. Kehoe. 1998. Paths of development for early- and late-bloomers in a dynamic Heckscher-Ohlin world. Minneapolis, Federal Reserve Bank of Minneapolis, Staff Report No. 256, Oct.

Atkeson, Andrew and Patrick J. Kehoe. 2004. Deflation and depression: is there an empirical link. American Economic Review 94 (2, May): 99-103.

Bagehot, Walter. 1873. Lombard Street, 14^th edn. London: Kegan, Paul & Co, 1917.

Balassa, Bela. 1964. The purchasing power parity doctrine: a reappraisal. Journal of Political Economy 72 (6, Dec): 584.596.

Ball, Laurence and N. Gregory Mankiw. 2002. The NAIRU in theory and practice. Journal of Economic Perspectives 16 (4, Autumn): 115-36.

Bank of Japan. 2012Feb14APP. Amendment to “Principal Terms and Conditions for the Asset Purchase Program.” Tokyo, Bank of Japan, Feb 14 http://www.boj.or.jp/en/announcements/release_2012/rel120214a.pdf

Bank of Japan. 2012Feb14PSG. The price stability goal in the medium to long term. Tokyo, Bank of Japan, Feb 14 http://www.boj.or.jp/en/announcements/release_2012/k120214b.pdf

Bank of Japan. 2012Feb14EME. Enhancement of monetary easing. Tokyo, Bank of Japan, Feb 14 http://www.boj.or.jp/en/announcements/release_2012/k120214a.pdf

Barbosa, Fernando de Holanda. 1987. Domestic and international sources of Brazilian inflation: 1947-80. In Luigi L. Pasinetti and P.J. Lloyd, eds. Structural change, economic interdependence and world development. Basingstoke: Palgrave Macmillan.

Barnett, Jessica C. and Marina S. Vornovitsky. 2016. Health Insurance coverage in the United States: 2015. Washington, DC, US Census Bureau, Sep 2016 http://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-257.pdf

Barro, Robert J. and David B. Gordon. 1983a. Rules, discretion and reputation in a model of monetary policy. Journal of Monetary Economics 12 (1): 101-121.

Barro, Robert J. and David B. Gordon. 1983b. A positive theory of monetary policy in a natural rate model. Journal of Political Economy 91 (4, Aug): 589-610.

Barro, Robert J. 2016. The reasons behind the Obama non-recovery,” Wall Street Journal, Sep 20 http://www.wsj.com/articles/the-reasons-behind-the-obama-non-recovery-1474412963

Barro, Robert J. and Tao Jin. 2016. Rate events and long-run risks. Cambridge, MA, National Bureau of Economic Research, NBER Working Paper No. 21871, Jan, http://www.nber.org/papers/w21871

Barsky, Robert B. and Lutz Kilian. 2004. Oil and the macroeconomy since the 1970s. Journal of Economic Perspectives 18 (4, Autumn): 115-34.

Barth, James R., Gerard Caprio, Jr. and Ross Levine. 2006. Rethinking bank regulation. Cambridge: Cambridge University Press.

Basel Committee on Banking Supervision. 2011Jun. Basel II: a global regulatory framework for more resilient banks and banking systems. Basel, Switzerland: BIS, Jun 2011 http://www.bis.org/publ/bcbs189.pdf

Batini, Nicoletta and Edward Nelson. 2002. The lag from monetary policy actions to inflation: Friedman revisited. London, Bank of England, External MPC Unit Discussion Paper No. 6, Jan.

Beim, David O. 2011Oct9. Can the euro be saved? New York City, Columbia University, Oct 9 http://www1.gsb.columbia.edu/mygsb/faculty/research/pubfiles/5573/Can%20the%20Euro%20be%20Saved.pdf

Benhabib, Jess and Mark M. Spiegel. 2009. Moderate inflation and the deflation-depression link. 2009. Journal of Money, Credit and Banking 41 (4, Jun): 787-798.

Benston, George J. and George G. Kaufman. 1997. The FDICA after five years. Journal of Economic Perspectives 11 (3, Summer, 1997): 139-58.

Bernanke, Ben S. 2002. Deflation: making sure “it” doesn’t happen here. Washington, DC, National Economists Club, Nov 21 http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

Bernanke, Ben S. 2000. Japanese monetary policy: a case of self-induced paralysis? In Ryoichi Mikitani and Adam S. Posen, Japan’s financial crisis and its parallels to US experience. Washington, DC, Institute for International Economics, Special Report 13, Sep 2000.

Bernanke, Ben S. 2002. Deflation: making sure “it” doesn’t happen here. Washington, DC, Before the National Economists Club, Nov 21 http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

Bernanke, Ben S. 2003. A perspective on inflation targeting. Business Economics 38 (3, Jul): 7–15.

Bernanke, Ben S. 2003JPY. Some thoughts on monetary policy in Japan. Tokyo, Before the Japan Society of Monetary Economics, May 31 http://www.federalreserve.gov/boarddocs/speeches/2003/20030531/default.htm

Bernanke, Ben S. 2009SL. The crisis and the policy response. London, London School of Economics, Stamp Lecture, Jan 13 http://www.federalreserve.gov/newsevents/speech/bernanke20090113a.htm

Bernanke, Ben S. 2010WP. What the Fed did and why: supporting the recovery and sustaining price stability. Washington Post, Nov 4. http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372_pf.html

Bernanke, Ben S. 2011Oct4JEC. Statement. Washington, DC, Joint Economic Committee, US Congress, Oct 4 http://www.federalreserve.gov/newsevents/testimony/bernanke20111004a.pdf

Bernanke, Ben S. 2012Apr25. Transcript of Chairman Bernanke’s press conference April 25, 2012. Washington, DC, Board of Governors of the Federal Reserve System, Apr 25 http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20120425.pdf

Bernanke, Ben S. 2012Aug22. Letter to The Honorable Darrell E. Issa. Washington, DC, Board of Governors of the Federal Reserve System, Aug 22 http://online.wsj.com/public/resources/documents/Bernankeletter0812.pdf

Bernanke, Ben S. 2012Oct14IMF. US monetary policy and international implications. Tokyo, Japan, Challenges of the Global Financial System: Risks and Governance under Evolving Globalization, High-level Seminar sponsored by Bank of Japan-International Monetary Fund, Oct 14 http://www.federalreserve.gov/newsevents/speech/bernanke20121014a.htm

Bernanke, Ben S. 2012JHAug31. Monetary policy since the onset of the crisis. Jackson Hole, WY, Federal Reserve Bank of Kansas City Economic Symposium, Aug 31 http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm

Bernanke, Ben S. 2012Nov20. The economic recovery and economic policy. New York City, NY, Economic Club, Nov 20 http://www.federalreserve.gov/newsevents/speech/bernanke20121120a.htm

Bernanke, Ben S. 2013Mar25. Monetary policy and the global economy. London, Bank of England and London School of Economics, Mar 25 http://www.federalreserve.gov/newsevents/speech/bernanke20130325a.htm

Bernanke, Ben S. 2013Jul17. Statement on semiannual monetary policy report to the Congress. Washington, DC, Jul 17, US House of Representatives, Jul 18, US Senate http://www.federalreserve.gov/newsevents/testimony/bernanke20130717a.htm

Bernanke, Ben S. and Frederic S. Mishkin. 1997. Inflation targeting: a new framework for monetary policy? Journal of Economic Perspectives 11 (2, Spring): 97–116.

Bernanke, Ben S. and Vincent R. Reinhart. 2004. Conducting monetary policy at very low short-term interest rates. American Economic Review 94 (2): 85-90.

Black, Fischer and Myron Scholes. 1973. The pricing of options and corporate liabilities. Journal of Political Economy 81 (May/June): 637-54.

Blanchard, Olivier. 2011WEOSep. Foreword to IMF 2011WEOSep: XIII-XIV.

Blanchard, Olivier. 2012WEOApr. Foreword to IMF 2012WEOApr: XIII-XIV

Blanchard, Olivier and Lawrence F. Katz. 1997. What we know and do not know about the natural rate of unemployment. Journal of Economic Perspectives 11 (1, Winter): 51-72.

Blinder, Alan S. 2000. Monetary policy at the zero lower bound: balancing the risks. Journal of Money, Credit and Banking 32 (4, Nov): 1093-1099.

Blinder, Alan S. and Mark Zandi. 2010Jul27. How the Great Recession was brought to an end. Princeton, NJ, http://www.princeton.edu/~blinder/End-of-Great-Recession.pdf

Board of Governors of the Federal Reserve System. 2012Dec6. Flow of funds accounts of the United States. Washington, DC, Federal Reserve System, Dec 6 http://www.federalreserve.gov/releases/z1/default.htm

Board of Governors of the Federal Reserve System. 2017Jul17. Monetary policy report. Washington, DC, Board of Governors of the Federal Reserve, Jul 17 http://www.federalreserve.gov/monetarypolicy/mpr_default.htm

Bordo, Michael D. 2012Sep27. Financial recessions don’t lead to weak recoveries. Wall Street Journal, Sep 27 http://professional.wsj.com/article/SB10000872396390444506004577613122591922992.html

Bordo, Michael D. 2012Oct21. Why this US recovery is weaker. Bloomberg View, Oct 21 http://www.bloomberg.com/news/2012-10-21/why-this-u-s-recovery-is-weaker.html

Bordo, Michael D. 2012Nov20. Expansionary monetary policy can create asset price booms. Washington, DC, Shadow Open Market Committee, Nov 20 http://shadowfed.org/wp-content/uploads/2012/11/Bordo-SOMC-Nov2012.pdf

Bordo, Michael D. and Hugh Rockoff. 2011. The influence of Irving Fisher on Milton Friedman’s monetary economics. Denver, CO, AEA Session on Irving Fisher and Modern Economics: 100 years after the Purchasing Power of Money, Jan 8 www.aeaweb.org/aea/2011conference/program/retrieve.php?pdfid

Bordo, Michael D, Ehsan Choudhri and Anna J. Schwartz. 1995. Could stable money have averted the Great Contraction. Economic Inquiry 33 (3, Jul): 484-505.

Bordo, Michael D. and Harold James. 2001. The Adam Klug Memorial Lecture: Haberler versus Nurkse: the case for floating exchange rates as an alternative to Bretton Woods? Cambridge, MA: NBER, WP 8545, Oct.

Bordo, Michael D. and Jopseh G. Haubrich. 2012DR. Deep recessions, fast recoveries, and financial crises: evidence from the American record. Cleveland, OH, Federal Reserve Bank of Cleveland, WP 12/14 http://www.clevelandfed.org/research/workpaper/2012/wp1214.pdf

Bordo, Michael D. and John Landon-Lane. 2013. Does expansionary monetary policy cause asset price booms; some historical and empirical evidence. Cambridge, MA, National Bureau of Economic Research, Working Paper 19585, Oct 2013 http://www.nber.org/papers/w19585

Bordo, Michael D. and Peter Rousseau. 2006. Legal political factors and the historical evolution of the finance-growth link. NBER Working Paper No. 12035. Cambridge, MA, National Bureau of Economic Research, Feb. Earlier presented at CPRN/ONB Workshop on International Financial Integration: The Role of Intermediaries, Vienna, 30 Sep-1Oct 2005.

Boskin, Michael J. 2010Sep. Summer of economic discontent. Wall Street Journal, Sep 2 http://online.wsj.com/article/SB10001424052748703882304575465462926649950.html?KEYWORDS=michael+boskin

Bricker, Jesse, Arthur B. Kennickell, Kevin B. Moore and John Sabelhaus. 2012. Changes in US family finances from 2007 to 2010: evidence from the Survey of Consumer Finances. Federal Reserve Bulletin 98 (2, Jun): 2-80 http://www.federalreserve.gov/pubs/bulletin/2012/PDF/scf12.pdf

Brunner, Karl and Allan H. Meltzer. 1973. Mr. Hicks and the “monetarists.” Economica NS 40 (157, Feb): 44-59.

Brunnermeier, Markus K. and Lasse Hege Pedersen. 2009. Market liquidity and funding liquidity. Review of Financial Studies 22 (6): 2201-38.

Buiter, Willem. 2011Oct31. EFSF needs bigger bazooka to maximize its firepower. Financial Times, Oct 31 http://www.ft.com/intl/cms/s/0/c4886f7a-03d3-11e1-bbc5-00144feabdc0.html#axzz1cMoq63R5

Buiter, Willem. 2012Oct15. Only big debt restructuring can save euro. Financial Times, Oct 15 http://www.ft.com/intl/cms/s/0/edd92eee-12de-11e2-aa9c-00144feabdc0.html#axzz29OP0k8cX

Buiter, Willem. 2014Feb4. The Fed’s bad manners risk offending foreigners. Financial Times, Feb 4 http://www.ft.com/intl/cms/s/0/fbb09572-8d8d-11e3-9dbb-00144feab7de.html#axzz2suwrwkFs

Brunner, Karl and Allan H. Meltzer. 1973. Mr. Hicks and the “monetarists.” Economica NS 40 (157, Feb): 44-59.

Burdekin, Richard C. 2005. US pressure on China’s currency: Milton Friedman and the silver episode revisited. Claremont McKenna College, Nov 2005 http://www.claremontmckenna.edu/rdschool/papers/2005-07.pdf

Bureau of Labor Statistics. 2011Feb11. Overview of seasonal adjustment of the current employment statistics program. Washington, Feb 11, 2011 http://www.bls.gov/ces/cessa_oview.pdf

Bureau of Labor Statistics. 2012Feb3. Seasonal adjustment files and documentation. Washington, BLD, Feb 3 http://www.bls.gov/web/empsit/cesseasadj.htm

Caballero, Ricardo and Francsco Giavazzi. 2012Jan15. Parity may be euro’s last chance. Bloomberg, Jan 15 http://www.bloomberg.com/news/2012-01-16/dollar-parity-may-be-euro-salvation-commentary-by-caballero-and-giavazzi.html

Cagan, Phillip. 1965. Determinants and effects of changes in the stock of money, 1875-1960. New York: Columbia University Press.

Calomiris, Charles C. and Gary B. Gorton. 1991. The origins of banking panics: models, facts and bank regulation. In R. Glenn Hubbard, ed. Financial markets and financial crises. Chicago: University of Chicago Press.

Calomiris, Charles W. and Stephen H. Haber. 2014. Fragile by design: the political origins of banking crises and scarce credit. Princeton: Princeton University Press http://press.princeton.edu/titles/10177.html

Calomiris, Charles W. 2017Apr. Why Trump might win with China. Wall Street Journal, Apr 17 https://www.wsj.com/articles/why-trump-might-win-with-china-1492469922

Cameron, Rondo E. 1961. France and the economic development of Europe 1800-1914: conquests of peace and seeds of war. Princeton: Princeton University Press.

Cameron, Rondo E. 1967. Banking in the early stages of industrialization. Oxford: Oxford University Press.

Cameron, Rondo E. 1972. Banking and economic development. Oxford: Oxford University Press.

Cameron, Rondo E. 1989. A concise economic history of the world: from Paleolithic times to the present. New York and Oxford: Oxford University Press.

Cameron, Rondo E., V.I. Bovkyn, Richard Sylla, Mira Wilkins, Boris Anan’ich, and A. A. Fursenko, eds. 1992. International Banking 1870-1914. Oxford: Oxford University Press.

CBO. 2011JunLTBO. CBO’s long-term budget outlook. Washington, DC, Congressional Budget Office, Jun http://www.cbo.gov/ftpdocs/122xx/doc12212/06-21-Long-Term_Budget_Outlook.pdf

CBO. 2012JanBEO. The budget and economic outlook: fiscal years 2012 to 2022. Washington, DC: Congressional Budget Office, Jan http://www.cbo.gov/ftpdocs/126xx/doc12699/01-31-2012_Outlook.pdf

CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31.

CBO. 2012MarBEO. Updated budget projections: fiscal years 2012 to 2022. Washington, DC: Congressional Budget Office, Mar http://www.cbo.gov/sites/default/files/cbofiles/attachments/March2012Baseline.pdf

CBO. 2012LTBO. The 2012 long-term budget outlook. Washington, DC: Congressional Budget Office, Jun http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-05-Long-Term_Budget_Outlook.pdf

CBO. 2012AugBEO. An update to the budget and economic outlook: fiscal years 2012 to 2022. Washington, DC, Congressional Budget Office, Aug http://www.cbo.gov/publication/43539

CBO. 2012NovMBR. Monthly budget review fiscal year 2012. Washington, DC, Congressional Budget Office, Nov 7 http://www.cbo.gov/publication/43698

CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC, Congressional Budget Office http://www.cbo.gov/publication/43692

CBO. 2012NovEEP. Economic effects of policies contributing to fiscal tightening in 2013. Washington, DC, Congressional Budget Office, Nov http://www.cbo.gov/publication/43694

CBO. 2013BEOFeb5. The budget and economic outlook: fiscal years 2013 to 2023. Washington, DC, Congressional Budget Office http://www.cbo.gov/publication/43907

CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office http://www.cbo.gov/publication/43904

CBO. 2013MEFeb5. Macroeconomic effects of alternative budget paths. Washington, DC, Congressional Budget Office, Feb 5 http://www.cbo.gov/publication/43769

CBO (2013Aug12). 2013AugHBD. Historical budget data—August 2013. Washington, DC, Congressional Budget Office, Aug 12 http://www.cbo.gov/publication/44507

CBO (2013Aug12Av). Kim Kowaleski and Amber Marcellino. Updated historical budget data. CBO, Aug 12 http://www.cbo.gov/publication/44508

CBO (2013Sep11). 2013Sep11. CBO’s baseline budget projections updated. Washington, DC, Congressional Budget Office, Sep 11 http://www.cbo.gov/publication/44574

CBO (2013Sep17). The 2013 long-term budget outlook. Washington, DC, Congressional Budget Office, Sep 17 http://www.cbo.gov/publication/44521

Chung, Hess, Jean-Philippe Laforte, David Reifschneider and John C. Williams. 2011. Have we underestimated the likelihood and severity of zero lower bound events? San Francisco, FRBSF, WP 2011-01 http://www.frbsf.org/publications/economics/papers/2011/wp11-01bk.pdf

Cline, William. 2001. The role of the private sector in resolving financial crises in emerging markets. Cambridge, MA, NBER, Jun.

Cline, William. 2002. Private sector involvement: definition, measurement and implementation. London, Bank of England Conference, Jul-23-4.

Coastworth, John H. 1981. Growth against development: the economic impact of railroads in Portfirian Mexico. DeKalb, Ill: Northern Illinois University Press.

Coastworth, John H. 2006. Counterfactual Mexicos. History Compass 4(1), 176-80.

Cobet, Aaron E. and Gregory A. Wilson. 2002. Comparing 50 years of labor productivity in US and foreign manufacturing. Monthly Labor Review (Jun): 51-65.

Cochrane, John A. 2010A. The government debt valuation equation. An appendix to “Understanding policy.” http://faculty.chicagobooth.edu/john.cochrane/research/Papers/

Cochrane, John H. 2011Jan. Understanding policy in the great recession: some unpleasant fiscal arithmetic. European Economic Review 55 (1, Jan): 2-30.

Cochrane, John H. 2012Aug31. The Federal Reserve: from central bank to central planner. Wall Street Journal, Aug 31 http://professional.wsj.com/article/SB10000872396390444812704577609384030304936.html?mod=WSJ_hps_sections_opinion

Cochrane, John H. 2014Jul2. The failure of macroeconomics. Wall Street Journal, Jul 2. http://online.wsj.com/articles/john-cochrane-new-keynesian-macroeconomic-models-dont-support-more-stimulus-spending-1404342631?KEYWORDS=john+h+cochrane

Cochrane, John H. 2016May02. Ending America’s slow-growth tailspin. Wall Street Journal, May 2. http://www.wsj.com/articles/ending-americas-slow-growth-tailspin-1462230818#:kf42ZuSoKO6LcA

Cochrane, John H. and Luigi Zingales. 2009. Lehman and the financial crisis. Wall Street Journal, Sep 15.

Cohen, Morris Raphael and Ernest Nagel. 1934. An introduction to logic and scientific method. New York: Harcourt, Brace and Company.

Cole, Harold L. and Lee E. Ohanian. 1999. The Great Depression in the United States from a neoclassical perspective. Federal Reserve Bank of Minneapolis Quarterly Review 23 (1, Winter): 2-24.

Cole, Harold L. and Narayana Kocherlakota. 1998. Zero nominal interest rates: why they are good and how to get them. Federal Reserve Bank of Minneapolis Quarterly Review 22 (2, Spring): 2-10.

Cooley, Thomas F. and Lee E. Ohanian. 2010. FDR and the lessons of the Depression. Wall Street Journal, Aug 27 http://online.wsj.com/news/articles/SB10001424052748703461504575443402028756986?KEYWORDS=Thomas+Cooley

Contador, Cláudio R. and Haddad, Cláudio L. 1975. Produto real, moeda e preços. Revista Brasileira de Estatística 36(143, jul/set): 407-40.

Cox, John C., Jonathan E. Ingersoll, Jr. and Stephen A. Ross. 1981. A re-examination of traditional hypotheses about the term structure of interest rates. Journal of Finance 36 (4, Sep): 769-99.

Cox, John C., Jonathan E. Ingersoll, Jr. and Stephen A. Ross. 1985. A theory of the term structure of interest rates. Econometrica 53 (2, Mar): 385-407.

Culbertson, John M. 1957. The term structure of interest rates. Quarterly Journal of Economics 71 (4, Nov): 485-517.

Culbertson, J. M. 1960. Friedman on the lag in effect of monetary policy. Journal of Political Economy 68 (6, Dec): 617-21.

Culbertson, J. M. 1961. The lag in effect of monetary policy: reply. Journal of Political Economy 69 (5, Oct): 467-77.

Culbertson, John M. 1963. The term structure of interest rates: reply. Quarterly Journal of Economics 77 (4, Nov): 691-6.

D’Amico Stefania and Thomas B. King. 2010. Flow and stock effects of large-sale Treasury purchases. Washington, DC, Federal Reserve board, Sep.

Darby, Michael R. Darby. 1974. The permanent income theory of consumption—a restatement. Quarterly Journal of Economics (88, 2): 228-50.

Deane, Phyllis. 1968. New estimates of gross national product for the United Kingdom 1830-1914. Review of Income and Wealth 14 (2, Jun): 95-112.

Delfim Netto, Antonio. 1959. O problema do café no Brasil. São Paulo: Faculdade de Economia e Administração da Universidade de São Paulo. Partly reprinted in Pelaez (1973).

De Long, J. Bradford. 1997. America’s peacetime inflation: the 1970s. In Christina D. Romer and David H. Romer, eds. Reducing inflation: motivation and strategy. Chicago: University of Chicago Press, 1997.

DeLong, J. Bradford and Barry Eichengreen. 2001Jul. Between meltdown and moral hazard: the international monetary and financial policies of the Clinton Administration. Cambridge, MA, Conference on the Economic Policies of the Clinton Administration, Kennedy School of Government, Jun 26-29 http://eml.berkeley.edu/~eichengr/research/clintonfinancialpolicies9.pdf

DeNavas-Walt, Carmen, Bernadette D. Proctor and Jessica C. Smith. 2012Sep. Income, poverty and health insurance coverage in the United States: 2011. Washington, DC, US Census Bureau http://www.census.gov/prod/2012pubs/p60-243.pdf

DeNavas-Walt, Carmen, Bernadette D. Proctor and Jessica C. Smith. 2013. Income, poverty, and health insurance coverage in the United States: 2012. Washington, DC: US Census Bureau, Current Population Reports, P60-245, US Government Printing Office http://www.census.gov/prod/2013pubs/p60-245.pdf

DeNavas-Walt, Carmen and Bernadette D. Proctor. 2014. Income and poverty in the United States: 2013. Washington, DC: US Census Bureau, Current Population Reports P60-249, US Government Printing Office, Sep 18.

DeNavas-Walt, Carmen and Bernadette D. Proctor. 2015. Income and poverty in the United States: 2014. Washington, DC: US Census Bureau, Current Population Reports P60-252, US Government Printing Office, Sep.

Doh, Taeyoung. 2010. The efficacy of large-scale asset purchases at the zero lower bound. Federal Reserve Bank of Kansas City Economic Review Second Quarter 2010: 5-34 http://www.kansascityfed.org/Publicat/EconRev/PDF/10q2Doh.pdf

Dorrance, G. S. 1948. The income terms of trade. Review of Economic Studies 16 (1, 1948-1949): 50-6.

Draghi, Mario. 2011Dec1. Introductory statement by Mario Draghi, President of the ECB. Brussels, Hearing before the Plenary of the European Parliament, Dec 1 http://www.ecb.int/press/key/date/2011/html/sp111201.en.html

Draghi, Mario. 2011Dec8. Introductory statement to the press conference. Frankfurt am Main, ECB, Dec 8 http://www.ecb.int/press/pressconf/2011/html/is111208.en.html

Draghi, Mario. 2012May26. Speech by Mario Draghi, President of the European Central Bank. London, Global Investment Conference, Jul 26 http://www.ecb.int/press/key/date/2012/html/sp120726.en.html

Draghi, Mario. 2012Aug29. The future of the euro: stability through change. Frankfurt am Main, ECB, published in Die Zeit, 29 Aug 2012 http://www.ecb.int/press/key/date/2012/html/sp120829.en.html

Duffie, Darell and Kenneth J. Singleton. 2003. Credit risk: pricing, measurement and management. Princeton: Princeton University Press.

Eggertsson, Gauti B. and Paul Krugman. 2010. Debt, deleveraging and the liquidity trap: A Fisher-Minsky-Koo approach. Princeton, Princeton University, Nov 16 http://www.princeton.edu/~pkrugman/debt_deleveraging_ge_pk.pdf

European Council. 2011Dec9. Statements by the euro area heads of state or government. Brussels, European Union, Dec 9 http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/126658.pdf

European Council. 2012Oct19. Conclusions. Brussels, European Union, Oct 19 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/133004.pdf

Diamond, DouglasW. 1984. Financial intermediation and delegated monitoring. Review of Economic Studies 51: 393-414.

Diamond, Douglas W. 1996. Financial intermediation as delegated monitoring: a simple example. Economic Quarterly Federal Reserve Bank of Richmond 82 (3): 51-66.

Diamond, Douglas W. and Philip H. Dybvig. 1983. Bank runs, deposit insurance and liquidity. Journal of Political Economy 91 (3, Jun): 401-49.

Diamond, Douglas W. and Philip H. Dybvig. 1986. Banking theory, deposit insurance and bank regulation. Journal of Business 59 (1, Jan): 55-68.

Diamond, Douglas W. and Raghuram G. Rajan. 2000. A theory of bank capital. Journal of Finance 55 (6, Dec): 2431-65.

Diamond, Douglas W. and Raghuram G. Rajan. 2001a. Banks and liquidity. American Economic Review 91 (2, May): 422-5.

Diamond, Douglas W. and Raghuram G. Rajan. 2001b. Liquidity Risk, liquidity creation and financial fragility: a theory of banking. Journal of Political Economy 109 (2, Apr): 287-327.

Dornbusch, Rudiger. 1976. Expectations and exchange rate dynamics. Journal of Political Economy 84 (6, Dec): 1161-76.

Draghi, Mario. 2011Dec15. The euro, monetary stability and the design of a fiscal compact. Berlin, Dec 15 http://www.ecb.int/press/key/date/2011/html/sp111215.en.html

Draghi, Mario. 2012May3. Introductory statement to the press conference. Barcelona, May 3 http://www.ecb.int/press/pressconf/2012/html/is120503.en.html

Draghi, Mario. 2012Jun15. President’s address at the 14^th ECB and its Watchers Conference. Frankfurt am Main, European Central Bank, Jun 15 http://www.ecb.int/press/key/date/2012/html/sp120615.en.html

Economides, Nicholas, Yannis Ioannides, Emmanuel Petrakis, Christopher Pissarides and Thanasis Stengos. 2012. What’s at stake in the Greek vote. Wall Street Journal, Jun 14 http://professional.wsj.com/article/SB10001424052702303822204577466541312448940.html?mod=WSJ_hps_sections_opinion

Eichengreen, Barry and Jeffrey Sachs. 1985. Exchange rates and economic recovery in the 1930s. Journal of Economic History 45 (4, Dec): 925-46.

Eggertson, Gauti B. and Michael Woodford. 2003. The zero bound on interest rates and optimal monetary policy. Brookings Papers on Economic Activity I (2003): 139-211.

European Central Bank. 2011MBDec. Editorial. Monthly Bulletin December 2011, 5-9 http://www.ecb.int/pub/pdf/mobu/mb201112en.pdf

European Commission. 2011Oct26SS. Euro summit statement. Brussels, European Commission, Oct 26 http://ec.europa.eu/news/economy/111027_en.htm

European Commission. 2011Oct26MRES. Main results of Euro Summit. Brussels, European Commission, Oct 26 http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/125645.pdf

European Council. 2011Dec9. Statements by the euro area heads of state or government. Brussels, European Union, Dec 9 http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/126658.pdf

Evans, Charles. 2010. Monetary policy in a low-inflation environment: developing a state-contingent price-level target. Boston, Federal Reserve Bank of Boston’s 55^th Economic Conference, Oct 16 http://chicagofed.org/webpages/publications/speeches/2010/10_16_boston_speech.cfm#_ftn1

Evans, Charles. 2012Aug27. Some thoughts on global risks and monetary policy. Hong Kong, China, Market News International Seminar, Aug 27 http://www.chicagofed.org/webpages/publications/speeches/2012/08_27_12_hongkong.cfm

Evans, Charles. 2012Nov27. Monetary policy in challenging times. Toronto, Canada, Howe Institute, Nov 27

http://www.chicagofed.org/webpages/publications/speeches/2012/11_27_12_cdhowe.cfm

Fabozi, Frank J., Gerald W. Buestow, Jr., and Robert R. Johnson. Measuring interest rate risk. In Frank J. Fabozzi, ed. The handbook of fixed income securities, 7^th Edition. New York, McGraw, 2006.

Fama, Eugene F. 1970. Efficient capital markets: a review of theory and empirical work. Journal of Finance 25 (2): 383-417.

Fama, Eugene F. and Robert R. Bliss. 1987. The information in long-maturity forward rates. American Economic Review 77 (4, Sep): 680-92.

Feldstein, Martin. 2016. A Federal Reserve oblivious to its effect on financial markets. Wall Street Journal, Jan 13 http://www.wsj.com/articles/a-federal-reserve-oblivious-to-its-effect-on-financial-markets-1452729166

Fisher, Irving. 1930. The theory of interest. New York: The Macmillan Company http://www.econlib.org/library/YPDBooks/Fisher/fshToI19.html

Fisher, Irving. 1933. The debt-deflation theory of great depressions. Econometrica 1(4): 337-57.

Fisher, Irving. 100% Money. 1936. New York: Adelphi Company.

Fishlow, Albert. 1965. American railroads and the transformation of the ante-bellum economy. Cambridge, MA: Harvard University Press.

Feldstein, Martin. 2012Mar19. Obama’s tax hikes threaten a new US recession. Financial Times, Mar 19 http://www.ft.com/intl/cms/s/0/0d0e7acc-6f7d-11e1-9c57-00144feab49a.html#axzz1pexRlsiQ

Fleming, J. Marcus. 1962. Domestic financial policies under fixed and under floating exchange rates. IMF Staff Papers 9: 369-79.

Fogel, Robert W. 1964. Railroads and American economic growth: essays in econometric history. Cambridge, MA: Harvard University Press.

Fogel, Robert W. and Stanley Engerman. 1974. Time on the cross. Boston: Little Brown.

Forbes, Kristin J. 2012JHAug9. The big “C”: identifying and mitigating contagion. Jackson Hole, WY, Federal Reserve Bank of Kansas City Symposium, Aug 31 http://www.kansascityfed.org/publicat/sympos/2012/kf.pdf

Friedman, Milton. 1953. The effects of a full-employment policy on economic stability: a formal analysis. In Milton Friedman, Essays on positive economics. Chicago: University of Chicago Press.

Friedman, Milton. 1953b. The case for flexible exchange rates. In Milton Friedman, Essays on positive economics. Chicago: University of Chicago Press: 157-203.

Friedman, Milton. 1957. A Theory of the Consumption Function. Princeton: Princeton University Press.

Friedman, Milton. 1961. The lag in effect of monetary policy. Journal of Political Economy 69 (5, Oct): 447-66.

Friedman, Milton. 1964. The monetary studies of the National Bureau. In The National Bureau enters its forty-fifth year. New York, NY: National Bureau of Economic Research, Inc., Forty-Fourth Annual Report: 7-25 http://www.nber.org/chapters/c4453.pdf

Friedman, Milton. 1968. The role of monetary policy. American Economic Review 58 (1, Mar): 1-17.

Friedman, Milton. 1969. The optimum quantity of money. In Milton Friedman, The optimum quantity of money and other essays. Chicago: Aldine, 1969.

Friedman, Milton. 1970. Controls on interest rates paid by banks. Journal of Money, Credit and Banking 2 (1, Feb): 15-32.

Friedman, Milton. 1982. Monetary policy: theory and practice. Journal of Money, Credit and Banking 14 (1, Feb): 98-118.

Friedman, Milton. 1988. The “plucking model” of business fluctuations revisited. Palo Alto, CA, The Hoover Institution, Stanford University, Working Papers in Economics E-88-48, Dec 1988.

Friedman, Milton. 1989. Bimetalism revisited. Palo Alto, CA, The Hoover Institution, Stanford University, Working Papers in Economics E-89-24. Aug 1989.

Friedman, Milton. Franklin D. Roosevelt, Silver and China. Journal of Political Economy 100 (1, Feb): 62-83.

Friedman, Milton and Anna Jacobson Schwartz. 1963. A monetary history of the United States, 1867-1960. Princeton: Princeton University Press.

Friedman, Milton and Anna Jacobson Schwartz. 1963a. Money and business cycles. Review of Economics and Statistics 45, Supplement (Feb): 32-64.

Friedman, Milton and Anna Jacobson Schwartz. 1970. Monetary statistics of the United States: estimates, sources, and methods. New York: Columbia University Press.

Friedman, Milton and Anna Jacobson Schwartz. 1987. Money and business cycles. In Anna Jacobson Schwartz, ed. Money in historical perspective. Chicago: University of Chicago Press.

Friedman, Milton and Gary S. Becker. 1957. A statistical illusion in judging Keynesian models. Journal of Political Economy 65 (1, Feb): 64-75.

FOMC. 2006Dec12. Meeting of the Federal Open Market Committee December 12, 2006. Washington, DC, Federal Reserve, Dec 12 http://www.federalreserve.gov/monetarypolicy/files/FOMC20061212meeting.pdf

Gagnon, Joseph, Matthew Raskin, Julie Remache and Brian Sack. 2010. Large-scale asset purchases by the Federal Reserve: did they work. New York, FRBNY Staff Report no. 441, Mar http://data.newyorkfed.org/research/staff_reports/sr441.pdf

Georgescu-Rogen, Nicholas. 1960. Economic theory and agrarian economics. Oxford Economic Papers New Series 12 (1, Feb): 1-40.

Gorton, Gary. 2009EFM. The subprime panic. European Financial Management 15 (1): 10-46.

Graham, Frank D. 1936. Partial reserve money and the 100 per cent proposal. American Economic Review (26, 3): 428-40.

Gorton, Gary and Andrew Metrick. 2010H. Haircuts. Federal Reserve Bank of St. Louis Review 92 (6, Nov/Dec): 507-19 http://research.stlouisfed.org/publications/review/10/11/Gorton.pdf

Gorton, Gary and Andrew Metrick. 2010SB. Securitized banking and the run on repo. New Haven, Yale University, 2010, Nov.

Greenspan, Alan. 1996. The challenge of central banking in a democratic society. Washingotn, DC, American Enterprise Institute, Dec 5 http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm

Greenspan, Alan. 2004. Risk and uncertainty in monetary policy. American Economic Review 94 (2, May): 33-40. Also available at http://www.federalreserve.gov/boarddocs/speeches/2004/20040103/default.htm

Gürkaynak, Refet S., Brian Sack and Eric T. Swanson. 2005. Do actions speak louder than words? The response of asset prices to monetary policy actions and statements. International Journal of Central Banking 1 (May): 55-93.

Haber, Stephen. 2011. Differential paths of financial development: evidence from new world economies. In Dora L. Costa and Naomi R. Lamoreaux, eds. Understanding long-run economic growth: geography, institutions and the knowledge economy. Chicago: University of Chicago Press, 2011, 89-120.

Haberler, Gottfried. 1937. Prosperity and depression. Lake Success, New York: United Nations. http://mises.org/document/4617/

Haddad, Cláudio L. 1974. Growth of Brazilian real output. Chicago, Ph.D. Dissertation, University of Chicago, Jun.

Hallerbach, Winfried G. 2001. Duration and Dimension. Tinbergen Institute Working Paper No. TI 99-047/2, Erasmus University, Amsterdam, the Netherlands http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=89567

Hamilton, Alexander. 1780. The national Bank. In Henry Cabot Lodge, ed. The works of Alexander Hamilton. New York and London: G. P. Putnam & Sons, 1904: 319-45. http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=1380&chapter=64319&layout=html#a_1594266

Hamilton, James D. and Jing Wu. 2010. The effectiveness of alternative monetary policy tools in a zero lower bound environment. San Diego, University of California San Diego, Nov 3 http://dss.ucsd.edu/~jhamilto/zlb.pdf

Hansen, Alvin H. 1938. Full recovery of stagnation? New York: W. W. Norton & Co., 1938.

Hansen, Alvin H. 1939. Economic progress and declining population growth. American Economic Review 29, 1 (Mar, 1939): 1-15.

Hansen, Alvin H. 1941. Fiscal policy and business cycles. New York: W. W. Norton & Co., 1941.

Harberger, Arnold C. 1971. Three basic postulates for applied welfare economics: an interpretive essay. Journal of Economic Literature 9 (3): 785-97.

Harberger, Arnold C. 1997. New frontiers in project evaluation? World Bank Research Observer 12 (1): 73-9.

Harris, Jennifer M. 2011BA. Benchmark article. Washington, DC, Bureau of Labor Statistics http://www.bls.gov/ces/cesbmart.pdf

Herkenhoff, Kyle F., Lee E. Ohanian and Edward C. Prescott. 2017. Tarnishing the Golden and Empire States: Land-Use Restrictions and the U.S. Economic Slowdown. NBER Working Paper No. 23790, Apr 2017 https://sites.google.com/site/kyleherkenhoff/research

Harrod, Roy F. 1939. International economics. Chicago: University of Chicago Press, 1939.

Hetzel, Robert L. and Ralph F. Leach. 2001. The Treasury-Fed accord: a new narrative account. Federal Reserve Bank of Richmond Economic Quarterly 87 (1, Winter): 33-55.

Hicks, John R. 1935. A suggestion for simplifying the theory of money. Economica NS 2 (5, Feb): 1-19.

Hicks, John R. 1937. Mr. Keynes and the “classics”: a suggested interpretation. Econometrica 5 (2, Apr): 147-59.

Hicks, John R. 1950. A contribution to the theory of the trade cycle. Oxford: Clarendon Press, 1950.

Hicks, John R. 1962. Liquidity. Economic Journal 72 (288, Dec): 787-802.

Hicks, John R. 1975. The scope and status of welfare economics. Oxford Economic Papers 27 (3): 307-26.

Hill, Jonathan B. 2007. Efficient tests of long-run causality in trivariate VAR processes with a rolling window study of the money-income relationship. Journal of Applied Econometrics 22 (2007): 747-765. Published online in Wiley InterScience www.interscience.wiley.com http://onlinelibrary.wiley.com/doi/10.1002/jae.925/full

Imlah, Albert H. 1958. Economic elements in the Pax Britannica. Cambridge, MA: Harvard University Press, 1958.

Ho, Tai-kuang and Cheng-chung Lai. 2012. Silver fetters? The rise and fall of Chinese price level under fluctuating world silver price, 1928-34. Hsinchu, Taiwan, National Tsiang Hua University, Nov http://apebh2013.files.wordpress.com/2013/02/ho-lai-textrv.pdf

Hobbs, Frank and Nicole Stoops. 2002. Demographic trends in the 20^th century. Washington, DC, US Government Printing Office http://www.census.gov/prod/2002pubs/censr-4.pdf

Hoover, Ethel D. 1958. Wholesale and retail prices in the nineteenth century. Journal of Economic History 18 (3, Sep): 298-316.

Hoover, Ethel D. 1960. Retail prices after 1850. In Trends in the American economy in the nineteenth century. New York: National Bureau of Economic Research, 1960.

IMF. 2011WEOSep. World economic outlook Sep 11: slowing growth, rising risks. Washington, DC, IMF Sep http://www.imf.org/external/pubs/ft/weo/2011/02/pdf/text.pdf

IMF. 2011JSRNov23. Japan sustainability report. Washington, DC, IMF, Nov 23 http://www.imf.org/external/np/country/2011/mapjapanpdf.pdf

IMF. 2012GFSRJan24. Global Financial Stability Report: market update. Washington, DC, IMF, Jan 24 http://www.imf.org/external/pubs/ft/fmu/eng/2012/01/index.htm

IMF. 2012FMJan24. Fiscal Monitor Update. Washington, DC, IMF, Jan 24 http://www.imf.org/external/pubs/ft/fm/2012/update/01/fmindex.htm

IMF. 2012WEOJan24. World Economic Outlook Update: an update of the key WEO projections. Washington, DC, IMF, Jan 24 http://www.imf.org/external/pubs/ft/weo/2012/update/01/index.htm

IMF. 2012WEOApr. World Economic Outlook April 2012: growth resuming, dangers remains. Washington, DC, IMF, 2012, Apr http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/text.pdf

IMF. 2012GFSRApr. Global financial stability report: the quest for lasting stability. Washington, DC, IMF 2012, Apr http://www.imf.org/external/pubs/ft/gfsr/2012/01/pdf/text.pdf

IMF. 2012FMApr. Fiscal monitor: balancing fiscal policy risks. Washington, DC, IMF, Apr

http://www.imf.org/external/pubs/ft/fm/2012/01/pdf/fm1201.pdf

IMFC. 2012Apr20. Joint Statement of the International Monetary and Financial Committee and the Group of 20 Finance Ministers and Central Bank Governors on IMF Resources. Washington, DC, IMF, Apr 20 http://www.imf.org/external/np/sec/pr/2012/pr12144.htm

IMFC. 2012Apr21. Communiqué of the Twenty-Fifth Meeting of the IMFC. Washington, DC, IMF, Apr 21 http://www.imf.org/external/np/sec/pr/2012/pr12145.htm

IMF. 2012FSAPJun8. Spain: Financial Stability Assessment. Washington, DC, International Monetary Fund, Jun http://www.imf.org/external/pubs/ft/scr/2012/cr12137.pdf

IMF. 2012FMOct. Fiscal Monitor: taking stock a progress report on fiscal adjustment. Washington, DC, International Monetary Fund, Oct http://www.imf.org/external/pubs/ft/fm/2012/02/pdf/fm1202.pdf

IMF. 2012GFSROct. Global Financial and Stability Report: restoring confidence and progressing on reforms. Washington, DC, International Monetary Fund, Oct http://www.imf.org/External/Pubs/FT/GFSR/2012/02/pdf/text.pdf

IMF. 2012WEOOct. World Economic Outlook October 2012: coping with high debt and sluggish growth. Washington, DC, International Monetary Fund, Oct http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf

Ingersoll, Jonathan. 1987. Theory of Financial Decision Making. New Jersey: Rowman.

Ireland, Peter N. 1999. Does the time-consistency problem explain the behavior of inflation in the United States. Journal of Monetary Economics 44 (2): 279-91.

Ireland, Peter N. 2003. Implementing the Friedman rule. Review of Economic Dynamics 6(2003): 120-134.

Issa, Darrell E. 2012Aug1. Letter to the Honorable Ben Bernanke. Washington DC, Committee on Oversight and Government Reform, Congress of the United States, House of Representatives, Aug 1 http://online.wsj.com/public/resources/documents/Bernankeletter0812.pdf

Ito, Takatoshi. Interventions and Japanese economic recovery. YenMacro, Michigan 2004 1 http://www.fordschool.umich.edu/rsie/Conferences/CGP/Oct2004Papers/Ito.pdf

Jensen, Michael C. 1993. The modern industrial revolution, exit and the failure of internal control systems. Journal of Finance 48 (3, Jul): 831-80.

Joint Forum of the Basel Committee on Banking Supervision, International Organization of Securities Commissions and the International Association of Supervisors. 2004. Credit risk transfer. BCBS, BIS, Oct. http://www.bis.org/publ/joint10.pdf

Kahil, Raouf. 1973. Inflation and economic development in Brazil. Oxford: Clarendon Press.

Kendall, Maurice G. and Alan Stuart. 1968. The advanced theory of statistics, III. New York: Hafner, 1968.

Kim, Chang-Jin and Charles R. Nelson. 1999. Friedman’s plucking model of business fluctuations: tests and estimates of permanent and transitory components. Journal of Money, Credit and Banking 31 (3, Part 1, Aug): 317-334.

Kohn, Donald L. 2009Apr18. Monetary policy in the financial crisis. Nashville, TN, Conference in Honor of Dewey Daane, Apr 18 http://www.federalreserve.gov/newsevents/speech/kohn20090418a.htm

Kohn, Donald L. 2009Sep10. Comments on “Interpreting the Unconventional US Monetary policy of 2007-2009.” Washington, Brookings Institution, Sep 10 http://www.federalreserve.gov/newsevents/speech/kohn20090910a.htm

Knight, Frank H. 1964. Risk, uncertainty and profit. New York: Reprints of Economic Classics, August M. Kelley, New York.

Krugman, Paul. 1998. It’s baaack: Japan’s slump and the return of the liquidity trap. Brookings Papers on Economic Activity 2 (1998): 137-205.

Krugman, Paul. 2011Jun 18. Mr. Keynes and the moderns. Princeton, Princeton University Jun 18. Prepared for Conference on 75^th Anniversary of Keynes’ General Theory, Cambridge, Cambridge University, Jun 19-21 http://www.princeton.edu/~pkrugman/keynes_and_the_moderns.pdf

Krugman, Paul. 2012Apr24. Earth to Ben Bernanke: chairman Bernanke should listen to Professor Bernanke. New York Times Magazine, Apr 24 http://www.nytimes.com/2012/04/29/magazine/chairman-bernanke-should-listen-to-professor-bernanke.html?pagewanted=all

Kuznets, Simon. 1971. Modern economic growth: findings and reflections. Lecture to the memory of Alfred Nobel, Dec 11, 1971 http://www.nobelprize.org/nobel_prizes/economics/laureates/1971/kuznets-lecture.html

Kydland, Finn E. and Edward C. Prescott. 1977. Rules rather than discretion: the inconsistency of optimal plans. Journal of Political Economy 85 (3, Jun): 473-92.

Lazear, Edward P. 2012Jan19. The jobs picture is still far from rosy. Wall Street Journal, Jan 19 http://professional.wsj.com/article/SB10001424052970204468004577165292033648810.html

Lazear, Edward P. 2013Jan7. Chinese “currency manipulation” is not the problem. Wall Street Journal, Jan 7 http://professional.wsj.com/article/SB10001424127887323320404578213203581231448.html

Lazear, Edward P. 2017Feb27. How Trump can hit 3% growth—maybe. Wall Street Journal, Feb 27 https://www.wsj.com/articles/how-trump-can-hit-3-growthmaybe-1488239746

Lazear, Edward P. and Spletzer, James R. 2012JHJul22. The United States labor market: status quo or a new normal? Jackson, Hole, WY, Federal Reserve Bank of Kansas City Symposium, Sep 1 http://www.kansascityfed.org/publicat/sympos/2012/el-js.pdf

Lazear, Edward P. and James R. Spletzer. 2012Mar. Hiring, churn and the business cycle. Cambridge, MA, NBER, Mar http://www.nber.org/papers/w17910

Lazear, Edward P. and James R. Spletzer. 2012May. Hiring, churn and the business cycle. American Economic Review Papers and Proceedings 102 (May, No. 3): 575-579.

Leff, Nathaniel H. 1975. Review of Inflation and Economic Development in Brazil, 1946-1963 by Raouf Kahil. Journal of Economic Literature 12 (2, Jun): 510-11.

Levin, Andrew and John B. Taylor. 2009. Falling behind the curve: a positive analysis of stop-start monetary policies and the Great Inflation. Cambridge, MA, NBER, Dec.

Lintner, John. 1965. The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. Review of Economics and Statistics 47 (1, Feb): 12-37.

Lucas, Robert E. 1975. An equilibrium model of the business cycle. Journal of Political Economy (83, 6): 1113-1144.

Lucas, Robert E. 1976. Econometric policy evaluation: a critique. Carnegie Rochester Conference Series on Public Policy I (1976): 16-46.

Lucas, Robert E. 2004. The industrial revolution: past and future. In Federal Reserve Bank of Minneapolis 2003Annual Report, May 1, 2004 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3333

Lucas, Robert E. 2011May. The US recession of 2007-201? Washington, University of Washington, Milliman Lecture, May 19 http://www.econ.washington.edu/news/millimansl.pdf

Macaulay, Frederick R. 1938. Some theoretical problems suggested by the movement of interest rates, bond yields and stock prices in the United States since 1856. New York, National Bureau of Economic Research http://papers.nber.org/books/maca38-1

MacFarlane, Helen and Paul Mortimer-Lee. 1994. Inflation over 300 years. Bank of England Quarterly Bulletin, May 1994, 156-162.

McGrattan, Ellen R. 2010. Capital taxation during the US Great Depression. Minneapolis, MN, Federal Reserve Bank of Minneapolis, Working Paper 670, Oct 2010 http://www.minneapolisfed.org/research/wp/wp670.pdf

Mann, Henry B. 1945. Nonparametric tests against trend. Econometrica 13 (3, Jul): 245-259.

Markowitz, Harry. 1952. Portfolio selection. Journal of Finance 7 (1, Mar): 77-91.

McCallum, Bennett. 1999. Issues in the design of monetary policy rules. In John B. Taylor and Michael Woodford, eds. Handbook of Macroeconomics Volume 1A. Amsterdam: Elsevier North Holland.

McKinnon, Ronald I. 1973. Money and Capital in Economic Development. Washington, DC: Brookings Institution.

McKinnon, Ronald I. 2011Dec18. Oh, for Alexander Hamilton to save Europe! Financial Times, Dec 18 http://www.ft.com/intl/cms/s/0/811611d6-273a-11e1-b7ec-00144feabdc0.html#axzz1gzoHXOj6

McKinnon, Ronald I. 2013Oct27. Tapering without tears—how to end QE3. Wall Street Journal, Oct 27.

McKinsey & Co. 2007. Sustaining New York and the US’ global financial services leadership. New York: McKinsey & Co.

Meltzer, Allan H. 2005. Origins of the Great Inflation. Federal Reserve Bank of St. Louis Review 87 (2, Part 2, Mar/Apr): 145-72.

Meltzer, Allan H. 2004. A history of the federal reserve, Volume 1: 1913-1951. Chicago: University of Chicago Press.

Meltzer, Allan H. 2010a. A history of the Federal Reserve, Volume 2, Book 1, 1951-1969. Chicago: University of Chicago Press.

Meltzer, Allan H. 2010b. A history of the Federal Reserve, Volume 2, Book 2, 1970-1986. Chicago: University of Chicago Press.

Metzler, Lloyd A. The nature and stability of inventory cycles. 1941. Review of Economics and Statistics 23 (3, Aug): 113-29.

Merton, Robert C. 1973. Theory of rational option pricing. Bell Journal of Economics and Management Science 4 (1, Spring): 141-83.

Merton, Robert C. 1974. On the pricing of corporate debt: the risk structure of interest rates. Journal of Finance 29 (2, May): 449-70.

Merton, Robert C. 1998. Applications of option-pricing theory: twenty-five years later. American Economic Review 88 (3): 323-49.

Meulendyke, Ann-Marie. 1998. U.S. monetary policy and financial markets. New York: Federal Reserve Bank of New York http://www.newyorkfed.org/education/addpub/monpol/

Modigliani, Franco and Richard Sutch. 1966. Innovations in interest rate policy. American Economic Review 56 (1/2, Mar): 178-97.

Modigliani, Franco and Richard Sutch. 1967. Debt management and the term structure of interest rates: an empirical analysis of recent experience. Journal of Political Economy 75 (4, Aug): 569-89.

Mossin, Jan. 1966. 1966. Equilibrium in a capital asset market. Econometrica 34 (4, Oct): 768-83.

Mundell, Robert A. 1963. Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economics and Political Science 29 (4): 475-85.

North, Douglass C. 1994. Economic performance through time. American Economic Review 84 (3): 359-68.

North, Douglass C. and Barry R. Weingast. 1989. Constitutions and commitments: the evolution of institutional governing public choice in seventeenth-century England. Journal of Economic History 49 (4): 803-32.

Nurkse, Ragnar. 1944. International currency experience: lessons of the interwar experience. Geneva, League of Nations.

Nurkse, Ragnar. 1959. Patterns of trade and development. Stockholm: Almquist & Wicksell.

O’Donoghue, Jim and Louise Goulding, 2004. Consumer Price Inflation since 1750. UK Office for National Statistics Economic Trends 604, Mar 2004, 38-46.

Pelaez, Carlos A. 2008. The reform of Alexander Hamilton. Philadelphia, University of Pennsylvania Law School, Unpublished manuscript.

Pelaez, Carlos M. and Carlos A. Pelaez. 2005. International Financial Architecture. Basingstoke: Palgrave Macmillan. http://us.macmillan.com/QuickSearchResults.aspx?search=pelaez%2C+carlos&ctl00%24ctl00%24cphContent%24ucAdvSearch%24imgGo.x=26&ctl00%24ctl00%24cphContent%24ucAdvSearch%24imgGo.y=14 http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10

Pelaez, Carlos M. and Carlos A. Pelaez. 2007. The Global Recession Risk. Basingstoke: Palgrave Macmillan. http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10

Pelaez, Carlos M. and Carlos A. Pelaez. 2008a. Globalization and the State: Vol. I. Basingstoke: Palgrave Macmillan. http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10

Pelaez, Carlos M. and Carlos A. Pelaez. 2008b. Globalization and the State: Vol. II. Basingstoke: Palgrave Macmillan.

Pelaez, Carlos M. and Carlos A. Pelaez. 2008c. Government Intervention in Globalization. Basingstoke: Palgrave Macmillan. http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10

Pelaez, Carlos M. and Carlos A. Pelaez. 2009a. Financial Regulation after the Global Recession. Basingstoke: Palgrave Macmillan. http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10

Pelaez, Carlos M. and Carlos A. Pelaez. 2009b. Regulation of Banks and Finance. Basingstoke: Palgrave Macmillan.http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10

Pelaez, Carlos Manuel. 1968. The State, the Great Depression and the Industrialization of Brazi. New York, PhD Dissertation, Columbia University in the City of New York, Jun.

Pelaez, Carlos Manuel. 1968b. A Balança Comercial, a Grande Depressão e a Industrialização Brasileira. Revista Brasileira de Economia 22 (1, Jan/Mar): 15-47.

Pelaez, Carlos Manuel. 1969. Acerca da política governamental, da Grande Depressão e da Industrialização no Brasil. Revista Brasileira de Economia 23 (3, Jul/Set): 77-88.

Pelaez, Carlos Manuel 1971. Análise econômica do programa brasileiro de sustentação do café—1906-1945. Revista Brasileira de Economia 25 (4, Out/Dez): 5-211.

Pelaez, Carlos Manuel. 1972. História da Industrialização Brasileira. Rio de Janeiro: APEC.

Pelaez, Carlos Manuel, ed. 1973. Essays on Coffee and Economic Development. Rio de Janeiro, IBC, 1973. Portuguese edition: Ensaios sobre Café e Desenvolvimento Econômico. Rio de Janeiro: Instituto Brasileiro do Café, 1973.

Pelaez, Carlos Manuel. 1974. Long-run Monetary Behavior and Institutions in an Underdeveloped Economy, 1800-1971. Copenhaguen, Paper Presented at the VI International Congress on Economic History, Session on Monetary Inflation in Historical Perspective, International Economic History Association, Aug 22.

Pelaez, Carlos Manuel. 1975. The Establishment of Banking Institutions in a Backward Economy: Brazil, 1800-1851. Business History Review 49 (4, Winter): 446-472.

Pelaez, Carlos Manuel. 1976a. The Theory and Reality of Imperialism in the Coffee Economy of Nineteenth-Century Brazil. Economic History Review 29, Second Series (May): 276-294.

Pelaez, Carlos Manuel. 1976b. A Comparison of Long-term Monetary Behavior and Institutions in Brazil, Europe and the United States. Journal of European Economic History 5 (2, Fall): 439-450.

Pelaez, Carlos Manuel. 1977. World War I and the Economy of Brazil: Some Evidence from Monetary Statistics. Journal of Interdisciplinary History (7, Apr): 683-680.

Pelaez, Carlos Manuel. 1979. História Econômica do Brasil: Um Elo entre a Teoria e a Realidade Econômica. São Paulo: Editora Atlas.

Pelaez, Carlos Manuel. 1986. O Cruzado e o Austral: Análise das Reformas Monetárias do Brasil e da Argentina. São Paulo: Editora Atlas.

Pelaez, Carlos Manuel. 1987. Economia Brasileira Contemporânea: Origens e Conjuntura Atual. São Paulo: Editora Atlas.

Pelaez, Carlos Manuel and Wilson Suzigan. 1978. Economia Monetária: Teoria, Política e Evidência Empírica. São Paulo, Atlas.

Pelaez, Carlos Manuel and Wilson Suzigan. 1981. História Monetária do Brasil Segunda Edição. Coleção Temas Brasileiros. Brasília: Universidade de Brasília.

Phelps, Edmund S. 1968. Money-wage dynamics and labor market equilibrium. Journal of Political Economy 76 (4, 2, Jul-Aug): 678-711.

Phelps, Edmund S. 2018. The fantasy of fiscal stimulus. The Wall Street Journal Oct 29, 2018 https://www.wsj.com/articles/the-fantasy-of-fiscal-stimulus-1540852299?mod=searchresults&page=1&pos=2

Pinto, Edward J. 2008. Statement. Washington, DC, US House of Representatives, Committee on Oversight and Government Reform, Dec 9.

Pozsar, Zoltan, Adrian Tobias, Adam Ashcraft and Hayley Boesky. 2012RFeb. Shadow banking. New York: Federal Reserve Bank of New York, Staff Report No. 458, Revised Feb 2012 http://www.newyorkfed.org/research/staff_reports/sr458.pdf

Prescott, Edward C. and Lee E. Ohanian. 2014Feb. US productivity growth has taken a dive. Wall Street Journal, Feb 4 http://online.wsj.com/news/articles/SB10001424052702303942404579362462611843696?KEYWORDS=Prescott

Prescott, Edward C. and Lee E. Ohanian. 2014Jun. Behind the productivity plunge: fewer startups. Wall Street Journal, Jun 25 http://online.wsj.com/articles/behind-the-productivity-plunge-fewer-startups-1403737197?KEYWORDS=Prescott

Prescott, Edward C. and Lee E. Ohanian. 2017Dec. What in the Sam Hill are Cows Doing on Sand Hill Road? Wall Street Journal, Dec 1 https://www.wsj.com/articles/what-in-the-sam-hill-are-cows-doing-on-sand-hill-road-1512171702

Proctor, Bernadette D., Jessica L. Semega and Melissa A. Kollar. 2016. Income and Poverty in the United States: 2015. Washington, D.C., US Census Bureau, Sep 2016 http://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-256.pdf

Reinhart, Carmen M. and Kenneth Rogoff. 2010GTD. Growth in a time of debt. American Economic Review 100 (2): 1-9.

Rajan, Raghuram G. 2004. Remarks. Sydney, Australia, Australasian Finance and Banking Conference, Dec 15.

Rajan, Raghuram G. 2005. Has financial development made the world riskier? Jackson Hole, WY, Symposium sponsored by the Federal Reserve Bank of Kansas City. http://www.kc.frb.org/publicat/sympos/2005/PDF/Rajan2005.pdf

Rajan, Raghuram G. 2012May8. Stop beating up on Ben Bernanke. Financial Times, May 8 http://blogs.ft.com/the-a-list/2012/05/08/stop-beating-up-on-ben-bernanke/

Rajan, Raghuram G. 2012FA. The true lessons of the recession: the West can’t borrow and spend its way to recovery. Foreign Affairs 91 (May/June, 3): 69-79.

Rajan, Raghuram G. 2014Apr10. Competitive monetary easing: is it yesterday once more? Washington DC, Brookings Institution, Apr 10 http://www.brookings.edu/~/media/events/2014/04/10%20global%20monetary%20policy%20hutchins/rajan_remarks_at_brookings.pdf

Rajan, Raghuram G. and Luigi Zingales. 2001. The influence of the financial revolution on the nature of the firm. American Economic Review 91 (2): 206-11.

Robinson, Joan. 1947. Beggar-my-neighbour remedies for unemployment. In Joan Robinson, Essays in the Theory of Employment, Oxford, Basil Blackwell, 1947.

Reinhart, Carmen M. 2010CB. This time is different chartbook: country histories on debt, default and financial crises. Cambridge, MA, NBER WP 15815, Mar http://www.nber.org/papers/w15815

Reinhart, Carmen M. and Vincent R. Reinhart. 2011Feb. Pride goes before a fall: Federal Reserve policy and asset markets. Cambridge, MA, NBER WP 16815, Feb http://www.nber.org/papers/w16815

Reinhart, Carmen M. and Vincent R. Reinhart. 2010AF. After the fall. Cambridge, MA, NBER WP 16634, Sep http://www.nber.org/papers/w16334

Reinhart Carmen M., Kenneth S. Rogoff and Miguel A. Savastano. 2003. Debt intolerance. Brookings Papers on Economic Activity 1 (2003): 1-74.

Reinhart, Carmen M. and Kenneth S. Rogoff. 2008TDPV. This time is different: a panoramic view of eight centuries of financial crises. Cambridge, MA, WP 13882, Mar http://www.nber.org/papers/w13882

Reinhart, Carmen M. and Kenneth S. Rogoff. 2009AFC. The aftermath of financial crises. Cambridge, MA, WP 14656, Jan http://www.nber.org/papers/w14656

Reinhart, Carmen M. and Kenneth Rogoff. 2009TD. This time is different: eight centuries of financial folly. Princeton: Princeton University Press http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691142165/ref=pd_sim_b_6

Reinhart, Carmen M. and Kenneth Rogoff. 2010GTD. Growth in a time of debt. American Economic Review 100 (2): 1-9.

Reinhart, Carmen M. and Kenneth S. Rogoff. 2010FCDC. From financial crash to debt crisis. Cambridge, MA, NBER WP 15795, Mar http://www.nber.org/papers/w15795 forthcoming in American Economic Review http://www.aeaweb.org/forthcoming/output/acceptedAER.php

Reinhart, Carmen M. and Kenneth S. Rogoff. 2011CEPR. A decade of debt. Washington, DC, Center for Economic and Policy Research, Discussion Paper No. 8310, Apr. Cambridge, MA, NBER WP 16827, Feb http://www.nber.org/papers/w16827

Reinhart, Carmen M. and Kenneth S. Rogoff. 2011EJ. The forgotten history of domestic debt. Economic Journal 121 (May): 319-350.

Reinhart, Carmen M. and Kenneth S. Rogoff. 2011Jul14. Debt endangers growth. Bloomberg, Jul14 http://www.bloomberg.com/news/2011-07-14/too-much-debt-means-economy-can-t-grow-commentary-by-reinhart-and-rogoff.html

Reinhart, Carmen M. and M. Belen Sbrancia. 2011LD. The liquidation of government debt. Cambridge, MA, NBER WP 16893, Mar http://www.nber.org/papers/w16893

Reinhart, Carmen M. and Kenneth S. Rogoff. 2012Oct14. This time is different, again? The United States five years after the onset of subprime. Cambridge, MA, Harvard University, Oct 14 http://www.economics.harvard.edu/faculty/rogoff/files/Is_US_Different_RR_3.pdf

Rogoff, Kenneth. 2002MF. Dornbusch’s overshooting model after twenty-five years. Washington, DC, IMF, Mundell-Fleming Lecture http://www.imf.org/external/np/speeches/2001/kr/112901.pdf

Roll, Richard. 1977. A critique of the asset pricing theory’s tests. Part I: on past and potential testability of the theory. Journal of Financial Economics 4 (2, Mar): 129-76.

Romer, Christina D. 1992. What ended the Great Depression? Journal of Economic History 52 (4, Dec): 757-84.

Romer, Christina D. 2009. Lessons from the New Deal. Washington DC, Testimony of Christina D. Romer, Chair, President’s Council of Economic Advisers, Before the Economic Policy Subcommittee, Senate Committee on Banking, Housing and Urban Affairs, Mar 31 http://www.whitehouse.gov/assets/documents/Testimony_of_Christina_D.pdf

Romer, Christina D. and David H. Romer. 2004. A new measure of monetary shocks: derivation and implications. American Economic Review 94 (4, Sep): 1055-84.

Rubin, Robert. 2014Jan8. Sound government finances will promote recovery. Financial Times, Jan 8.

Samuelson, Paul A. 1964. Theoretical notes on trade problems. Review of Economics and Statistics 46 (2, May): 145.154.

Samuelson, Paul A. 1965. Proof that properly anticipated stock prices fluctuate randomly. Industrial Management Review 6 (2): 41-9.

Samuelson, Paul A. 1974. Lessons from the current economic expansion. American Economic Review 64 (2, May): 75-7.

Sargent, Thomas J. 1983. The end of four big inflations. In Robert E. Hall, ed. Inflation: causes and effects. Chicago: Chicago University Press.

Sargent, Thomas J. and Christopher A. Sims. 1977. Business cycle modelling without pretending to have too much a priori economic theory. In Christopher A. Sims, ed. New methods in business cycle research. Minneapolis: Federal Reserve Bank of Minneapolis.

Sargent, Thomas J. and Neil Wallace. 1973. The stability of models of money and growth with perfect foresight. Econometrica 41 (6, Nov): 1043-8.

Sargent, Thomas J. and Neil Wallace. 1981. Some unpleasant monetarist arithmetic. Federal Reserve Bank of Minneapolis Quarterly Review 5 (3, Fall): 1-17.

Sargent, Thomas J. and William L. Silber. 2012Mar20. The challenges of the Fed’s bid for transparency. Financial Times, Mar 20 http://www.ft.com/intl/cms/s/0/778eb1ce-7288-11e1-9c23-00144feab49a.html#axzz1pexRlsiQ

Schumpeter, Joseph A. 1939. Business cycles: a theoretical, historical and statistical analysis of the capitalist process. New York and London: McCraw Hill Book Company.

Seers, Dudley. 1962. A theory of inflation and growth in under-developed economies based on the experience of Latin America. Oxford Economic Papers New Series 14 (Jun, 2): 173-95.

Seligman, Edwin R. A. 1908. The crisis of 1907 in the light of history. Introduction to The currency problem and the present financial situation. New York: Columbia University Press http://fraser.stlouisfed.org/docs/publications/books/currencyprob/1908currencyproblem_introduction.pdf

Sharpe, William F. 1964. Capital asset prices: a theory of market equilibrium under conditions of risk. Journal of Finance 19 (3, Sep): 425-42.

Shaw, Edward S. 1973. Financial Deepening in Economic Development. New York: Oxford University Press.

Shikida, Claudio Djissey, Ari Francisco de Araujo Jr and Eirk Figueiredo. 2014. Política monetária, produto e preços: contribuições de Peláez e um teste de tri-causalidade para o período 1861-1970. Revista de Economia e Administração, 13 (3, jul/set): 312-27.

Shultz, George P., Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor. 2012. The magnitude of the mess we’re in. Wall Street Journal, Sep 16, 2012 http://professional.wsj.com/article/SB10001424052702303561504577497442109193610.html?mod=WSJ_hps_sections_opinion

Simons, Henry C. 1936. Rules versus authorities in monetary policy. Journal of Political Economy 44 (1, Feb): 1-30.

Simons, Henry C. 1942. Hansen on fiscal policy. Journal of Political Economy 50 (2, Apr): 161-96.

Simons, Henry C. 1948. Economic Policy for a free society. Chicago: University of Chicago Press.

Sims, Christopher A. 1972. Money, income and causality. American Economic Review 62 (4, Sep): 540-52.

Singer, Hans W. 1950. The distribution of gains between investing and borrowing countries. American Economic Review 40 (2, May): 473-485.

Smith, Jessica C. and Carla Medalia. 2014. Health insurance coverage in the United States: 2013. US Current Population Reports, P60-250, US Census Bureau. Washington, DC: US Government Printing Office, Sep 18.

Smith, Jessica C. and Carla Medalia. 2015. Health insurance coverage in the United States: 2014. US Current Population Reports, P60-253, US Census Bureau. Washington, DC: US Government Printing Office, Sep.

Standard & Poor’s Rating Services (S&PRS). 2012Jan13. Standard & Poor’s takes various rating actions on 16 eurozone sovereign governments. Frankfurt, S&P Rating Services, Jan 13 http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245327294763

Standard & Poor’s Rating Services (S&PRS). 2012Jan16. European Financial Stability Facility long-term Ratings Cut to ‘AA+’; short-term ratings affirmed; outlook developing. Frankfurt, S&P Rating Services, Jan 16 http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245327337060

Stein, Stanley J. and Barbara H. Stein. 1970. The colonial heritage of Latin America. New York and London: Oxford University Press.

Summerhill, William R. 1997. Railroads and the Brazilian economy before 1914. Business and Economic History 26 (2, winter), 318-322.

Summerhill, William R. 1998. Market intervention in a backward economy: railway subsidy in Brazil, 1854-1913. Economic History Review LI (3), 542-68.

Summerhill, William R. 2003. Order against progress: government, foreign investment, and railroads in Brazil. 1854-1913. Palo Alto, Stanford: Stanford University Press.

Summerhill, Jr., William R. 2007SC. Sovereign credibility with financial underdevelopment. Palo Alto, CA, Hoover Seminar on Collective Choice, Mar 6.

Summerhill, Jr., William R. 2007IR. Inglorious revolution: political institutions, sovereign debt and financial underdevelopment in Imperial Brazil. Los Angeles, CA, UCLA, Book Manuscript.

Summerhill, William R. 2015. Inglorious revolution: political institutions, sovereign debt, and financial underdevelopment in Brazil. New Haven, CT, Yale University Press https://yalepress.yale.edu/yupbooks/book.asp?isbn=9780300139273

Summers, Lawrence H. 2013Nov8. Presentation. Washington, DC, IMF Fourteenth Annual Research Conference in Honor of Stanley Fischer, IMF, Nov 8 http://larrysummers.com/imf-fourteenth-annual-research-conference-in-honor-of-stanley-fischer/

Svensson, Lars E. 2003. What is wrong with Taylor rules? Using judgment in monetary policy through targeting rules. Journal of Economic Literature 41 (2 Jun): 426–77.

Svensson, Lars E. 2003LT. Escaping from a liquidity trap and deflation: the foolproof way and others. Journal of Economic Perspectives 17 (4, Autumn): 145-66.

Swanson, Eric T. 2011Mar. Let’s twist again: a high-frequency event-study analysis of operation twist and its implication for QE2. Forthcoming in Brookings Papers on Economic Activity http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2011_spring_bpea_papers/2011_spring_bpea_conference_swanson.pdf

Taylor, Alan M. 2012. The great leveraging. Basel, Switzerland, Bank for International Settlements, Jul http://www.bis.org/events/conf120621/taylor.pdf

Taylor, John B. 1993. Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy 39 (1993): 195-214.

Taylor, John B. 1997. Comment. In Christina Romer and David Romer, eds. Reducing inflation: motivation and strategy. Chicago: University of Chicago Press.

Taylor, John B. 1998LB. Monetary policy and the long boom. Federal Reserve Bank of St. Louis Review (Nov-Dec): 3-11.

Taylor, John B. 1999. An historical analysis of monetary policy rules. In John B. Taylor, ed. Monetary policy rules. Chicago: University of Chicago Press.

Taylor, John B. 2007JH. Housing and monetary policy. Jackson Hole, WY, Federal Reserve Bank of Kansas City Symposium http://www.kansascityfed.org/PUBLICAT/SYMPOS/2007/PDF/Taylor_0415.pdf

Taylor, John B. 2008Nov. The financial crisis and the policy responses: an empirical analysis of what went wrong. Bank of Canada, Nov 2008 http://www.stanford.edu/~johntayl/Onlinepaperscombinedbyyear/2008/The_Financial_Crisis_and_the_Policy_Responses_An_Empirical_Analysis_of_What_Went_Wrong.pdf

Taylor, John B. 2009. Getting off track: how government actions and interventions caused, prolonged, and worsened the financial crisis. Stanford, CA, Hoover Institution Press.

Taylor, John B. 2012FP. First principles: five keys to restoring America’s prosperity. New York: W. W. Norton.

Taylor, John B. 2012Mar27. Testimony before the Joint Economic Committee at the Hearing on “Monetary Policy Going Forward: Why a Sound Dollar Boosts Growth and Employment.” Washington, DC, JEC, Mar 27 http://jec.senate.gov/republicans/public/?a=Files.Serve&File_id=f002b5f0-9fc0-45f9-9d53-e563137c040e

Taylor, John B. 2012Mar28. The dangers of an interventionist Fed. Wall Street Journal, Mar 28 http://professional.wsj.com/article/SB10001424052702303816504577307403971824094.html?mod=WSJ_hps_sections_opinion

Taylor, John B. 2012JMCB. Monetary policy rules work and discretion doesn’t: a tale of two eras. Palo Alto, CA, Stanford University, Mar 2012, forthcoming in the Journal of Money, Credit and Banking, 2012 http://www.stanford.edu/~johntayl/JMCB%20lecture.pdf

Taylor, John B. 2012Oct25. An unusually weak recovery as usually defined. Economics One, A Blog by John B. Taylor, Oct 25 http://www.johnbtaylorsblog.blogspot.co.uk/2012/10/an-unusually-weak-recovery-as-usually.html

Taylor, John B. 2013Oct28. Economic failure causes political polarization. Wall Street Journal, Oct 28.

Taylor, John B. 2014Jan01. The economic Hokum of “Secular Stagnation.” Wall Street Journal, Jan 1 http://online.wsj.com/news/articles/SB10001424052702304858104579263953449606842?KEYWORDS=john+b+taylor

Taylor, John B. 2014Jan3. The role of policy in the Great Recession and the weak recovery. Palo Alto, Stanford University, prepared for Allied Social Science Associations, Recessions and Recoveries, American Economic Association, Philadelphia, Jan 3 http://www.aeaweb.org/aea/2014conference/program/preliminary.php?search_string=taylor&search_type=last_name&association=&jel_class=&search=Search#search_box

Taylor, Jonn B. 2014Jun26. The Fed needs to return to monetary rules, Wall Street Journal, Jun 26 http://online.wsj.com/articles/john-taylor-the-fed-needs-to-return-to-monetary-rules-1403823464?KEYWORDS=john+b+taylor

Taylor, John B. 2014Jul15. How to spark another ‘Great Moderation,” Wall Street Journal, Jul 15 http://online.wsj.com/articles/john-taylor-how-to-spark-another-great-moderation-1405469227?KEYWORDS=john+b+taylor

Taylor, John B. 2015. Getting back to a rules-based monetary strategy. 2015. New York, Princeton Club, Presented to the Shadow Open Market Committee Conference, Mar 20.

Taylor, John B. 2016Dec7. Unconventional monetary policy, normalization, and reform. Washington D.C., Testimony before the Subcommittee on Monetary Policy and Trade Committee on Financial Services, US House of Representatives, Dec 7.

Taylor, John B. 2016Dec20. The case for a rules-based Fed. Wall Street Journal, Dec 20 http://www.wsj.com/articles/the-case-for-a-rules-based-fed-1482276881

Taylor, John B. 2018Nov19. Government as a cause of the 2008 financial crisis: a reassessment after 10 years. Hoover Institution, Stanford University, Oct 19, 2018 https://www.hoover.org/sites/default/files/research/docs/govt_as_cause_of_crisis-a_reassement_10.pdf

Taylor, John B. and John C. Williams. 2010. Simple and robust rules for monetary policy. In Benjamin Friedman and Michael Woodford, eds. Handbook of monetary economics Volume 3B. Amsterdam: Elsevier North Holland.

Temin, Peter. 1997. Two views of the British industrial revolution. Journal of Economic History 57 (1, Mar): 63-82.

Tobias, Adrian and Adam B. Aschraft. 2012Apr. Shawdow banking regulation. New York, Federal Reserve Bank of New York, Staff Report No. 559, Apr http://www.newyorkfed.org/research/staff_reports/sr559.pdf

Tobin, James. 1958. Liquidity preference as behavior toward risk. Review of Economic Studies 26 (Feb): 65-86.

Tobin, James. 1961. Money, capital, and other stores of value. American Economic Review 51 (2, May): 26-37.

Tobin, James. 1969. A general equilibrium approach to monetary theory. Journal of Money, Credit and Banking 1 (1, Feb): 15-29.

Tobin, James. 1974. Monetary policy in 1974 and beyond. Brookings Papers on Economic Activity 1 (1974): 219-32.

Treynor, Jack L. 1962. Toward a theory of market value of risky assets, unpublished manuscript, 1962, provided by Craig W. French, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=628187

Vayanos, Dimitri and Jean-Luc Vila. 2009. A preferred-habitat model of the term structure of interest rates. New Orleans, AFA Meetings Paper, Nov 1. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=971439

Vilela Luz, Nícia. 1961. A luta pela industrialização do Brasil (1808 a 1930). São Paulo: Difusão Europeia do Livro.

Vilela Luz, Nicia and Carlos Manuel Peláez. 1972. Economia e história: o encontro dos dois campos de conhecimento. Revista Brasileira de Economia 26 (3, Jul/Sep): 273-301.

Villela, Annibal V. and Wilson Suzigan. 1973. Política do governo e crescimento da economia brasileira. Rio de Janeiro: IPEA/INPES.

Viner, Jacob. 1937. Studies in the theory of international trade. New York: Harper and Brothers, 1965. Available at http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=1414

Wallis, W. Allen and Geoffrey H. Moore. 1941. A significance test for time series and other ordered observations. New York: National Bureau of Economic Research, 1941.

Williams, David, C.A. E. Goodhart and D. H. Gowland. 1976. Money, income and causality: the UK experience. American Economic Review 66 (3, Jun): 417-23.

Winston, Clifford. 2006. Government failure versus market failure. Washington, DC: American Enterprise Institute/Brookings Joint Center for Regulatory Studies, Brookings Institution Press.

Wolf, Martin. 2012Oct23. A slow convalescence under Obama. Financial Times, Oct 23, 2012 http://www.ft.com/intl/cms/s/0/791fc13a-1c57-11e2-a63b-00144feabdc0.html#axzz2AotsUk1q

Wriston, Walter B. 1982. Banking against disaster. New York Times, Sep 14.

Yellen, Janet L. 2011AS. The Federal’s Reserve’s asset purchase program. Denver, Colorado, Allied Social Science Association Annual Meeting, Jan 8 http://federalreserve.gov/newsevents/speech/yellen20110108a.pdf

Yellen, Janet L. 2013Nov14. Testimony. Washington, DC. Committee on Banking, Housing and Urban Affairs, US Senate, Nov 14 http://www.federalreserve.gov/newsevents/testimony/yellen20131114a.htm

Yellen, Janet L. 2014Jul15. Semiannual Monetary Policy Report to Congress. Washington DC, US Senate, Committee on Banking, Housing and Urban Affairs, Jul 15 2014 http://www.federalreserve.gov/newsevents/testimony/yellen20140715a.htm

Yellen, Janet L. 20014Aug22. Labor market dynamics and monetary policy. Jackson Hole, WY, Federal Reserve Bank of Kansas City Economic Symposium, Aug 22 http://www.federalreserve.gov/newsevents/speech/yellen20140822a.htm

Zingales, Luigi. 2000. In search of new foundations. Journal of Finance 55 (4, Aug): 1623-54.

CMP Associates Regulation Blog

Followers

Blog Archive

About Me

Saturday, July 20, 2019

No comments:

Post a Comment