Wealth of Households and Nonprofit Organizations Recovering In Second Quarter 2020 by Growing 7.0 Percent Inflation Adjusted Above Levels Relative to First Quarter 2020 and Equal in Inflation Adjusted Levels Relative to Fourth Quarter 2019, Financial Assets and Real Estate Lead Wealth Recovery, World Inflation Waves, Destruction of Household Nonfinancial Wealth with Cyclically Stagnating Total Real Wealth in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth, and Government Intervention in Globalization: Part II
Carlos M. Pelaez
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
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
IIB Destruction of Household Nonfinancial Wealth
with Stagnating Total Real Wealth 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
IIA Destruction
of Household Nonfinancial Wealth with Stagnating Total Real Wealth. The
valuable report on Financial Accounts of
the United States formerly Flow of Funds Accounts of the United States
provided by the Board of Governors of the Federal Reserve System (https://www.federalreserve.gov/releases/z1/default.htm https://www.federalreserve.gov/apps/fof/) is rich in
important information and analysis. Table IIA-1, updated in this blog for every
new quarterly release, shows the balance sheet of US households combined with
nonprofit organizations in 2007, 2018, 2019 and IIQ2020. Assets increased to
$121.6 trillion in 2018 by $36.5 trillion relative to 2007 or 42.8 percent.
Assets increased to $135.0 trillion in 2019 by $49.8 trillion or 58.5 percent.
Assets increased to $135.4 trillion in IIQ2020 by $50.3 trillion or 59.0
percent. Liabilities increased from $14.5 trillion in 2007 to $15.9 trillion in
2018, by $1374.7 billion or increase of 9.5 percent. Liabilities increased $1875.4
billion or 12.9 percent from 2007 to 2019. Liabilities increased $1977.8
billion or 13.6 percent from 2007 to IIQ2020. Net worth increased from $70,660.3
billion in 2007 to $118,955.3 billion in IIQ2020 by $48,295.0 billion or 68.3
percent. The US consumer price index for all items increased from 210.036 in
Dec 2007 to 257.797 in Jun 2020 (https://www.bls.gov/cpi/data.htm) or 22.7
percent. Net worth adjusted by CPI inflation increased 32.7 percent from 2007
to IIQ2020. Nonfinancial assets increased $10,349.3 billion from $30,537.5
billion in 2007 to $40,886.8 billion in IIQ2020 or 33.9 percent. There was
increase from 2007 to IIQ2020 of $8,660.5 billion in real estate assets or by 33.6
percent. Real estate assets adjusted for CPI inflation increased 8.9 percent
between 2007 and IIQ2020. The National Association of Realtors estimated that
the gains in net worth in homes by Americans were about $4 trillion between
2000 and 2005 (quoted in Pelaez and Pelaez, The Global Recession Risk
(2007), 224-5). Net worth decreased by $7,228.5 billion from IVQ2019 to IQ2020
or by 6.1 percent in the global recession, with output in the US reaching a
high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. Net worth increased $7,607,1
billion from IQ2020 to IIQ2020 or 6.8 percent. Net worth increased 0.3 percent
from IVQ2019 to IIQ2020. Real estate increased $879.7 billion from IVQ2019 to IIQ2020
or 2.6 percent. Financial assets decreased $479.4 billion from IVQ2019 to IIQ2020
or 0.5 percent. Stock markets recovered in Apr to Sep 2020.
|
2007 |
2018 |
2019 |
IIQ2020 |
|
|
Assets |
85,162.3 |
121,640.9 |
134,954.1 |
135,435.2 |
|
Nonfinancial |
30,537.5 |
37,849.3 |
39,926.3 |
40,886.8 |
|
Real Estate |
25,745.9 |
31,705.0 |
33,526.7 |
34,406.4 |
|
Durable Goods |
4,473.9 |
5,521.7 |
5,750.1 |
5,819.5 |
|
Financial |
54,624.8 |
83,791.6 |
95,027.8 |
94,548.4 |
|
Deposits |
5,916.5 |
9,631.0 |
10,164.0 |
11,168.7 |
|
Debt Secs. |
3,514.4 |
5,208.9 |
5,801.1 |
5,382.4 |
|
Mutual Fund Shares |
4,535.9 |
8,005.8 |
10,038.6 |
9,519.1 |
|
Equities Corporate |
9757.7 |
16,559.2 |
21,287.4 |
19,518.7 |
|
Equity Noncorporate |
8,927.9 |
11,556.5 |
12,338.4 |
12,424.3 |
|
Pension |
16,419.5 |
25,743.9 |
27,745.0 |
27,719.4 |
|
Liabilities |
14,502.0 |
15,876.7 |
16,377.4 |
16,479.8 |
|
Home Mortgages |
10,625.0 |
10,185.1 |
10,4549 |
10,592.4 |
|
Consumer Credit |
2,609.5 |
3998.1 |
4180.6 |
4,079.1 |
|
Net Worth |
70,660.3 |
105,764.2 |
118,576.7 |
118,955.3 |
Notes: Deposits: Total Time and Savings Deposits FL15303005;
Net Worth = Assets – Liabilities
Source: Board of Governors of the Federal Reserve System. 2020. Flow
of funds, balance sheets and integrated macroeconomic accounts: second quarter
2020. Washington, DC, Federal Reserve System, Sep 21. https://www.federalreserve.gov/releases/z1/current/default.htm
The explanation
of the sharp contraction of household wealth can probably be found in the
origins of the financial crisis and global recession. Let V(T)
represent the value of the firm’s equity at time T and B stand
for the promised debt of the firm to bondholders and assume that corporate
management, elected by equity owners, is acting on the interests of equity
owners. Robert C. Merton (1974, 453) states:
“On the
maturity date T, the firm must either pay the promised payment of B
to the debtholders or else the current equity will be valueless. Clearly, if at
time T, V(T) > B, the firm should pay the
bondholders because the value of equity will be V(T) – B >
0 whereas if they do not, the value of equity would be zero. If V(T)
≤ B, then the firm will not make the payment and default the firm to the
bondholders because otherwise the equity holders would have to pay in
additional money and the (formal) value of equity prior to such payments would
be (V(T)- B) < 0.”
Pelaez and
Pelaez (The Global Recession Risk (2007), 208-9) apply this analysis to
the US housing market in 2005-2006 concluding:
“The house
market [in 2006] is probably operating with low historical levels of individual
equity. There is an application of structural models [Duffie and Singleton
2003] to the individual decisions on whether or not to continue paying a
mortgage. The costs of sale would include realtor and legal fees. There could
be a point where the expected net sale value of the real estate may be just
lower than the value of the mortgage. At that point, there would be an
incentive to default. The default vulnerability of securitization is unknown.”
There are
multiple important determinants of the interest rate: “aggregate wealth, the
distribution of wealth among investors, expected rate of return on physical
investment, taxes, government policy and inflation” (Ingersoll 1987, 405).
Aggregate wealth is a major driver of interest rates (Ibid, 406).
Unconventional monetary policy, with zero fed funds rates and flattening of
long-term yields by quantitative easing, causes uncontrollable effects on risk
taking that can have profound undesirable effects on financial stability.
Excessively aggressive and exotic monetary policy is the main culprit and not
the inadequacy of financial management and risk controls.
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 (Ibid). According to a subsequent
restatement: “The basic idea is simply that individuals live for many years and
that therefore the appropriate constraint for consumption decisions 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→∞.
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
close to zero interest rates, 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 to purchase 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).
There are
significant elements of the theory of bank financial fragility of Diamond and
Dybvig (1983) and Diamond and Rajan (2000, 2001a, 2001b) that help to explain
the financial fragility of banks during the credit/dollar crisis (see also
Diamond 2007). The theory of Diamond and Dybvig (1983) as exposed by Diamond
(2007) is that banks funding with demand deposits have a mismatch of liquidity
(see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 58-66).
A run occurs when too many depositors attempt to withdraw cash at the same
time. All that is needed is an expectation of failure of the bank. Three
important functions of banks are providing evaluation, monitoring and liquidity
transformation. Banks invest in human capital to evaluate projects of borrowers
in deciding if they merit credit. The evaluation function reduces adverse
selection or financing projects with low present value. Banks also provide
important monitoring services of following the implementation of projects,
avoiding moral hazard that funds be used for, say, real estate speculation
instead of the original project of factory construction. The transformation
function of banks involves both assets and liabilities of bank balance sheets.
Banks convert an illiquid asset or loan for a project with cash flows in the
distant future into a liquid liability in the form of demand deposits that can
be withdrawn immediately.
In the theory
of banking of Diamond and Rajan (2000, 2001a, 2001b), the bank creates
liquidity by tying human assets to capital. The collection skills of the
relationship banker convert an illiquid project of an entrepreneur into liquid
demand deposits that are immediately available for withdrawal. The
deposit/capital structure is fragile because of the threat of bank runs. In
these days of online banking, the run on Washington Mutual was through
withdrawals online. A bank run can be triggered by the decline of the value of
bank assets below the value of demand deposits.
Pelaez and
Pelaez (Regulation of Banks and Finance 2009b, 60, 64-5) find immediate
application of the theories of banking of Diamond, Dybvig and Rajan to the
credit/dollar crisis after 2007. It is a credit crisis because the main issue
was the deterioration of the credit portfolios of securitized banks as a result
of default of subprime mortgages. It is a dollar crisis because of the
weakening dollar resulting from relatively low interest rate policies of the
US. It caused systemic effects that converted into a global recession not only
because of the huge weight of the US economy in the world economy but also
because the credit crisis transferred to the UK and Europe. Management skills
or human capital of banks are illustrated by the financial engineering of
complex products. The increasing importance of human relative to inanimate
capital (Rajan and Zingales 2000) is revolutionizing the theory of the firm
(Zingales 2000) and corporate governance (Rajan and Zingales 2001). Finance is
one of the most important examples of this transformation. Profits were derived
from the charter in the original banking institution. Pricing and structuring
financial instruments was revolutionized with option pricing formulas developed
by Black and Scholes (1973) and Merton (1973, 1974, 1998) that permitted the
development of complex products with fair pricing. The successful financial
company must attract and retain finance professionals who have invested in
human capital, which is a sunk cost to them and not of the institution where
they work.
The complex
financial products created for securitized banking with high investments in
human capital are based on houses, which are as illiquid as the projects of
entrepreneurs in the theory of banking. The liquidity fragility of the
securitized bank is equivalent to that of the commercial bank in the theory of
banking (Pelaez and Pelaez, Regulation of Banks and Finance (2009b),
65). Banks created off-balance sheet structured investment vehicles (SIV) that
issued commercial paper receiving AAA rating because of letters of liquidity
guarantee by the banks. The commercial paper was converted into liquidity by
its use as collateral in SRPs at the lowest rates and minimal haircuts because
of the AAA rating of the guarantor bank. In the theory of banking, default can
be triggered when the value of assets is perceived as lower than the value of
the deposits. Commercial paper issued by SIVs, securitized mortgages and
derivatives all obtained SRP liquidity on the basis of illiquid home mortgage
loans at the bottom of the pyramid. The run on the securitized bank had a clear
origin (Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 65):
“The increasing
default of mortgages resulted in an increase in counterparty risk. Banks were
hit by the liquidity demands of their counterparties. The liquidity shock
extended to many segments of the financial markets—interbank loans,
asset-backed commercial paper (ABCP), high-yield bonds and many others—when
counterparties preferred lower returns of highly liquid safe havens, such as
Treasury securities, than the risk of having to sell the collateral in SRPs at
deep discounts or holding an illiquid asset. The price of an illiquid asset is
near zero.”
Gorton and Metrick (2010H, 507) provide a
revealing quote to the work in 1908 of Edwin R. A. Seligman, professor of
political economy at Columbia University, founding member of the American
Economic Association and one of its presidents and successful advocate of
progressive income taxation. The intention of the quote is to bring forth the
important argument that financial crises are explained in terms of “confidence”
but as Professor Seligman states in reference to historical banking crises in
the US, the important task is to explain what caused the lack of confidence. It
is instructive to repeat the more extended quote of Seligman (1908, xi) on the
explanations of banking crises:
“The current
explanations may be divided into two categories. Of these the first includes
what might be termed the superficial theories. Thus it is commonly stated that
the outbreak of a crisis is due to lack of confidence,--as if the lack of
confidence was not in itself the very thing which needs to be explained. Of
still slighter value is the attempt to associate a crisis with some particular
governmental policy, or with some action of a country’s executive. Such puerile
interpretations have commonly been confined to countries like the United
States, where the political passions of democracy have had the fullest way.
Thus the crisis of 1893 was ascribed by the Republicans to the impending Democratic
tariff of 1894; and the crisis of 1907 has by some been termed the ‘[Theodore]
Roosevelt panic,” utterly oblivious of the fact that from the time of President
Jackson, who was held responsible for the troubles of 1837, every successive
crisis had had its presidential scapegoat, and has been followed by a political
revulsion. Opposed to these popular, but wholly unfounded interpretations, is
the second class of explanations, which seek to burrow beneath the surface and
to discover the more occult and fundamental causes of the periodicity of
crises.”
Scholars ignore
superficial explanations in the effort to seek good and truth. The problem of
economic analysis of the credit/dollar crisis is the lack of a structural model
with which to attempt empirical determination of causes (Gorton and Metrick
2010SB). There would still be doubts even with a well-specified structural
model because samples of economic events do not typically permit separating
causes and effects. There is also confusion is separating the why of the crisis
and how it started and propagated, all of which are extremely important.
In true
heritage of the principles of Seligman (1908), Gorton (2009EFM) discovers a
prime causal driver of the credit/dollar crisis. The objective of subprime and
Alt-A mortgages was to facilitate loans to populations with modest means so
that they could acquire a home. These borrowers would not receive credit
because of (1) lack of funds for down payments; (2) low credit rating and
information; (3) lack of information on income; and (4) errors or lack of other
information. Subprime mortgage “engineering” was based on the belief that both
lender and borrower could benefit from increases in house prices over the short
run. The initial mortgage would be refinanced in two or three years depending
on the increase of the price of the house. According to Gorton (2009EFM, 13,
16):
“The
outstanding amounts of Subprime and Alt-A [mortgages] combined amounted to
about one quarter of the $6 trillion mortgage market in 2004-2007Q1. Over the
period 2000-2007, the outstanding amount of agency mortgages doubled, but
subprime grew 800%! Issuance in 2005 and 2006 of Subprime and Alt-A mortgages
was almost 30% of the mortgage market. Since 2000 the Subprime and Alt-A
segments of the market grew at the expense of the Agency (i.e., the government
sponsored entities of Fannie Mae and Freddie Mac) share, which fell from almost
80% (by outstanding or issuance) to about half by issuance and 67% by
outstanding amount. The lender’s option to rollover the mortgage after an
initial period is implicit in the subprime mortgage. The key design features of
a subprime mortgage are: (1) it is short term, making refinancing important;
(2) there is a step-up mortgage rate that applies at the end of the first
period, creating a strong incentive to refinance; and (3) there is a prepayment
penalty, creating an incentive not to refinance early.”
The prime
objective of successive administrations in the US during the past 20 years and
actually since the times of Roosevelt in the 1930s has been to provide
“affordable” financing for the “American dream” of home ownership. The US
housing finance system is mixed with public, public/private and purely private
entities. The Federal Home Loan Bank (FHLB) system was established by Congress
in 1932 that also created the Federal Housing Administration in 1934 with the
objective of insuring homes against default. In 1938, the government created
the Federal National Mortgage Association, or Fannie Mae, to foster a market for
FHA-insured mortgages. Government-insured mortgages were transferred from
Fannie Mae to the Government National Mortgage Association, or Ginnie Mae, to
permit Fannie Mae to become a publicly-owned company. Securitization of
mortgages began in 1970 with the government charter to the Federal Home Loan
Mortgage Corporation, or Freddie Mac, with the objective of bundling mortgages
created by thrift institutions that would be marketed as bonds with guarantees
by Freddie Mac (see Pelaez and Pelaez, Financial Regulation after the Global
Recession (2009a), 42-8). In the third quarter of 2008, total mortgages in
the US were $12,057 billion of which 43.5 percent, or $5423 billion, were
retained or guaranteed by Fannie Mae and Freddie Mac (Pelaez and Pelaez, Financial
Regulation after the Global Recession (2009a), 45). In 1990, Fannie Mae and
Freddie Mac had a share of only 25.4 percent of total mortgages in the US.
Mortgages in the US increased from $6922 billion in 2002 to $12,088 billion in
2007, or by 74.6 percent, while the retained or guaranteed portfolio of Fannie
and Freddie rose from $3180 billion in 2002 to $4934 billion in 2007, or by
55.2 percent.
According to
Pinto (2008) in testimony to Congress:
“There are
approximately 25 million subprime and Alt-A loans outstanding, with an unpaid
principal amount of over $4.5 trillion, about half of them held or guaranteed
by Fannie and Freddie. Their high risk activities were allowed to operate at
75:1 leverage ratio. While they may deny it, there can be no doubt that Fannie
and Freddie now own or guarantee $1.6 trillion in subprime, Alt-A and other
default prone loans and securities. This comprises over 1/3 of their risk
portfolios and amounts to 34% of all the subprime loans and 60% of all Alt-A
loans outstanding. These 10.5 million unsustainable, nonprime loans are
experiencing a default rate 8 times the level of the GSEs’ 20 million
traditional quality loans. The GSEs will be responsible for a large percentage
of an estimated 8.8 million foreclosures expected over the next 4 years,
accounting for the failure of about 1 in 6 home mortgages. Fannie and Freddie
have subprimed America.”
In perceptive analysis
of growth and macroeconomics in the past six decades, Rajan (2012FA) argues
that “the West can’t borrow and spend its way to recovery.” The Keynesian
paradigm is not applicable in current conditions. Advanced economies in the
West could be divided into those that reformed regulatory structures to
encourage productivity and others that retained older structures. In the period
from 1950 to 2000, Cobet and Wilson (2002) find that US productivity, measured
as output/hour, grew at the average yearly rate of 2.9 percent while Japan grew
at 6.3 percent and Germany at 4.7 percent (see Pelaez and Pelaez, The Global Recession Risk (2007),
135-44). In the period from 1995 to
2000, output/hour grew at the average yearly rate of 4.6 percent in the US but
at lower rates of 3.9 percent in Japan and 2.6 percent in the US. Rajan
(2012FA) argues that the differential in productivity growth was accomplished
by deregulation in the US at the end of the 1970s and during the 1980s. In
contrast, Europe did not engage in reform with the exception of Germany in the
early 2000s that empowered the German economy with significant productivity
advantage. At the same time, technology and globalization increased relative
remunerations in highly-skilled, educated workers relative to those without
skills for the new economy. It was then politically appealing to improve the
fortunes of those left behind by the technological revolution by means of
increasing cheap credit. As Rajan (2012FA) argues:
“In 1992, Congress passed the Federal Housing Enterprises
Financial Safety and Soundness Act, partly to gain more control over Fannie Mae
and Freddie Mac, the giant private mortgage agencies, and partly to promote
affordable homeownership for low-income groups. Such policies helped money flow
to lower-middle-class households and raised their spending—so much so that
consumption inequality rose much less than income inequality in the years
before the crisis. These policies were also politically popular. Unlike when it
came to an expansion in government welfare transfers, few groups opposed
expanding credit to the lower-middle class—not the politicians who wanted more
growth and happy constituents, not the bankers and brokers who profited from
the mortgage fees, not the borrowers who could now buy their dream houses with
virtually no money down, and not the laissez-faire bank regulators who thought
they could pick up the pieces if the housing market collapsed. The Federal
Reserve abetted these shortsighted policies. In 2001, in response to the
dot-com bust, the Fed cut short-term interest rates to the bone. Even though
the overstretched corporations that were meant to be stimulated were not
interested in investing, artificially low interest rates acted as a tremendous
subsidy to the parts of the economy that relied on debt, such as housing and
finance. This led to an expansion in housing construction (and related
services, such as real estate brokerage and mortgage lending), which created
jobs, especially for the unskilled. Progressive economists applauded this
process, arguing that the housing boom would lift the economy out of the
doldrums. But the Fed-supported bubble proved unsustainable. Many construction
workers have lost their jobs and are now in deeper trouble than before, having
also borrowed to buy unaffordable houses. Bankers obviously deserve a large
share of the blame for the crisis. Some of the financial sector’s activities
were clearly predatory, if not outright criminal. But the role that the
politically induced expansion of credit played cannot be ignored; it is the
main reason the usual checks and balances on financial risk taking broke down.”
In fact, Raghuram G.
Rajan (2005) anticipated low liquidity in financial markets resulting from low
interest rates before the financial crisis that caused distortions of
risk/return decisions provoking the credit/dollar crisis and global recession
from IVQ2007 to IIQ2009. Near zero interest rates of unconventional monetary
policy induced excessive risks and low liquidity in financial decisions that
were critical as a cause of the credit/dollar crisis after 2007. Rajan (2012FA)
argues that it is not feasible to return to the employment and income levels
before the credit/dollar crisis because of the bloated construction sector,
financial system and government budgets.
Table IIA-2 shows the euphoria of prices
during the housing boom and the subsequent decline. House prices rose 64.0
percent in the US national home price index between Jun 2000 and Jun 2005.
Prices rose 76.0 percent in the US national index from Jun 2000 to Jun 2006.
House prices rose 29.1 percent between Jun 2003 and Jun 2005 for the US national
propelled by low fed funds rates of 1.0 percent between Jul 2003 and Jul
2004. Fed funds rates increased by 0.25
basis points at every meeting of the Federal Open Market Committee (FOMC) from
Jun 2004 until Jun 2006, reaching 5.25 percent. Simultaneously, the suspension
of auctions of the 30-year Treasury bond caused decrease of yields of
mortgage-backed securities with intended increase in mortgage rates. Similarly,
between Jun 2003 and Jun 2006 the US national increased 38.5 percent. House
prices have increased from Jun 2006 to Jun 2020 by 19.1 percent for the US
national. Measuring house prices is quite difficult because of the lack of
homogeneity that is typical of standardized commodities. In the 12 months
ending in Jun 2020, house prices increased 4.3 percent in the US national.
Table IIA-1 also shows that house prices increased 109.6 percent between Jun
2000 and Jun 2020 for the US national. House prices are close to the lowest
level since peaks during the boom before the financial crisis and global
recession. The US national increased 19.1 percent in Jun 2020 from the peak in
Jun 2006 and increased 19.1 percent from the peak in Jul 2006. The final part
of Table II-2 provides average annual percentage rates of growth of the house
price indexes of Standard & Poor’s Case-Shiller. The average rate for the
US national was 3.6 percent from Dec 1987 to Dec 2019 and 3.6 percent from Dec
1987 to Dec 2000. Although the global recession affecting the US between
IVQ2007 (Dec) and IIQ2009 (Jun) caused decline of house prices of slightly
above 30 percent, the average annual growth rate between Dec 2000 and Dec 2019
was 3.6 percent for the US national.
Table IIA-2,
US, Percentage Changes of Standard & Poor’s Case-Shiller National Home
Price Indices, Not Seasonally Adjusted, ∆%
|
|
US National |
|
∆% Jun 2000
to Jun 2003 |
27.1 |
|
∆% Jun 2000
to Jun 2005 |
64.0 |
|
∆% Jun 2003
to Jun 2005 |
29.1 |
|
∆% Jun 2000
to Jun 2006 |
76.0 |
|
∆% Jun 2003
to Jun 2006 |
38.5 |
|
∆% Jun 2005
to Jun 2020 |
27.8 |
|
∆% Jun 2006
to Jun 2020 |
19.1 |
|
∆% Jun 2009
to Jun 2020 |
46.7 |
|
∆% Jun 2010
to Jun 2020 |
48.8 |
|
∆% Jun 2011
to Jun 2020 |
54.9 |
|
∆% Jun 2012
to Jun 2020 |
53.5 |
|
∆% Jun 2013
to Jun 2020 |
40.5 |
|
∆% Jun 2014
to Jun 2020 |
32.2 |
|
∆% Jun 2015
to Jun 2020 |
26.7 |
|
∆% Jun 2016
to Jun 2020 |
20.8 |
|
∆% Jun 2017
to Jun 2020 |
14.3 |
|
∆% Jun 2018
to Jun 2020 |
7.7 |
|
∆% Jun 2019
to Jun 2020 |
4.3 |
|
∆% Jun 2000
to Jun 2020 |
109.6 |
|
∆% Peak Jun
2006 to Jun 2020 |
19.1 |
|
∆% Peak Jul
2006 to Jun 2020 |
19.1 |
|
Average ∆%
Dec 1987-Dec 2019 |
3.6 |
|
Average ∆%
Dec 1987-Dec 2000 |
3.6 |
|
Average ∆%
Dec 1992-Dec 2000 |
4.5 |
|
Average ∆%
Dec 2000-Dec 2019 |
3.6 |
Monthly house prices
increased sharply from Feb 2013 to Jan 2014 for both the SA and NSA national
house price, as shown in Table IIA-3. In Jan 2013, the seasonally adjusted
national house price index increased 0.9 percent and the NSA increased 0.3.
House prices increased at high monthly percentage rates from Feb to Nov 2013.
The most important seasonal factor in house prices is school changes for
wealthier homeowners with more expensive houses. With seasonal adjustment,
house prices fell from Dec 2010 throughout Mar 2011 and then increased in every
month from Apr to Jul 2011 but fell in every month from Aug 2011 to Feb 2012.
The not seasonally adjusted index registers increase in Mar 2012 of 1.4
percent. Not seasonally adjusted house
prices increased 1.9 percent in Apr 2012 and at high monthly percentage rates
through Aug 2012. House prices not seasonally adjusted stalled from Oct 2012 to
Dec 2012 and surged from Feb to Sep 2013, decelerating in Oct 2013-Jan 2014.
House prices grew at fast rates in Mar-Jul 2014. The SA national house price
index increased 0.2 percent in May 2020 and the NSA index increased 0.6
percent. Declining house prices cause multiple adverse effects of which two are
quite evident. (1) There is a disincentive to buy houses in continuing price
declines. (2) More mortgages could be losing fair market value relative to
mortgage debt. Another possibility is a wealth effect that consumers restrain
purchases because of the decline of their net worth in houses.
Table IIA-3,
US, Monthly Percentage Change of S&P Corelogic Case-Shiller National Home
Price Indices, Seasonally Adjusted and Not Seasonally Adjusted, ∆%
|
|
|
SA ∆% |
|
|
NSA ∆% |
|
December 2010 |
-0.1 |
-0.8 |
|||
|
January 2011 |
-0.4 |
-1.1 |
|||
|
February 2011 |
-0.8 |
-0.9 |
|||
|
March 2011 |
-0.3 |
0.0 |
|||
|
April 2011 |
0.0 |
1.0 |
|||
|
May 2011 |
-0.1 |
1.1 |
|||
|
June 2011 |
0.0 |
0.9 |
|||
|
July 2011 |
-0.1 |
0.3 |
|||
|
August 2011 |
-0.3 |
-0.4 |
|||
|
September
2011 |
-0.5 |
-1.1 |
|||
|
October 2011 |
-0.5 |
-1.3 |
|||
|
November 2011 |
-0.6 |
-1.3 |
|||
|
December 2011 |
-0.3 |
-1.1 |
|||
|
January 2012 |
0.0 |
-0.7 |
|||
|
February 2012 |
-0.1 |
-0.1 |
|||
|
March 2012 |
1.0 |
1.4 |
|||
|
April 2012 |
0.9 |
1.9 |
|||
|
May 2012 |
0.7 |
1.9 |
|||
|
June 2012 |
0.6 |
1.5 |
|||
|
July 2012 |
0.5 |
0.8 |
|||
|
August 2012 |
0.4 |
0.3 |
|||
|
September
2012 |
0.4 |
-0.2 |
|||
|
October 2012 |
0.5 |
-0.3 |
|||
|
November 2012 |
0.7 |
0.0 |
|||
|
December 2012 |
0.6 |
-0.1 |
|||
|
January 2013 |
0.9 |
0.3 |
|||
|
February 2013 |
0.6 |
0.6 |
|||
|
March 2013 |
1.5 |
1.9 |
|||
|
April 2013 |
1.0 |
2.0 |
|||
|
May 2013 |
0.9 |
1.9 |
|||
|
June 2013 |
0.9 |
1.7 |
|||
|
July 2013 |
0.9 |
1.2 |
|||
|
August 2013 |
0.9 |
0.7 |
|||
|
September
2013 |
0.8 |
0.2 |
|||
|
October 2013 |
0.6 |
-0.1 |
|||
|
November 2013 |
0.5 |
-0.1 |
|||
|
December 2013 |
0.6 |
0.0 |
|||
|
January 2014 |
0.6 |
0.1 |
|||
|
February 2014 |
0.4 |
0.3 |
|||
|
March 2014 |
0.3 |
0.8 |
|||
|
April 2014 |
0.2 |
1.1 |
|||
|
May 2014 |
0.2 |
1.1 |
|||
|
June 2014 |
0.2 |
0.9 |
|||
|
July 2014 |
0.3 |
0.6 |
|||
|
August 2014 |
0.4 |
0.2 |
|||
|
September
2014 |
0.4 |
-0.1 |
|||
|
October 2014 |
0.4 |
-0.2 |
|||
|
November 2014 |
0.4 |
-0.1 |
|||
|
December 2014 |
0.4 |
-0.1 |
|||
|
January 2015 |
0.4 |
-0.1 |
|||
|
February 2015 |
0.3 |
0.2 |
|||
|
March 2015 |
0.4 |
0.9 |
|||
|
April 2015 |
0.3 |
1.1 |
|||
|
May 2015 |
0.3 |
1.1 |
|||
|
June 2015 |
0.3 |
0.9 |
|||
|
July 2015 |
0.4 |
0.6 |
|||
|
August 2015 |
0.5 |
0.3 |
|||
|
September
2015 |
0.5 |
0.1 |
|||
|
October 2015 |
0.6 |
0.0 |
|||
|
November 2015 |
0.5 |
0.1 |
|||
|
December 2015 |
0.5 |
0.0 |
|||
|
January 2016 |
0.4 |
0.0 |
|||
|
February 2016 |
0.2 |
0.1 |
|||
|
March 2016 |
0.3 |
0.8 |
|||
|
April 2016 |
0.3 |
1.1 |
|||
|
May 2016 |
0.4 |
1.0 |
|||
|
June 2016 |
0.4 |
0.9 |
|||
|
July 2016 |
0.4 |
0.6 |
|||
|
August 2016 |
0.6 |
0.4 |
|||
|
September
2016 |
0.5 |
0.2 |
|||
|
October 2016 |
0.5 |
0.0 |
|||
|
November 2016 |
0.6 |
0.1 |
|||
|
December 2016 |
0.5 |
0.1 |
|||
|
January 2017 |
0.6 |
0.1 |
|||
|
February 2017 |
0.3 |
0.2 |
|||
|
March 2017 |
0.4 |
0.8 |
|||
|
April 2017 |
0.4 |
1.1 |
|||
|
May 2017 |
0.4 |
1.1 |
|||
|
June 2017 |
0.4 |
0.9 |
|||
|
July 2017 |
0.5 |
0.7 |
|||
|
August 2017 |
0.7 |
0.4 |
|||
|
September
2017 |
0.6 |
0.2 |
|||
|
October 2017 |
0.5 |
0.1 |
|||
|
November 2017 |
0.6 |
0.2 |
|||
|
December 2017 |
0.6 |
0.2 |
|||
|
January 2018 |
0.6 |
0.1 |
|||
|
February 2018 |
0.5 |
0.4 |
|||
|
March 2018 |
0.4 |
0.8 |
|||
|
April 2018 |
0.4 |
1.0 |
|||
|
May 2018 |
0.3 |
0.9 |
|||
|
June 2018 |
0.4 |
0.8 |
|||
|
July 2018 |
0.2 |
0.4 |
|||
|
August 2018 |
0.4 |
0.2 |
|||
|
September
2018 |
0.3 |
0.0 |
|||
|
October 2018 |
0.4 |
0.0 |
|||
|
November 2018 |
0.2 |
-0.1 |
|||
|
December 2018 |
0.2 |
-0.2 |
|||
|
January 2019 |
0.2 |
-0.2 |
|||
|
February 2019 |
0.2 |
0.1 |
|||
|
March 2019 |
0.2 |
0.7 |
|||
|
April 2019 |
0.3 |
0.9 |
|||
|
May 2019 |
0.2 |
0.8 |
|||
|
June 2019 |
0.2 |
0.6 |
|||
|
July 2019 |
0.1 |
0.4 |
|||
|
August 2019 |
0.4 |
0.2 |
|||
|
September
2019 |
0.4 |
0.1 |
|||
|
October 2019 |
0.4 |
0.0 |
|||
|
November 2019 |
0.4 |
0.1 |
|||
|
December 2019 |
0.4 |
0.1 |
|||
|
January 2020 |
0.5 |
0.0 |
|||
|
February 2020 |
0.5 |
0.4 |
|||
|
March 2020 |
0.5 |
0.9 |
|||
|
April 2020 |
0.4 |
1.0 |
|||
|
May 2020 |
0.0 |
0.6 |
|||
|
June 2020 |
0.2 |
0.6 |
Table IIA-4 summarizes the brutal drops in
assets and net worth of US households and nonprofit organizations from 2007 to
2008 and 2009. Total assets fell $9.1 trillion or 10.7 percent from 2007 to
2008 and $8.1 trillion or 9.5 percent to 2009. Net worth fell $9.0 trillion
from 2007 to 2008 or 12.8 percent and $7.9 trillion to 2009 or 11.2 percent.
Subsidies to housing prolonged over decades together with interest rates at 1.0
percent from Jun 2003 to Jun 2004 inflated valuations of real estate and risk
financial assets such as equities. The increase of fed funds rates by 25 basis
points until 5.25 percent in Jun 2006 reversed carry trades through exotic
vehicles such as subprime adjustable rate mortgages (ARM) and world financial
markets. 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 to purchase 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).
Table IIA-4,
Difference of Balance Sheet of Households and Nonprofit Organizations, Billions
of Dollars from 2007 to 2008 and 2009
|
2007 |
2008 |
Change to 2008 |
2009 |
Change to 2009 |
|
|
A |
85,162.3 |
76,039.9 |
-9,122.4 |
77,035.2 |
-8,127.1 |
|
Non |
30,537.5 |
27,981.2 |
-2,556.3 |
26,010.2 |
-4,527.3 |
|
RE |
25,745.9 |
23,067.0 |
-2,678.9 |
21,079.6 |
-4,666.3 |
|
FIN |
54,624.8 |
48,058.7 |
-6,566.1 |
51,025.1 |
-3,599.7 |
|
LIAB |
14,502.0 |
14,398.4 |
-103.6 |
14,275.9 |
-226.1 |
|
NW |
70,660.3 |
61,641.5 |
-9,018.8 |
62,759.3 |
-7,901.0 |
Source: Board
of Governors of the Federal Reserve System. 2020. Flow of funds, balance
sheets and integrated macroeconomic accounts: second quarter 2020.
Washington, DC, Federal Reserve System, Jun 21. https://www.federalreserve.gov/releases/z1/current/default.htm
The apparent improvement in Table IIA-4A is mostly because of increases
in valuations of risk financial assets by the carry trade from zero interest
rates to leveraged exposures in risk financial assets such as stocks,
high-yield bonds, emerging markets, commodities and so on. Zero interest rates
also act to increase net worth by reducing debt or liabilities. The net worth
of households has become an instrument of unconventional monetary policy by
zero interest rates in the theory that increases in net worth increase
consumption that accounts for 67.0 percent of GDP in IIQ2020 (https://cmpassocregulationblog.blogspot.com/2020/08/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html), generating
demand to increase aggregate economic activity and employment. There are
neglected and counterproductive risks in unconventional monetary policy.
Between 2007 and IIQ2020, real estate increased in value by $8660.5 billion and
financial assets increased $32,391.1 billion for net gain of real estate and
financial assets of $39,923.6 billion, explaining most of the increase in net
worth of $48,295.0 billion obtained by deducting the increase in liabilities of
$1977.8 billion from the increase of assets of $50,273.0 billion (with minor
rounding error). Net worth increased from $70,660.3 billion in IVQ2007 to $118,955.3
billion in IIQ2020 by $48,295.0 billion or 68.3 percent. The US consumer price
index for all items increased from 210.036 in Dec 2007 to 257.797 in Jun 2020 (https://www.bls.gov/cpi/data.htm) or 22.7
percent. Net worth adjusted by CPI inflation increased 37.2 percent from 2007
to IIQ2020. Real estate assets adjusted for CPI inflation increased 8.9 percent
from 2007 to IIQ2020. There are multiple complaints that unconventional
monetary policy concentrates income on wealthier individuals because of their
holdings of financial assets while the middle class has gained less because of
fewer holdings of financial assets and higher share of real estate in family
wealth. There is nothing new in these arguments. Interest rate ceilings on
deposits and loans have been commonly used. The Banking Act of 1933 imposed
prohibition of payment of interest on demand deposits and ceilings on interest
rates on time deposits. These measures were justified by arguments that the
banking panic of the 1930s was caused by competitive rates on bank deposits that
led banks to engage in high-risk loans (Friedman, 1970, 18; see Pelaez and
Pelaez, Regulation of Banks and Finance (2009b), 74-5). The objective of
policy was to prevent unsound loans in banks. Savings and loan institutions
complained of unfair competition from commercial banks that led to continuing
controls with the objective of directing savings toward residential
construction. Friedman (1970, 15) argues that controls were passive during
periods when rates implied on demand deposit were zero or lower and when
Regulation Q ceilings on time deposits were above market rates on time
deposits. The Great Inflation or stagflation of the 1960s and 1970s changed the
relevance of Regulation Q. Friedman (1970, 26-7) predicted the future:
“The banks have been forced into costly structural
readjustments, the European banking system has been given an unnecessary
competitive advantage, and London has been artificially strengthened as a
financial center at the expense of New York.”
In short, Depression regulation exported the US financial system
to London and offshore centers. What is vividly relevant currently from this
experience is the argument by Friedman (1970, 27) that the controls affected
the most people with lower incomes and wealth who were forced into accepting controlled-rates
on their savings that were lower than those that would be obtained under freer
markets. As Friedman (1970, 27) argues:
“These are the people who have the fewest
alternative ways to invest their limited assets and are least sophisticated about
the alternatives.” 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. US economic growth has been at only 1.2 percent on
average in the cyclical expansion in the 44 quarters from IIIQ2009 to IIQ2020
and in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. 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
second estimate of GDP for IIQ2020 (https://www.bea.gov/sites/default/files/2020-08/gdp2q20_2nd.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/2020/08/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.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, 3.8 percent from IQ1983 to IVQ1992, 3.7 percent from IQ1983 to
IQ1993, 3.6 percent from IQ1983 to IIQ1993, 3.6 percent from IQ1983 to
IIIQ1993, 3.7 percent from IQ1983 to IVQ1993 and at 7.9 percent from IQ1983 to
IVQ1983 (https://cmpassocregulationblog.blogspot.com/2020/08/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html). 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 (https://apps.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 IIQ2020 and in the global recession with output in the US
reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event would have accumulated to
44.7 percent. GDP in IIQ2020 would be $22,807.6 billion (in constant dollars of
2012) if the US had grown at trend, which is higher by $5525.4 billion than
actual $17,282.2 billion. There are more than five trillion dollars of GDP less
than at trend, explaining the 34.8 million unemployed or underemployed
equivalent to actual unemployment/underemployment of 20.2 percent of the
effective labor force with the largest part originating in the global recession
with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event (https://cmpassocregulationblog.blogspot.com/2020/09/exchange-rate-fluctuations-1.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/thirty-eight-million-unemployed-or.html). Unemployment is decreasing while employment is increasing in
initial adjustment of the lockdown of economic activity in the global recession
resulting from the COVID-19 event (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf). US GDP in IIQ2020 is 24.2 percent lower than at trend. US GDP
grew from $15,762.0 billion in IVQ2007
in constant dollars to $17,282.5 billion in IIQ2020 or 9.6 percent at the
average annual equivalent rate of 0.7 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 2.9 percent per year from
Aug 1919 to Aug 2020. Growth at 2.9 percent per year would raise the NSA index
of manufacturing output (SIC, Standard Industrial Classification) from 108.2987
in Dec 2007 to 155.5554 in Aug 2020. The actual index NSA in Aug 2020 is
99.2841 which is 36.2 percent below trend. The underperformance of
manufacturing in Mar-Aug 2020 originates partly in the earlier global recession
augmented by the current global recession with output in the US reaching a high
in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19. 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 (SIC,
Standard Industrial Classification) from 108.2987 in Dec 2007 to 163.3909 in
Aug 2020. The actual index NSA in Aug 2020 is 99.2841, which is 39.2 percent
below trend. Manufacturing output grew at average 1.7 percent between Dec 1986
and Aug 2020. Using trend growth of 1.7 percent per year, the index would
increase to 134.0774 in Aug 2020. The output of manufacturing at 99.2841 in Aug
2020 is 26.0 percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification
System), manufacturing output fell from the high of 110.5147 in Jun 2007 to the
low of 86.3800 in Apr 2009 or 21.8 percent. The NAICS manufacturing index
increased from 86.3800 in Apr 2009 to 100.4257 in Aug 2020 or 16.3 percent. The
NAICS manufacturing index increased at the annual equivalent rate of 3.5
percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the
NAICS manufacturing output index from 106.6777 in Dec 2007 to 164.9372 in Aug
2020. The NAICS index at 100.4257 in Aug 2020 is 39.1 below trend. The NAICS
manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999
to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output
index from 106.6777 in Dec 2007 to 132.0705 in Aug 2020. The NAICS index at
100.4257 in Aug 2020 is 24.0 percent below trend under this alternative
calculation.
Table IIA-4A,
US, Difference of Balance Sheet of Households and Nonprofit Organizations
Billions of Dollars from 2007 to 2018, 2019 and IIQ2020
|
Value 2007 |
Change to
2018 |
Change to
2019 |
Change to
IIQ2020 |
|
|
Assets |
85,162.3 |
36,478.7 |
49,791.9 |
50,273.0 |
|
Nonfinancial |
30,537.5 |
7,311.8 |
9,388.8 |
10,349.3 |
|
Real Estate |
25,745.9 |
5,959.1 |
7,780.8 |
8,660.5 |
|
Financial |
54,624.8 |
29,166.8 |
40,403.3 |
39,923.6 |
|
Liabilities |
14,502.0 |
1,374.7 |
1,875.4 |
1,977.8 |
|
Net Worth |
70,660.3 |
35,103.9 |
47,916.4 |
48,295.0 |
Notes: Deposits: Total Time and Savings Deposits FL15303005;
Net Worth = Assets – Liabilities
Source: Board
of Governors of the Federal Reserve System. 2020. Flow of funds, balance
sheets and integrated macroeconomic accounts: second quarter 2020.
Washington, DC, Federal Reserve System, Jun 21. https://www.federalreserve.gov/releases/z1/current/default.htm
The comparison of net worth of households and nonprofit
organizations in the entire economic cycle from IQ1980 (and from IVQ1979) to IVQ1993
and from IVQ2007 to IIQ2020 is in Table IIA-5. The data reveal the following
facts for the cycles in the 1980s:
- IVQ1979
to IVQ1993. Net worth increased 192.6 percent from IVQ1979 to IVQ1993, the
all items CPI index increased 90.1 percent from 76.7 in Dec 1979 to 145.8
in Dec 1993 and real net worth increased 53.9 percent.
- IQ1980
to IVQ1985. Net worth increased 66.5 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 22.0 percent.
- IVQ1979
to IVQ1985. Net worth increased 70.0 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 19.3 percent.
- IQ1980
to IQ1989. Net worth increased 121.5 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 45.0 percent.
- IQ1980
to IIQ1989. Net worth increased 126.0 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 45.9 percent.
- IQ1980
to IIIQ1989. Net worth increased 131.8 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 50.3 percent.
- IQ1980
to IVQ1989. Net worth increased 136.2 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 50.0 percent.
- IQ1980
to IQ1990. Net worth increased 137.6 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 47.9 percent.
- IQ1980
to IIQ1990. Net worth increased 140.1 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 48.1 percent
- IQ1980
to IIIQ1990. Net worth increased 138.3 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 43.9 percent.
- IQ1980
to IVQ1990. Net worth increased 143.0 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 45.5 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 (https://apps.bea.gov/iTable/index_nipa.cfm). This new cyclical
contraction explains the contraction of net worth in IIIQ1990
- IQ1980
to IQ1991. Net worth increased 149.3 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 47.9 percent.
- IQ1980 to IIQ1991. Net worth increased 149.8 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 47.1 percent.
- IQ1980
to IIIQ1991. Net worth increased 152.8 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 47.6 percent.
- IQ1980
to IVQ1991. Net worth increased 159.1 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 50.5 percent.
- IQ1980
to IQ1992. Net worth increased 160.1 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 49.6 percent.
- IQ1980
to IIQ1992. Net worth increased 161.0 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 49.1 percent.
- IQ1980
to IIIQ1992. Net worth increased 164.8 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 50.1 percent.
- IQ1980
to IVQ1992. Net worth increased 171.2, the all items CPI index increased
77.2 percent from 80.1 in Mar 1980 to 141.9 in Dec 1992 and real net worth
increased 53.1 percent.
- IQ1980
to IQ1993. Net worth increased 174.8 percent, the all items CPI increased
79.3 percent from 80.1 in Mar 1980 to 143.6 in Mar 1993 and real net worth
increased 53.3 percent.
- IQ1980
to IIQ1993. Net worth increased 177.6 percent, the all items CPI increased
80.3 percent from 80.1 in Jun 1980 to 144.4 in Jun 1993 and real net worth
increased 54.0 percent.
- IQ1980
to IIIQ1993. Net worth increased 181.9 percent, the all items CPI
increased 81.1 percent from 80.1 in Jun 1980 to 145.1 in Sep 1993 and real
net worth increased 55.6 percent.
- IQ1980
to IVQ1993. Net worth increased 186.5 percent, the all items CPI increased
82.0 percent from 80.1 in Jun 1980 to 145.8 in Dec 1993 and real net worth
increased 57.4 percent.
There is comparatively weaker performance in the current
economic cycle:
- IVQ2007
to IVQ2019. Net worth increased 67.8 percent, the all items CPI increased
22.3 percent from 210.036 in Dec 2007 to 256.974 in Dec 2019 and real net
worth increased 37.2 percent.
- IVQ2007 to IQ2020. Net
worth increased 57.6 percent, the all items CPI increased 22.9 percent
from 210.036 in Dec 2020 to 258.115 in Mar 2020 and real or inflation
adjusted net worth increased 28.2 percent. Net worth decreased by $7,228.5
billion from IVQ2019 to IQ2020 or by 6.1 percent in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in
the lockdown of economic activity in the COVID-19 event. Real estate
increased $422.0 billion from IVQ2019 to IQ2020 or 1.3 percent. Corporate
equities decreased $5,286.7 billion or 24.8. Financial assets decreased $7,632.7
billion from IVQ2019 to IQ2020 or 8.0 percent. Stock markets recovered in
Apr to Jul 2020.
- IVQ2007 to IIQ2020. Net
worth increased 68.3 percent, the all items CPI increased 22.7 percent
from 210.036 in Dec 2020 to 257.797 in Jun 2020 and real or inflation
adjusted net worth increased 37.2 percent. Real estate assets adjusted for
inflation increased 8.9 percent. Net worth increased $7,607,1 billion from
IQ2020 to IIQ2020 or 6.8 percent, or 7.0 percent adjusted for inflation, and
increased 0.3 percent from IVQ2019. Corporate equities increased $3518.0
billion from IQ2020 to IIQ2020 or 22.0 percent and are lower by 8.3
percent relative to IVQ2019. Real estate increased $457.7 billion from
IQ2020 to IIQ2020 or 1.3 percent and is higher 2.6 percent relative to
IVQ2019. Growth of real net worth at the long-term average of 3.2 percent
per year from IVQ1945 to IIQ2020 would have accumulated to 48.3 percent in
the entire cycle from IVQ2007 to IIQ2020, much higher than actual 37.2
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 1.2 percent on average in the cyclical expansion in the
44 quarters from IIIQ2009 to IIQ2020 and in the global recession with output in
the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. 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
second estimate of GDP for IIQ2020 (https://www.bea.gov/sites/default/files/2020-08/gdp2q20_2nd.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/2020/08/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.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, 3.8 percent from IQ1983 to IVQ1992, 3.7 percent from IQ1983 to
IQ1993, 3.6 percent from IQ1983 to IIQ1993, 3.6 percent from IQ1983 to
IIIQ1993, 3.7 percent from IQ1983 to IVQ1993 and at 7.9 percent from IQ1983 to
IVQ1983 (https://cmpassocregulationblog.blogspot.com/2020/08/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html). 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 (https://apps.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 IIQ2020 and in the global recession with output in the US
reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event would have accumulated to
44.7 percent. GDP in IIQ2020 would be $22,807.6 billion (in constant dollars of
2012) if the US had grown at trend, which is higher by $5525.4 billion than
actual $17,282.2 billion. There are more than five trillion dollars of GDP less
than at trend, explaining the 34.8 million unemployed or underemployed
equivalent to actual unemployment/underemployment of 20.2 percent of the
effective labor force with the largest part originating in the global recession
with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event (https://cmpassocregulationblog.blogspot.com/2020/09/exchange-rate-fluctuations-1.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/thirty-eight-million-unemployed-or.html). Unemployment is decreasing while employment is increasing in
initial adjustment of the lockdown of economic activity in the global recession
resulting from the COVID-19 event (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf). US GDP in IIQ2020 is 24.2 percent lower than at trend. US GDP
grew from $15,762.0 billion in IVQ2007
in constant dollars to $17,282.5 billion in IIQ2020 or 9.6 percent at the
average annual equivalent rate of 0.7 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 2.9 percent per year from
Aug 1919 to Aug 2020. Growth at 2.9 percent per year would raise the NSA index
of manufacturing output (SIC, Standard Industrial Classification) from 108.2987
in Dec 2007 to 155.5554 in Aug 2020. The actual index NSA in Aug 2020 is
99.2841 which is 36.2 percent below trend. The underperformance of
manufacturing in Mar-Aug 2020 originates partly in the earlier global recession
augmented by the current global recession with output in the US reaching a high
in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19. 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 (SIC,
Standard Industrial Classification) from 108.2987 in Dec 2007 to 163.3909 in
Aug 2020. The actual index NSA in Aug 2020 is 99.2841, which is 39.2 percent
below trend. Manufacturing output grew at average 1.7 percent between Dec 1986
and Aug 2020. Using trend growth of 1.7 percent per year, the index would increase
to 134.0774 in Aug 2020. The output of manufacturing at 99.2841 in Aug 2020 is
26.0 percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification
System), manufacturing output fell from the high of 110.5147 in Jun 2007 to the
low of 86.3800 in Apr 2009 or 21.8 percent. The NAICS manufacturing index
increased from 86.3800 in Apr 2009 to 100.4257 in Aug 2020 or 16.3 percent. The
NAICS manufacturing index increased at the annual equivalent rate of 3.5 percent
from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the NAICS
manufacturing output index from 106.6777 in Dec 2007 to 164.9372 in Aug 2020.
The NAICS index at 100.4257 in Aug 2020 is 39.1 below trend. The NAICS
manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999
to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output
index from 106.6777 in Dec 2007 to 132.0705 in Aug 2020. The NAICS index at
100.4257 in Aug 2020 is 24.0 percent below trend under this alternative
calculation.
Table IIA-5,
Net Worth of Households and Nonprofit Organizations in Billions of Dollars,
IVQ1979 to IVQ1993 and IVQ2007 to IIQ2020
|
Period IQ1980
to IVQ1993 |
|
|
Net Worth of
Households and Nonprofit Organizations USD Millions |
|
|
IVQ1979 IQ1980 |
9,104.3 9,297.0 |
|
IVQ1985 IIIQ1986 IVQ1986 IQ1987 IIQ1987 IIIQ1987 IVQ1987 IQ1988 IIQ1988 IIIQ1988 IVQ1988 IQ1989 IIQ1989 IIIQ1989 IVQ1989 IQ1990 IIQ1990 |
15,481.3 16,537.2 17,107.6 17,731.7 18,023.6 18,435.6 18,381.2 18,890.3 19,328.2 19,649.2 20,156.4 20,589.4 21,011.8 21,554.8 21,957.1 22,086.3 22,324.4 |
|
III1990 |
22,156.6 |
|
IV1990 |
22,590.8 |
|
I1991 |
23,175.6 |
|
IIQ1991 |
23,224.2 |
|
IIIQ1991 |
23,503.9 |
|
IVQ1991 |
24,090.5 |
|
IQ1992 |
24,181.0 |
|
IIQ1992 |
24,266.8 |
|
IIIQ1992 |
24,617.6 |
|
IVQ1992 |
25,216.9 |
|
IQ1993 |
25,546.5 |
|
IIQ1993 |
25,809.1 |
|
IIIQ1993 |
26,205.8 |
|
IVQ1993 |
26,640.1 |
|
∆ USD IVQ1979
to IVQ1985 IVQ1979 to
IVQ1993 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 |
+6,377.0 ∆%70.0
R∆19.3 +17,535.8 ∆%192.6R∆%53.9
+6,184.3∆%66.5
R∆%22.0 +7,240.2
∆%77.9 R∆%29.3 +7,810.6
∆%84.0 R∆%33.4 +8,434.7
∆%90.7 R∆%36.3 +8,726.6
∆%93.9 R∆%36.8 +9,138.6
∆%98.3 R∆%38.1 +9084.2
∆%97.7 R∆%37.2 +9593.3
∆%103.2 R∆%39.7 10,031.2
∆%107.9 R∆%41.1 +10,352.2
∆%111.3 R∆%41.3 +10,859.4
∆%116.8 R∆%44.1 +11292.4
∆%121.5 R∆%45.0 +11,714.8
∆%126.0 R∆% 45.9 +12,257.4
∆%131.8 R∆% 50.3 +12,660.1
∆%136.2 R∆%50.0 +12,789.3
∆%137.6 R∆%47.9 +13,027.4
∆%140.1 R∆%48.1 |
|
IQ1980-IIIQ1990 |
+12,859.6∆%138.3 R∆%43.9 |
|
IQ1980-IVQ1990 |
+13,293.8 ∆%143.0 R∆%45.5 |
|
IQ1980-IQ1991 |
+13,878.6 ∆%149.3 R∆%47.9 |
|
IQ1980-IIQ1991 |
+13,927.2 ∆%149.8 R∆%47.1 |
|
IQ1980-IIIQ1991 |
+14,206.9 ∆%152.8 R∆%47.6 |
|
IQ1980-IVQ1991 |
+14,793.5 ∆%159.1 R∆%50.5 |
|
IQ1980-IQ1992 |
+14,884.0 ∆%160.1 R∆%49.6 |
|
IQ1980-IIQ1992 |
+14,969.8 ∆%161.0 R∆%49.1 |
|
IQ1980-IIIQ1992 |
+15,320.6 ∆%164.8 R∆%50.1 |
|
IQ1980-IVQ1992 |
+15,919.9 ∆%171.2 R∆%53.1 |
|
IQ1980-IQ1993 |
+16,249.5 ∆%174.8 R∆%53.3 |
|
IQ1980-IIQ1993 |
+16,512.1 ∆%177.6 R∆% 54.0 |
|
IQ1980-IIIQ1993 |
+16,908.8 ∆%181.9 R∆% 55.6 |
|
IQ1980-IVQ1993 |
+17343.1 ∆%186.5 R∆% 57.4 |
|
Period
IVQ2007 to IIQ2020 |
|
|
Net Worth of
Households and Nonprofit Organizations USD Millions |
|
|
IVQ2007 |
70,660.3 |
|
IVQ2019 |
118,576.7 |
|
∆ USD
Billions |
+47916.4
∆%67.8 R∆% 37.2 |
|
IQ2020 |
111,348.2 |
|
∆ USD Billions |
+40,687.9
∆%57.6 R∆%28.2 |
|
IIQ2020 |
118,955.3 |
|
∆ USD
Billions |
+48,295.0
∆%68.3 R∆%37.2 |
|
IIQ2020/IQ2020 |
+7,607.1
∆%6.8 R∆%7.0 |
Net Worth =
Assets – Liabilities. R∆% real percentage change or adjusted for CPI percentage
change.
Notes: Deposits:
Total Time and Savings Deposits FL15303005; Net Worth = Assets – Liabilities
Source: Board
of Governors of the Federal Reserve System. 2020. Flow of funds, balance
sheets and integrated macroeconomic accounts: second quarter 2020.
Washington, DC, Federal Reserve System, Jun 21. https://www.federalreserve.gov/releases/z1/current/default.htm
Chart IIA-1 of the Board of Governors of the
Federal Reserve System provides US wealth of households and nonprofit
organizations from IVQ2007 to IIQ2020. There is remarkable stop and go behavior
in this series with two sharp declines and two standstills in the 44 quarters
of expansion of the economy beginning in IIIQ2009. The increase in net worth of
households and nonprofit organizations is the result of increases in valuations
of risk financial assets and compressed liabilities resulting from zero
interest rates. Wealth of households and nonprofits organization increased 37.2
percent from IVQ2007 to IIQ2020 when adjusting for consumer price inflation. Net worth of households and nonprofit organizations fell 3.4
percent from 109,450.8 billion in IIIQ2018 to 105,764.2 billion in IVQ2018 or
$3,686.6 billion. Financial assets decreased 4.6 percent from 87,796.2 billion
in IIIQ2018 to 83,791.6 billion in IVQ2018 or $4004.6 billion. Corporate
equities fell 13.9 percent from $19,232.1 billion in IIIQ2018 to $16,559.2 billion
in IVQ2018 or $2,672.9 billion. These are the revised data in the report of
Sep 21, 2020, for IIQ20120. Net worth decreased by $7,228.5 billion from
IVQ2019 to IQ2020 or by 6.1 percent in the global recession, with output in the
US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. Real estate increased $422.0
billion from IVQ2019 to IQ2020 or 1.3 percent. Corporate equities decreased
$5,286.7 billion or 24.8. Financial assets decreased $7,632.7 billion from
IVQ2019 to IQ2020 or 8.0 percent. Stock markets recovered in Apr to Jul 2020. Net worth
increased $7,607,1 billion from IQ2020 to IIQ2020 or 6.8 percent, or 7.0
percent adjusted for inflation, and increased 0.3 percent from IVQ2019.
Corporate equities increased $3518.0 billion from IQ2020 to IIQ2020 or 22.0
percent and are lower by 8.3 percent relative to IVQ2019. Real estate increased
$457.7 billion from IQ2020 to IIQ2020 or 1.3 percent and is higher 2.6 percent
relative to IVQ2019.
Chart IIA-1, Net Worth of Households and Nonprofit
Organizations in Millions of Dollars, IVQ2007 to IIQ2020
Notes: Deposits: Total Time and Savings Deposits FL15303005;
Net Worth = Assets – Liabilities
Source: Board of Governors of the Federal Reserve System.
2020. Flow of funds, balance sheets and integrated macroeconomic
accounts: second quarter 2020. Washington, DC, Federal Reserve
System, Sep 21. https://www.federalreserve.gov/releases/z1/current/default.htm
Chart IIA-2 of the Board of Governors of the Federal Reserve
System provides US wealth of households and nonprofit organizations from
IVQ1979 to IVQ1993. There are changes in the rates of growth of wealth
suggested by the changing slopes but there is smooth upward trend. There was
significant financial turmoil during the 1980s. Benston and Kaufman (1997, 139)
find that there was failure of 1150 US commercial and savings banks between
1983 and 1990, or about 8 percent of the industry in 1980, which is nearly
twice more than between the establishment of the Federal Deposit Insurance
Corporation in 1934 through 1983. More than 900 savings and loans associations,
representing 25 percent of the industry, were closed, merged or placed in
conservatorships (see Pelaez and Pelaez, Regulation
of Banks and Finance (2008b), 74-7). The Financial Institutions Reform,
Recovery and Enforcement Act of 1989 (FIRREA) created the Resolution Trust
Corporation (RTC) and the Savings Association Insurance Fund (SAIF) that
received $150 billion of taxpayer funds to resolve insolvent savings and loans.
The GDP of the US in 1989 was $5641.6 billion (https://apps.bea.gov/iTable/index_nipa.cfm), such that
the partial cost to taxpayers of that bailout was around 2.66 percent of GDP in
a year. The Bureau of Economic Analysis estimates US GDP in 2019 at $21,561.1
billion, such that the bailout would be equivalent to cost to taxpayers of
about $573.5 billion in current GDP terms. A major difference with the Troubled
Asset Relief Program (TARP) for private-sector banks is that most of the costs
were recovered with interest gains whereas in the case of savings and loans
there was no recovery. Money center banks were under extraordinary pressure
from the default of sovereign debt by various emerging nations that represented
a large share of their net worth (see Pelaez 1986). Net worth of households and nonprofit organizations
increased 186.5 percent from IQ1980 to IVQ1993 and 57.4 percent when adjusting
for consumer price inflation. 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 (https://apps.bea.gov/iTable/index_nipa.cfm). This new cyclical contraction explains the
contraction followed by stability of net worth in the final segment followed by
mild increase and then rising trend in Chart IIA-2.
Chart IIA-2, Net Worth of Households and Nonprofit
Organizations in Millions of Dollars, IVQ1979 to IVQ1993
Notes: Deposits: Total Time and Savings Deposits FL15303005;
Net Worth = Assets – Liabilities
Source: Board of Governors of the Federal Reserve System.
2020. Flow of funds, balance sheets and integrated macroeconomic
accounts: second quarter 2020. Washington, DC, Federal Reserve
System, Sep 21. https://www.federalreserve.gov/releases/z1/current/default.htm
Chart IIA-3 of the Board of Governors of the
Federal Reserve System provides US wealth of households and nonprofit
organizations from IVQ1945 at $806.6 billion to IIQ2020 at $118,955.3 billion
or increase of 14,647.7 percent. The consumer price index not seasonally
adjusted was 18.2 in Dec 1945 jumping to 257.797 in IIQ2020 or increase of 1,316.5
percent. There was a gigantic increase of US net worth of households and
nonprofit organizations over 74.50 years with inflation-adjusted increase from
$44.319 in dollars of 1945 to $461.430 in IIQ2020 or 941.2 percent. In a simple
formula: {[($118,955.3/806.6)/(257.797/18.2)-1]100 = 941.2%}. Wealth of
households and nonprofit organizations increased from $806.6 billion at
year-end 1945 to $118,9555.3 billion at the end of IIQ2020 or 14,647.7 percent.
The consumer price index increased from 18.2 in Dec 1945 to 257.797 in Jun 2020
or 1,316.5 percent. Net wealth of households and nonprofit organizations in
dollars of 1945 increased from $44.319 in 1945 to $461.430 in IIQ2020 or 941.2
percent at the average yearly rate of 3.2 percent. US real GDP grew at the
average rate of 2.9 percent from 1945 to 2019 (https://apps.bea.gov/iTable/index_nipa.cfm). The combination of collapse of values of real estate and
financial assets during the global recession of IVQ2007 to IIIQ2009 caused
sharp contraction of net worth of US households and nonprofit organizations.
Recovery has been in stop-and-go fashion during the worst cyclical expansion in
the 74.50 years when US GDP grew at 2.1 percent on average in the forty-four
quarters between IIIQ2009 and IIQ2020 (https://cmpassocregulationblog.blogspot.com/2020/08/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html). US GDP was
$228.0 billion in 1945 and net worth of households and nonprofit organizations
$806.6 billion for ratio of wealth to GDP of 3.54. The ratio of net worth of
households and nonprofits of $70,660.2 billion in 2007 to GDP of $14,451.9
billion was 4.89. The ratio of net worth of households and nonprofits of $118,576.7
billion in 2019 to GDP of $21,433.2 billion was 5.53. The final data point in
Chart IIA-3 is net worth of household and nonprofit institutions at $118,955.3
billion in IIQ2020 for increase of 14,647.7 percent relative to $806.6 billion
in IVQ1945. CPI adjusted net worth of household and nonprofit institutions
increased from $44.319 in IVQ1945 to $461.430 in IIQ2020 or 941.2 percent at
the annual equivalent rate of 3.2 percent. Net worth of households and
nonprofit organizations fell 3.4 percent from 109,450.8 billion in IIIQ2018 to
105,764.2 billion in IVQ2018 or $3,686.6 billion. Financial assets decreased 4.6
percent from 87,796.2 billion in IIIQ2018 to 83,791.6 billion in IVQ2018 or $4004.6
billion. Corporate equities fell 13.9 percent from $19,232.1 billion in
IIIQ2018 to $16,559.2 billion in IVQ2018 or $2,672.9 billion. These are the
revised data in the report of Sep 21, 2020, for IIQ20120. Net worth decreased
by $7,228.5 billion from IVQ2019 to IQ2020 or by 6.1 percent in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. Real estate increased $422.0
billion from IVQ2019 to IQ2020 or 1.3 percent. Corporate equities decreased
$5,286.7 billion or 24.8. Financial assets decreased $7,632.7 billion from
IVQ2019 to IQ2020 or 8.0 percent. Stock markets recovered in Apr to Jul 2020. Net worth
increased $7,607,1 billion from IQ2020 to IIQ2020 or 6.8 percent, or 7.0
percent adjusted for inflation, and increased 0.3 percent from IVQ2019.
Corporate equities increased $3518.0 billion from IQ2020 to IIQ2020 or 22.0
percent and are lower by 8.3 percent relative to IVQ2019. Real estate increased
$457.7 billion from IQ2020 to IIQ2020 or 1.3 percent and is higher 2.6 percent
relative to IVQ2019.
Chart IIA-3, Net Worth of Households and Nonprofit
Organizations in Millions of Dollars, IVQ1945 to IIQ2020
Notes: Deposits: Total Time and Savings Deposits FL15303005;
Net Worth = Assets – Liabilities
Source: Board of Governors of the Federal Reserve System.
2020. Flow of funds, balance sheets and integrated macroeconomic
accounts: second quarter 2020. Washington, DC, Federal Reserve
System, Sep 21. https://www.federalreserve.gov/releases/z1/current/default.htm
Table IIA-6 provides percentage changes of
nonfinancial domestic sector debt. Households increased debt by 10.5 percent in
2006 but reduced debt from 2010 to 2011. Households have increased debt
moderately since 2012. Financial repression by zero fed funds rates or negative
interest rates intends to increase debt and reduce savings. Business had not
been as exuberant in acquiring debt and has been increasing debt benefitting
from historically low costs while increasing cash holdings to around $2
trillion by swelling undistributed profits because of the uncertainty of
capital budgeting. The key to growth and hiring consists in creating the
incentives for business to invest and hire. States and local government were
forced into increasing debt by the decline in revenues but began to contract in
IQ2011, decreasing again from IQ2011 to IVQ2011, increasing at 2.1 percent in
IIQ2012 and decreasing at 0.2 percent in IIIQ2012 and 2.6 percent in IVQ2012.
State and local government increased debt at 1.9 percent in IQ2013 and
decreased at 1.1 percent in IIQ2013. State and local government decreased debt
at 3.0 percent in IIIQ2013 and at 2.8 percent in IVQ2013. State and local
government reduced debt at 1.7 percent in IQ2014 and decreased at 0.4 percent
in IIQ2014. State and local government reduced debt at 2.7 percent in IIIQ2014
and increased at 0.7 percent in IVQ2014. State and local government increased
debt at 1.6 percent in IQ2015 and increased at 0.2 percent in IIIQ2015. State
and local government decreased debt at 0.9 percent in IVQ2015. State and local
government increased debt at 0.7 percent in IQ2016 and increased at 2.4 percent
in IIQ2016. State and local government increased debt at 0.7 percent in
IIIQ2016. Opposite behavior is for the federal government that has been rapidly
accumulating debt but without success in the self-assigned goal of promoting
economic growth. Financial repression constitutes seigniorage of government
debt (http://cmpassocregulationblog.blogspot.com/2011/05/global-inflation-seigniorage-financial.html http://cmpassocregulationblog.blogspot.com/2011/05/global-inflation-seigniorage-monetary.html).
Table IIA-6,
US, Percentage Change of Nonfinancial Domestic Sector Debt
|
Total |
Households |
Business |
Federal |
State & |
|
|
IIQ2020 |
25.3 |
0.5 |
14.0 |
58.9 |
3.5 |
|
IQ2020 |
10.6 |
3.8 |
18.4 |
11.4 |
0.9 |
|
IVQ2019 |
3.3 |
3.4 |
1.9 |
4.5 |
2.9 |
|
IIIQ2019 |
5.9 |
3.3 |
6.0 |
8.9 |
0.9 |
|
IIQ2019 |
3.5 |
4.0 |
4.3 |
3.1 |
-1.8 |
|
IQ2019 |
5.9 |
2.2 |
6.8 |
9.6 |
-0.6 |
|
IVQ2018 |
3.4 |
2.7 |
4.6 |
4.1 |
-2.7 |
|
IIIQ2018 |
3.8 |
3.5 |
4.5 |
4.4 |
-1.2 |
|
IIQ2018 |
4.3 |
3.5 |
3.3 |
6.7 |
0.2 |
|
IQ2018 |
6.7 |
3.1 |
3.9 |
14.3 |
-3.2 |
|
IVQ2017 |
3.8 |
5.1 |
4.8 |
1.8 |
4.0 |
|
IIIQ2017 |
4.5 |
2.6 |
6.1 |
6.0 |
-0.6 |
|
IIQ2017 |
4.6 |
4.2 |
6.4 |
4.4 |
-1.0 |
|
IQ2017 |
3.3 |
3.8 |
6.0 |
1.7 |
-2.2 |
|
IVQ2016 |
2.0 |
2.6 |
1.8 |
2.1 |
-0.3 |
|
IIIQ2016 |
5.2 |
4.4 |
6.0 |
6.1 |
0.7 |
|
IIQ2016 |
4.5 |
3.7 |
4.2 |
6.0 |
2.4 |
|
IQ2016 |
5.5 |
2.4 |
9.2 |
6.2 |
0.7 |
|
IVQ2015 |
8.0 |
4.1 |
5.9 |
15.6 |
-0.9 |
|
IIIQ2015 |
2.1 |
1.3 |
5.3 |
0.6 |
0.3 |
|
IIQ2015 |
4.7 |
3.8 |
8.2 |
3.4 |
0.2 |
|
IQ2015 |
3.0 |
2.2 |
7.5 |
-0.3 |
1.6 |
|
IVQ2014 |
3.7 |
2.3 |
6.4 |
3.1 |
0.7 |
|
2019 |
4.7 |
3.3 |
4.8 |
6.7 |
0.3 |
|
2018 |
4.7 |
3.3 |
4.2 |
7.6 |
-1.6 |
|
2017 |
4.2 |
3.8 |
6.2 |
3.7 |
0.0 |
|
2016 |
4.4 |
3.1 |
5.4 |
5.6 |
1.1 |
|
2015 |
4.4 |
2.2 |
7.1 |
5.0 |
0.4 |
|
2014 |
3.8 |
1.2 |
6.7 |
5.4 |
-2.5 |
|
2013 |
4.1 |
2.3 |
4.7 |
6.7 |
-0.3 |
|
2012 |
4.6 |
0.5 |
5.4 |
10.1 |
-0.3 |
|
2011 |
3.7 |
0.1 |
2.5 |
10.8 |
-1.0 |
|
2010 |
4.5 |
-0.4 |
-0.7 |
18.5 |
3.0 |
|
2009 |
3.7 |
0.5 |
-3.9 |
20.4 |
4.7 |
|
2008 |
5.7 |
0.0 |
5.7 |
21.4 |
1.4 |
|
2007 |
8.1 |
7.1 |
12.5 |
4.7 |
6.2 |
|
2006 |
8.4 |
10.5 |
9.8 |
3.9 |
4.4 |
Note: Quarterly data for IQ2016 and earlier and annual data for
2007 and earlier are from prior reports.
Net Worth =
Assets – Liabilities. R∆% real percentage change or adjusted for CPI percentage
change.
Notes:
Deposits: Total Time and Savings Deposits FL15303005; Net Worth = Assets –
Liabilities
Source: Board of Governors of the Federal
Reserve System. 2020. Flow of funds, balance sheets and integrated
macroeconomic accounts: second quarter 2020. Washington, DC, Federal
Reserve System, Sep 21. https://www.federalreserve.gov/releases/z1/current/default.htm
Table IIA-7 provides wealth
of US households and nonprofit organizations since 2005 in billions of current
dollars at the end of period, NSA. Wealth fell from $70,660 billion in 2007 to
$62,759 billion in 2009 or 11.2 percent and to $67,686 billion in 2011 or 4.2
percent. Wealth increased 68.3 percent from 2007 to IIQ2020, increasing 37.2
percent after adjustment for inflation, primarily because of bloating financial
assets while nonfinancial assets declined/stagnated cyclically in real terms. Net worth of households and nonprofit
organizations fell 3.4 percent from 109,450.8 billion in IIIQ2018 to 105,764.2
billion in IVQ2018 or $3,686.6 billion. Financial assets decreased 4.6 percent
from 87,796.2 billion in IIIQ2018 to 83,791.6 billion in IVQ2018 or $4004.6
billion. Corporate equities fell 13.9 percent from $19,232.1 billion in
IIIQ2018 to $16,559.2 billion in IVQ2018 or $2,672.9 billion. These are the
revised data in the report of Sep 21, 2020, for IIQ20120. Net worth decreased
by $7,228.5 billion from IVQ2019 to IQ2020 or by 6.1 percent in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. Real estate increased $422.0
billion from IVQ2019 to IQ2020 or 1.3 percent. Corporate equities decreased
$5,286.7 billion or 24.8. Financial assets decreased $7,632.7 billion from
IVQ2019 to IQ2020 or 8.0 percent. Stock markets recovered in Apr to Jul 2020. Net worth
increased $7,607,1 billion from IQ2020 to IIQ2020 or 6.8 percent, or 7.0
percent adjusted for inflation, and increased 0.3 percent from IVQ2019.
Corporate equities increased $3518.0 billion from IQ2020 to IIQ2020 or 22.0
percent and are lower by 8.3 percent relative to IVQ2019. Real estate increased
$457.7 billion from IQ2020 to IIQ2020 or 1.3 percent and is higher 2.6 percent
relative to IVQ2019.
|
Quarter |
Net Worth |
|
IIQ2020 |
118,955 |
|
IQ2020 |
111,348 |
|
IVQ2019 |
118,577 |
|
IIIQ2019 |
115,049 |
|
IIQ2019 |
113,956 |
|
IQ2019 |
111,812 |
|
IVQ2018 |
105,764 |
|
IIIQ2018 |
109,451 |
|
IIQ2018 |
107,482 |
|
IQ2018 |
105,840 |
|
IVQ2017 |
105,099 |
|
IIIQ2017 |
102,355 |
|
IIQ2017 |
100,368 |
|
IQ2017 |
98,632 |
|
IVQ2016 |
96,109 |
|
IIIQ2016 |
95,324 |
|
IIQ2016 |
93,459 |
|
IQ2016 |
92,000 |
|
IVQ2015 |
90,797 |
|
IIIQ2015 |
89,206 |
|
IIQ2015 |
90,167 |
|
IQ2015 |
89,612 |
|
IVQ2014 |
87,704 |
|
IIIQ2014 |
85,800 |
|
IIQ2014 |
85,204 |
|
IQ2014 |
83,319 |
|
IVQ2013 |
81,622 |
|
IIIQ2013 |
79,525 |
|
IIQ2013 |
76,972 |
|
IQ2013 |
75,792 |
|
IVQ2012 |
72,854 |
|
2019 |
118,577 |
|
2018 |
105,764 |
|
2017 |
105,099 |
|
2016 |
96,109 |
|
2015 |
90,797 |
|
2014 |
87,704 |
|
2013 |
81,622 |
|
2012 |
72,854 |
|
2011 |
67,686 |
|
2010 |
66,427 |
|
2009 |
62,759 |
|
2008 |
61,641 |
|
2007 |
70,660 |
|
2006 |
69,116 |
|
2005 |
64,552 |
Net Worth =
Assets – Liabilities. R∆% real percentage change or adjusted for CPI percentage
change.
Notes:
Deposits: Total Time and Savings Deposits FL15303005; Net Worth = Assets –
Liabilities
Source: Board
of Governors of the Federal Reserve System. 2020. Flow of funds, balance
sheets and integrated macroeconomic accounts: second quarter 2020.
Washington, DC, Federal Reserve System, Sep 21. https://www.federalreserve.gov/releases/z1/current/default.htm
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
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