Global Economic Global Economic OutlookOutlook

June 2009June 2009

Good NewsGood News

Credit Standards Getting Easier

Foreign Ownership of Stocks and Bonds

10-yr Treasury Yields

ConcernsConcerns

Sources of Economic Growth

Percent of Long-term Unemployed

Unemployment Rate and NAIRU

HousingHousing

                                                         

     

                                                          

     

State & LocalState & Local

GovernmentsGovernments

S&L Budget Gaps

State and Local Government Drag

S&L Purchases as % of GDP

Sales Tax Collections

State and Local Property Taxes

StimulusStimulus

No AmmunitionNo Ammunition

Budget Deficits % of GDP

Exit Strategy

Real Federal Funds Rate

Inflation Expectations

OOOOOOoooutpOutput Gap

Taylor’s Rule

Actual

Federal Funds Rate

Change Policy

•Language

•Interest Rate

•Sell MBS

- 1

- 0.5

0

0.5

1

1.5

2

2.5

3

3.5

2008 2009 2010 2011

U.S. Economic Growth (% Change Year over Year)

Forecast

European Economic Growth

0

10

20

30

40

50

60

70

80

90

European Bank’s Exposure to Greece Billions of US dollars

Share of U.S. Exports

OutlookOutlookBought TimeBought Time

Vs.Vs.

Deficits RemainDeficits Remain

Debt Maturity Schedule

Who Should Leave Euro?

•PIGS

•Germany

Euro Breakup?Euro Breakup?Political UnionPolitical Union

Vs.Vs.

Economic UnionEconomic Union

Global Debt Global Debt ProblemProblem

Solve Debt Solve Debt Problem?Problem?GrowthDefaultInflation

Debt to GDPDebt to GDPOver 90%: 1.7%Over 90%: 1.7%

Vs.Vs.

Below 30%: 3.5%Below 30%: 3.5%

Over 100%Over 100%

Stunt GrowthStunt Growth

- 5

- 4

- 3

- 2

- 1

0

1

2

2008 2009 2010 2011

Euro Economic Growth (% change Year over Year)

Forecast

Asia Economic Growth

Asia:V-Shaped

•Trade Rebound

•Inventory Building

•Capital Inflows

•Strong Domestic Demand

•Weak Financial Sys.

Asian Dependence on Europe

Asian Exports to AE and China

China’s Economy

China’s Infrastructure Spending

China’s Bank Lending

China’s Property Prices

China’s Inflation

Value of Chinese Yuan

8

8.5

9

9.5

10

10.5

2008 2009 2010 2011

China’s Economic Growth (% Change Year over Year)

Forecast

Global Global ImbalanceImbalance

Rebalancing Global Trade

StocksStocks

ContrarianIndicator?

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