jason henderson vice president and branch executive federal reserve bank of kansas city – omaha...
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Jason HendersonVice President and Branch ExecutiveFederal Reserve Bank of Kansas City – Omaha Branchwww.kansascityfed.org/omahaJune 16, 2009
The views expressed are those of the author and do not necessarily reflect the opinions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
The Economic Recovery is
Underway
Concerns Shift from Growth to
Inflation
Implications for Agriculture
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Real GDP Growth
Annual percent change
Source: Bureau of Economic Analysis Federal Reserve Board of Governors
Federal Reserve ProjectionCentral Tendency
“U” “W” “V” “L”
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Unemployment Rate
2007 Monthly Average
Source: Bureau of Labor Statistics
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Unemployment Rate
May 2009 – April 2010 Average
Source: Bureau of Labor Statistics
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
U.S. Monthly Retail and Food Sales
Billion dollars
Source: U.S. Census Bureau
2007
2008
2009
2010
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Thousands
Source: U.S. Census Bureau
U.S. Housing MarketsIndex
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
IndexU.S. Manufacturing Activity Indices
Source: Institute of Supply Management
Non-Manufacturing
Manufacturing
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Structures
Equipment and Software
Corporate Profits and Nonresidential Fixed Investment
Percent change from year ago
Source: Bureau of Economic Analysis
Corporate ProfitsAfter Tax
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Source: Bureau of Economic Analysis and Federal Reserve Board of Governors
Billion dollars
U.S. Real Net Exports of Goods and Services and Value of the Dollar
Index
Broad Dollar Index(right axis)
Real Net Exports(left axis)
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
U.S. Government Outlays
Billion Dollars
Source: Congressional Budget Office, March 2010
Projected
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
U.S. Debt as a Percent of GDPPercent
Source: Congressional Budget Office, November 2009
CBO Alternative Fiscal Scenario
CBO Extended Baseline Scenario
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
The Economic Recovery is
Underway
Concerns Shift from Growth to
Inflation
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Money * VelocityPrice =Quantity
Definition of Inflation: Too much money
chasing too few goods
MVQ
Quantity Theory of Money
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Federal Reserve Balance Sheet: AssetsBillion Dollars
Source: Federal Reserve Bank of Cleveland
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Hold to maturity Sell assets Keep reserves on deposit at the
Fed. Interest on excess reserves Reverse repurchase agreements Term deposits
All strategies lead to higher interest rates. When? How fast?
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Nonfarm Employment Change and Unemployment Rate
Thousands
Source: Bureau of Labor Statistics
Percent
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
•Financial markets
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Billion dollars
Source: Federal Reserve Board of Governors
Farm Debt Outstanding at Commercial Banks
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Percent
Source: Federal Reserve Board of Governors
Charge-off and Delinquency RatesOn Agricultural Loans
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
•Financial markets
•U.S. consumer demand
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Percent change from previous year
U.S. Food Expenditures
Source: USDA2010 data through March
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
•Financial markets
•U.S. consumer demand
•Export activity
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
GDP Growth
Source: IMF, April 2010
Percent Change
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Billion dollars
Source: USDA
U.S. Agricultural Exports
2007
2009
2008
2010
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Index
Source: Federal Reserve Board of Governors
Value of U.S. Dollar(Broad Index)
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
•Financial markets
•U.S. consumer demand
•Export activity
•Energy markets
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
World Crude Oil Supply Balance
Million barrels per day
Source: Energy Information Administration
Forecast: May 2010
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Dollars per barrel Dollars per thousand cubic feet
Crude Oil and Natural Gas Prices
Source: Energy Information Administration
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
•Financial markets
•U.S. consumer demand
•Export activity
•Energy markets
•Farmland values
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Ratio
Calculations based on Iowa State University and University of Nebraska data
Farmland Values to Rent Ratio
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Source: USDA
U.S. Debt Repayment Capacity Utilization
Farmers do not have enough income to service debt
Farmers do have enough income to service debt
Index
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
•Financial markets
•U.S. consumer demand
•Export activity
•Energy markets
•Farmland values
•Government policy
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
Financial markets and regulationEnvironmental policyEnergy policyHealth care policyAgricultural policyRural development???
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Federal Reserve Bank of Kansas City – Omaha BranchRegional, Public and Community Affairs Division
The economic recovery is underway. Stronger consumer demand is boosting business
activity.
But, deleveraging will limit the recovery.
Questions will switch from growth to
inflation. Will high unemployment limit inflation?
What will start the “chasing”?
The recovery brings opportunities and risks
to the farm sector.