Download - State of the Economy
State of the Economy
Robert P. MurphyMises AcademyAugust 12, 2011
I. Monetary Policy
A. The Bubbly Stock Market
B. The Stock Market & the Fed
C. Interest Rate Signals?!
D. Fed & Housing Bubble
E. Unprecedented
II. Puzzling Price Inflation?
A. Has “Money Supply” Exploded?
B. Reserves Sitting At Fed
C. “Official” Consumer Price Inflation
D. But Producer Prices…
12-month Price Change, June 2011Source: Bureau of Labor Statistics
Finished Goods 7.0%
Intermediate Goods 11.0%
Crude Goods 26.2%
E. Dollar Resumes Free Fall
F. Dangers of Aggregation
VS.
G. Time Bomb?
If lent out all excess reserves, commercial banks could create ~$16 trillion in money held by
the public, about a 9-fold increase.
Even if this didn’t affect demand to hold USD, would
mean gas prices in ballpark of $30/gallon.
H. Fed’s Exit Strategy?
III. The Fiscal Mess
A. Digging In Fast
B. Accrual Versus Cash Acc’ting
Present-value of long-run shortfall in total
government obligations (Social Security,
Medicare, etc.) versus projected receipts runs anywhere from $60 -
$100 trillion.
C. CBO Baseline Projections
D1. What About Tea party Deal?!
D2. Tea Party Deal (Cont’d)
IV. The Future
A. Batten Down the Hatches
Expect sluggish “real” growth (high
unemployment), with sharply rising consumer prices
eventually.
Stock market may crash again, but in long run (after
Eurozone implodes) U.S. bonds leave holder
vulnerable to price inflation.
B. Don’t Despair!