Rural Outlook Conference

US and Oklahoma Economic Outlook Presentation

October 2015

Rural Outlook PresentationOctober 2015 Agenda

• Status of the US Economy– Storyline Retrospective– Major Indicators

• Monetary Policy– Fed’s Balance Sheet– Money Supply Growth

• Special Topics– Status of the Oklahoma Economy

• Employment Trends—State and Regional• Unemployment

– Price of Crude Oil & Employment Implications

Storyline and Continuing Saga

19th Year and Counting

First Chapters of StoryIrrational Exuberance

Stock Market Bubble/Bust

Floods of Liquidity Promoting Speculation and Low Rates

Rise of the Housing Bubble

Recession of 2001

Greenspan “Put”: Expand the Money Supply in the Face of any Financial Trauma

• 1987 Stock Market Crash– Solution—Add liquidity

• 1990 Gulf War– Solution—Add liquidity

• Mexican Financial Crisis– Solution—Add liquidity

• Asian/Russian Financial Crisis– Solution—Add liquidity

• Long-Term Capital Market Collapse– Solution—Add liquidity

• Y2K Problems– Solution—Add liquidity

• Stock Market Collapse– Solution—Add liquidity

• 2001 Recession– Solution—Add liquidity

• 9/11 Attack– Solution—Add liquidity

Has Greenspan created MORAL HAZARDS?

Next Chapters of StorySubprime Mortgage Crisis

Financial Contagion

Recession of 2007-2008

Fiscal & Monetary Stimulus

Housing Market Collapse

Muted Economic Recovery

The Continuing 19-Year SagaCredit Market Deleveraging

Sovereign Debt Crises

Currency Devaluations

Global Political Discord

Quantitative Easing Forever

Demographic and Other Cliffs

Continuing Slow Growth

Status of the National Economic Recovery

“Nobody can predict how long governments can get away with fake growth, fake money,

fake financial stability, fake jobs, fake inflation numbers and fake income growth.”

Paul Singer, Eliott Management, $8.6B AUM

Real Annualized GDP Growth

Recent Estimates place Q1 2013 at a 1.6% gain

Industrial Production

Retail Sales

Year-over-Year Change in U.S. Non-Ag Employment

Purchasing Mgrs Index and Fed Manufacturing Surveys

Recent Estimates place Q1 2013 at a 1.6% gain

Case Shiller Housing Price Indices

Housing Starts

Inflation

Monetary Policy

Federal Reserve gone wild?

Fed’s Magical Balance Sheet

U.S. Treasury securities 2,461.6 Reserve balances with F.R. Banks 2,479.3Federal agency debt securities 38.7 Currency in circulation 1,317.4Mortgage-backed securities 1,729.8 Reverse repurchase agreements 251.5Credit loans 208.1 Treasury cash holdings 0.2Other loans 0.1 Other deposits with F.R. Banks 418.1Other Federal Reserve assets 80.2 Other liabilities and capital 63.1Gold stock 11.0

Total 4,529.6 Total 4,529.6

Fed's Balance Sheet November 26, 2014 ($billions)

Fed’s Magical Balance Sheet

Federal Reserve’s Asset Holdings

Stock Market and Member Bank Reserves

Bank Reserve Balances Deposited at the Fed

U.S. Government Budget Balances

Status of the Oklahoma Economy

OKC, Tulsa, BOS Employment Trends

US and Oklahoma Employment Growth

Comparative State Unemployment Rates

Price of Oil

Houston, we have a problem!

WTI: What Happened in the 1980’s

WTI Historic

Historic U.S. Oil Production

US Historic Rig Count

Oil v. Natural Gas Rig Count

Oil Prices and Rig Counts

OK Direct Mining Sector Employment

OK Regional Direct Mining Sector Employment

That’s all, folks