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Jason Henderson Vice President and Branch Executive Federal Reserve Bank of Kansas City – Omaha Branch www.kansascityfed.org/omaha September 28, 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. Financial Crisis Economic Recession Inflation and Federal Reserve exit strategy Financial Risks to Agriculture Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division LIBOR-OIS Spread Basis Points 3-month 1-month Source: Federal Reserve Board of Governors Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Commercial Real Estate Vacancy Rates Percent Percent Office Industrial Retail Multifamily Source: Torto-Wheaton Research Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Financial Crisis Economic Recession Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Real GDP Growth Annualized percent change from previous quarter Blue Chip Forecast Source: Bureau of Economic Analysis and Blue Chip Economic Indicators Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Monthly Retail and Food Sales Billion dollars 2008 2007 2006 2009 Source: U.S. Census Bureau Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Non-farm Job Growth and Unemployment Rate Change from previous month (Thousands) Percent Unemployment Rate (Right Scale) Job Change (Left Scale) Source: Bureau of Labor Statistics Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Assets Held by Households and Nonprofit Organization Trillion dollars Source: Federal Reserve Board of Governors Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Personal Savings as a Percent of Disposable Income Percent Source: Bureau of Economic Analysis Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Food Sales Percent change from previous year Source: USDA 2009 data are year-to-date through August Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Per Capita Expenditures on Beef, Pork, Poultry, and Milk Products Percent change Calculations based on Bureau of Economic Analysis data * The National Bureau of Economic Research indicates the recession started in Dec. 2007. At the time of publication, the end of the recession has yet to be specified. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Real Net Exports of Goods and Services Billion dollars Source: Bureau of Economic Analysis Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division GDP Growth Annual percent change, constant dollars Projection China World U.S. Source: International Monetary Fund, April 2009 Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Estimated Budget Impact of American Recovery and Reinvestment Act (ARRA) of 2009 Billion Dollars Source: Congressional Budget Office, February 13, 2009 Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Financial Crisis Economic Recession Inflation and Federal Reserve exit strategy Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Central Bank 1 2 Short-term interest rates Bank Reserves 3 Bank Credit Excess Reserves Long-term Interest rates Economic activity Source: Gordon Sellon (2003) “Monetary Policy and the Zero Bound: Policy Options When Short-Term Rates Reach Zero” Economic Review http://www.kansascityfed.org/Publicat/ECONREV/PDF/4q03sell.pdf Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Federal Reserve Balance Sheet: Assets Billion Dollars Source: Federal Reserve Board of Governors Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Fed Funds Rate Percent Source: Federal Reserve Board of Governors and CME Group Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Financial Crisis Economic Recession Inflation and Federal Reserve exit strategy Financial Risks to Agriculture Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Percent Charge-off and Delinquency Rates on Agricultural Loans Source: Federal Reserve Board of Governors Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Collateral Requirements and Loan Maturity on Non-Real Estate Loans Diffusion Index Months Average Maturity of Non-Real Estate Loans – U.S. (Right Axis) Collateral Required Tenth Federal Reserve District (Left Axis) Source: Federal Reserve Bank of Kansas City and Agricultural Finance Databook Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Farmland Values Dollars per acre Source: USDA Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Domestic Debt Outstanding Percent of GDP Financial Business Household Nonfinancial Business Source: Federal Reserve Board of Governors Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division The financial crisis and recession appear to be ending . Risks surround the recovery. The outlook hinges on consumer spending. As the recovery strengthens, questions will switch from growth to inflation. Will the recovery lift agricultural demand in 2010? Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division For More Information Federal Reserve Bank of Kansas City – Omaha Branch www.kansascityfed.org/omaha