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by Gilbert R. Yochum Dean College of Business and Public Administration Old Dominion University March 15, 2012 PowerPoint Presentation
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by Gilbert R. Yochum Dean College of Business and Public Administration Old Dominion University March 15, 2012. The Economy and Financial Markets . U.S. Real GDP and Real Potential GDP (in 2005 dollars). Billions of Dollars.

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byGilbert R. YochumDeanCollege of Business and Public AdministrationOld Dominion UniversityMarch 15, 2012

The Economy and

Financial Markets

slide2

U.S. Real GDP and Real Potential GDP (in 2005 dollars)

Billions of Dollars

Source: US Department of Commerce, Congressional Budget Office and Federal Reserve Bank

slide3

War and Peace in the Credit Markets: Selected Interest Rate Risk Spreads

Percent

Average Risk Spread (50 Years)

30-Year Mortgage 1.7%

Corporate Bond 2.1%

Source: Federal Reserve Bank and the Old Dominion University Economic Forecasting Project

slide4

Cleaning Out the Skeletons in the Closet: Estimated Mortgage Rate Resets (First reset in billions of $)

*Option ARMs show estimated recast schedule based on current negam rate & a 5yr hard recast schedule where data is missing

Source: Credit Suisse , LoanPerformance, FH/FN/GN

slide5

Net Percentage of U.S. Banks Tightening Standards for Mortgage Loans

All residential

Source: Federal Reserve Bank. Measures of Supply and Demand for Residential Mortgage Loans

slide6

U.S. Existing House Prices: Annual Change

Year-over-year percentage change

Source: Federal Housing Finance Agency, Standard and Poor’s Case-Shiller Home Price Index (20 cities) and Old Dominion University Economic Forecasting Project . Data are for median price. FHFA data are based on FHA conforming loans for residential resale property. 2011 is estimated.

commercial bank delinquency rates residential and commercial real estate loans and total loans
Commercial Bank Delinquency Rates: Residential and Commercial Real Estate Loans and Total Loans

Source: Federal Reserve Bank

commercial bank charge off rates
Commercial Bank Charge-Off Rates

(Percent)

Source: Federal Reserve Bank

bank credit of all commercial banks
Bank Credit of All Commercial Banks

(Billions of Dollars)

Source: Federal Reserve Bank

bank excess reserves
Bank Excess Reserves

(Billions of Dollars)

Source: Federal Reserve Bank

slide11

U.S. Corporate Profits (1990-2011): Resulting Cash

Hoard over $1 Trillion.

Billions of $

Source: U.S. Department of Commerce. Undistributed profit with IVA and CCA adjustment.

slide12

Checkable Deposits and Currency - Assets - Balance Sheet of Nonfarm Nonfinancial Corporate Business

(Billions of Dollars)

Source: Federal Reserve Bank

slide13

Private Nonresidential Fixed Investment

(Billions of Dollars)

Source: Federal Reserve Bank

commercial real estate cre price index and business investment in structures
Commercial Real Estate (CRE) Price Index and Business Investment in Structures

Billions of $

Fixed Investment in Structures

CRE Price Index

Sources: U.S. Department of Commerce, MIT Real Estate Center and The National Council of Real Estate Investment Fiduciaries.

slide15

Annual CPI and Core Inflation Rate and Long-Run Inflation Objective Upper and Lower Limits (1990 to 2012)

Target Rate

Source: U.S. Department of Labor and Old Dominion University Economic Forecasting Project

slide16
Inflation Expectations: The Government Bond Tips Spread(Ten Year T-Bond Rate minus Ten Year Inflation Protected T-Bond Rate)

Expected Inflation Rate

Source: Federal Reserve Bank and the Old Dominion University Economic Forecasting Project

slide17

Treasury Yield Curve: Operation Twist

Source: Federal Reserve Bank and Old Dominion University Economic Forecasting Project

slide18

Federal Government Spending, Revenue and Deficit as a Proportion

of GDP 1941-2040 (CBO Alternative Scenario)

Proportion of GDP

Source: Federal Reserve Bank and Congressional Budget Office.

slide22

CPI

+2.3%

risks to forecast
Risks to Forecast
  • Substantial slow down in Eurozone will dampen U.S. growth
  • Housing market continues to be a drag
  • Political drift creating more uncertainty
  • Disruptions in world oil Supply
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byGilbert R. YochumDeanCollege of Business and Public AdministrationOld Dominion UniversityMarch 15, 2012

The Economy and

Financial Markets