US Economic History: Great Recession January 29, 216 Dr. Edward Yardeni 516-972-7683 eyardeni@ Debbie Johnson 48-664-1333 djohnson@ Mali Quintana 48-664-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents Federal Funds Target Rate 1 Debt 2-4 Mortgage Debt 5-6 Fed Assets 7-8 January 29, 216 / US Economic History: Great Recession www.
6. 5.5 5. 4.5 4. 3.5 3. 2.5 1.5 1..5. Figure 1. FEDERAL FUNDS TARGET RATE (percent) Federal Funds Rate () 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Source: Board of Governors of the Federal Reserve System. Federal Funds Target Rate 6. 5.5 5. 4.5 4. 3.5 3. 2.5 1.5 1..5. 14 Figure 2. COMMERCIAL PAPER OUTSTANDING (billion dollars, sa) 14 12 12 1 Commercial Paper: Asset-Backed (256.6) 1 8 8 6 6 4 4 2 1/27 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Source: Board of Governors of the Federal Reserve System. 2 Page 1 / January 29, 216 / US Economic History: Great Recession www.
Debt 2 18 16 14 12 1 8 Figure 3. DEBT OF FINANCIAL SECTORS (trillion dollars, nsa, ratio scale) Total Financial Debt (15.3) 2 18 16 14 12 1 8 6 Total Securitized Debt* (9.1) 6 4 Total Less Securitized* Debt (6.3) 4 2 2 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 * Sum of government sponsored entreprises, agency & GSE-backed mortgage pools, and ABS issuers. Source: Flow of Funds. 76 74 72 7 68 66 64 62 Figure 4. DEBT OF FINANCIAL SECTORS (percent) Total Securitized Debt* / Financial Debt (59.2) 76 74 72 7 68 66 64 62 6 58 56 54 52 5 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 6 58 56 54 52 5 * Sum of GSE, agency & GSE-backed mortgage pools, and ABS issuers. Source: Flow of Funds. Page 2 / January 29, 216 / US Economic History: Great Recession www.
8.1 7.3 6.5 5.7 4.9 4.1 3.3 2.5 Figure 5. Debt CREDIT MARKET DEBT OWED BY FINANCIAL SECTORS* (trillion dollars, nsa, ratio scale) 8.1 7.3 6.5 5.7 4.9 4.1 3.3 2.5 1.7 1.7.9.9 Agency & GSE-backed Mortgage Pool Securities (1.7) GSE Issues (6.3) Corporate Bonds Issued by Financial Sector (4).1 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18.1 * As a result of two accounting rules, FAS 166 and 167, the assets and liabilities of some special purpose entities (SPEs) have been moved onto the balance sheets of the US chartered commercial bank, government-sponsored enterprise finance company sectors. The consolidated assets and liabilities were removed from the agency and GSE-backed mortgage pool sector and the issuers of asset-backed securities (ABS) sector. Source: Federal Reserve Board, Flow of Funds Accounts. 5 Figure 6. CORPORATE BONDS OUTSTANDING (trillion dollars, nsa) 5 4 Financial Sector 4 3 2 ABS Issuers (1) Commercial Banking (.2) 3 2 1 1 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 Source: Federal Reserve Board, Flow of Funds Accounts. Page 3 / January 29, 216 / US Economic History: Great Recession www.
15 125 Figure 7. HOME MORTGAGE BORROWING (billion dollars, 4-quarter sum) Debt 15 125 1 1 75 75 5 5 25 25-25 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 Source: Federal Reserve Board, Flow of Funds Accounts. -25 85 8 75 7 65 6 55 5 45 4 35 3 25 2 15 1 5-5 -1-15 -2-25 -3-35 -4-45 Figure 8. CORPORATE NET NEW ISSUES (billion dollars, 4-quarter sum) Nonfinancial & Financial Corporate Issues Bonds & Equities (197.7) 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 Source: Federal Reserve Board, Flow of Funds Accounts. 85 8 75 7 65 6 55 5 45 4 35 3 25 2 15 1 5-5 -1-15 -2-25 -3-35 -4-45 Page 4 / January 29, 216 / US Economic History: Great Recession www.
25 2 Figure 9. Mortgage Debt TOTAL VALUE OF HOUSEHOLD REAL ESTATE HOLDINGS & HOME MORTGAGE DEBT (trillion dollars, nsa) 25 2 15 1 Total Value of Household Real Estate Holdings* (21) Owners Equity in Household Real Estate (12) Home Mortgage Debt (9.5) 15 1 5 5 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 * Home mortgages plus owners equity in household real estate. Source: Federal Reserve Board Flow of Funds Accounts. 7 65 Figure 1. HOUSEHOLD MORTGAGE DEBT (as a percent of value of household real estate*) 7 65 6 6 55 55 5 5 45 4 45 4 35 35 3 25 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 3 25 * Home mortgages plus owners equity in household real estate. Source: Federal Reserve Board Flow of Funds Accounts. Page 5 / January 29, 216 / US Economic History: Great Recession www.
3.2 Figure 11. Mortgage Debt MARKET VALUE OWNER-OCCUPIED HOUSEHOLD REAL ESTATE 3.2 3. 3. 2 2 2.6 2.6 2 2.2 As a ratio of disposable personal income excluding personal current transfer payments and other labor income 2 2.2 1 1 1 1 1. As a ratio of disposable personal income 58 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 1. Source: Federal Reserve Board Flow of Funds Accounts and US Department of Commerce, Bureau of Economic Analysis. 1.5 1 Figure 12. HOME MORTGAGES OUTSTANDING* 1.5 1 1.3 1.3 1.1 1.1 1..9 As a ratio of disposable personal income excluding personal current transfer payments and other labor income 1..9.7.7.6.6.5.3 As a ratio of disposable personal income 58 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18.3.5 * Includes home equity loans and second mortgages. Source: Federal Reserve Board Flow of Funds Accounts and US Department of Commerce, Bureau of Economic Analysis. Page 6 / January 29, 216 / US Economic History: Great Recession www.
4 4 Figure 13. FED S ASSETS* (trillion dollars) Fed Assets QE1 QE2 QE3 & QE4 1/27 4 4 4. 4. 3.6 Total Assets 3.6 3.2 2 US Treasuries + Agency Debt + MBS 3.2 2 2 2 28 29 21 211 212 213 214 215 216 2.6 2 2.2 * Average of daily figures for weeks ending Wednesday. Note: QE1 (announced 11/25/8) = Fed buys $4tn in mortgage securities. QE2 (announced 11/3/1) = Fed buys $6bn in Treasuries. QE3 (announced 9/13/12) = Fed buys $4bn/month in mortgage securities (to infinity and beyond). QE4 (announced 12/12/12) = Fed buys $45bn/month in Treasuries. Source: Federal Reserve Board. Figure 14. FED S ASSETS* (trillion dollars) QE1 QE2 QE3 & QE4 1/27 2.6 2 2.2 1 1 1..6.2. US Treasury Securities Agency Debt + MBS 28 29 21 211 212 213 214 215 216 1 1 1..6.2. * Average of daily figures for weeks ending Wednesday. Note: QE1 (announced 11/25/8) = Fed buys $4tn in mortgage securities. QE2 (announced 11/3/1) = Fed buys $6bn in Treasuries. QE3 (announced 9/13/12) = Fed buys $4bn/month in mortgage securities (to infinity and beyond). QE4 (announced 12/12/12) = Fed buys $45bn/month in Treasuries. Source: Federal Reserve Board. Page 7 / January 29, 216 / US Economic History: Great Recession www.
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Fed Assets Page 8 / January 29, 216 / US Economic History: Great Recession www.