Harping on the Fed Index

1.   Likely fall in nominal GDP between 2008 and 2009:  1%

Last time NGDP fell that rapidly:  1937-38

2.   Fall in monetary base during first half of 2009:  3.1%

Last time monetary base fell that fast in first half (excluding post-Y2K fall):  1938

3.   Current yield on 3 month T-bills:  0.18%

Yield on 3 month T-bills on January 1st, 1938:  0.10%

4.  Date Fed first instituted a policy of paying banks to hoard reserves:  October 2008.

Previous time Fed instituted a policy which increased the demand for reserves:  1937

5.   Increase in the minimum wage since 2007:  41%   ($5.15 to $7.25)

Largest percentage increase in the minimum wage:  Infinity, November 1938  ($0 to $0.25)

6.   Percentage of US economists who want to see the minimum wage completely eliminated:  47%

Voting pattern of US economists:  3 to 1 Democratic

7.  Change in the PPI between June 2008 and June 2009:   -13.2%

Change in the PPI between June 1937 and June 1938:  -10.0%

8.  Change in the DJIA between August 31, 2008 and November 20, 2008:  -34.6%

Change in the DJIA between August 31, 1937 and November 20, 1937:  -33.4%



8 Responses to “Harping on the Fed Index”

  1. Gravatar of StatsGuy StatsGuy
    6. August 2009 at 09:52

    What, the markets are rising and you cite… data? Please…

    The Federal Open Markets Committee has already declared victory.


    “The Federal Open Market Committee “is unlikely to extend the life of these programs, unless, of course, either the economy or the financial markets take a significant turn for the worse” Meyer said. “We therefore expect the FOMC to announce at its upcoming meeting that it will allow the Treasury purchase program to expire in Mid-September.” “I don’t think this is a close call in terms of the ultimate outcome.”

    They are “winding down” liquidity operations, subject to further evidence that things are getting worse.

    Thus, things will get worse.

    It’s August, 2008. Version 2.0

  2. Gravatar of ssumner ssumner
    6. August 2009 at 11:12

    Statsguy, Yes, It just makes me shake my head. I teach monetary economics and I have no idea how to explain to my students what the Fed is up to. What is their goal? I don’t have a clue. Can someone remind me why we are going to spend about $700 billion over the next two years in fiscal stimulus? Can someone explain why Bernanke suggested fiscal stimulus was needed, and hasn’t yet publicly said it’s no longer needed? Can someone explain any of this?

    It’s not that I don’t see the economy is getting a tiny bit better–but what is their goal? Have they achieved it? If so, do we need fiscal stimulus? None of it adds up.

  3. Gravatar of Thruth Thruth
    7. August 2009 at 08:35

    “Can someone explain why Bernanke suggested fiscal stimulus was needed, and hasn’t yet publicly said it’s no longer needed? Can someone explain any of this?”

    He wants a second term

  4. Gravatar of ssumner ssumner
    8. August 2009 at 04:59

    Thruth. Well, that’s one explanation. We’ll see what he says when he is re-appointed. You may be right, and if so he may go back to being a deficit hawk after being re-appointed.

  5. Gravatar of calieconomist calieconomist
    8. August 2009 at 12:08

    Where do you get the figure for the percent of economists that want the minimum wage eliminated? I haven’t seen it before.

  6. Gravatar of ssumner ssumner
    8. August 2009 at 15:14

    Calieconomist, Go to this wikipedia link, and scroll down to “surveys of economists.” The exact figure is 46.8% in 2006.


    BTW, I finally found the CS survey I kept mentioning. You have to scroll way down to see the graph. Keep in mind that some broader indices show actual rises in the spring of 2008, the CS survey is biased toward the sub-prime markets.


  7. Gravatar of happyjuggler0 happyjuggler0
    8. August 2009 at 16:51

    Scott (and everyone else who uses wikipedia),

    The vast bulk of pages (long ones anyway) at wikipedia have a table of contents of sorts after the first paragraph or so. If you click on the “chapter” you are interested in, it brings you right to that spot. You can then copy and paste that link instead of explaining where on the long page you want readers to go to.

    Like this.

  8. Gravatar of ssumner ssumner
    9. August 2009 at 05:32

    Thanks happyjuggler0.

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