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fomc | 2,003 | It was not, in part because their employment growth has been so strong. If one had a crystal ball and could discern the changes in structural productivity from the adjustment components and so forth, one could draw some conclusions. We on the staff remain equally interested in and to some degree puzzled by the Canadian... | 88 |
fomc | 2,003 | Second, in the productivity analysis for the United States we always used to factor out capital composition, for example. We've ceased doing that in the last year or two. Is there any particular reason why? | 40 |
fomc | 2,003 | The capital composition? | 4 |
fomc | 2,003 | In other words, there was a shift toward higher valuated capital stock as differentiated from the constant dollar value. | 22 |
fomc | 2,003 | I believe that's in there. | 6 |
fomc | 2,003 | It's in there through the way we calculate the capital services part of the capital deepening. | 18 |
fomc | 2,003 | I understand that. What I'm saying is that you used to split it out either as a separate category or a memo item. You tend not to do that anymore. | 33 |
fomc | 2,003 | Well, I think that was many years ago, and that's because we used capital stock growth rather than capital services and we would then make the adjustment for changes in composition. But when we shifted over to using capital services, which incorporates that effect, we no longer showed that separately. | 56 |
fomc | 2,003 | But you still do show the constant dollar capital stock from which one can in fact infer the differential. What is it that you forecast? Do you have it by chance? | 34 |
fomc | 2,003 | I'm not sure I have it with me. | 9 |
fomc | 2,003 | Don't worry about it now. | 6 |
fomc | 2,003 | Yes, we may have to send something to you on that later. | 14 |
fomc | 2,003 | When you get it, just send it on. I think I have it somewhere, but I can't find it. I noticed in the last several weeks that the implicit CPI forecast, which is on the Treasury inflation-adjusted securities, jumped significantly. Is that a technical-- | 54 |
fomc | 2,003 | We've found over the last couple of years that inflation compensation inferred from the indexed debt is very sensitive to oil prices--a little oversensitive. So we can explain part of that by the run-up in oil prices. | 43 |
fomc | 2,003 | Thank you. President Broaddus. | 8 |
fomc | 2,003 | I have two questions, Mr. Chairman. One quick detail question: On the middle left panel of chart 5, what is the difference between the trend and the transitory components of structural productivity? | 40 |
fomc | 2,003 | The trend component was the part that we thought would persist; the transitory part reflected the level effects that we saw going on. So if a business restructures--makes some one-time efficiency gains that we think are going to last in terms of the level of its productivity--we call that the transitory effect. We saw ... | 115 |
fomc | 2,003 | Thanks. The second question I have is for Karen; it has to do with the dollar. I've been on the call for the last month, and one day we had a brief discussion about the unusual nature of the current situation. In the past, in times of great uncertainty and geopolitical risks the dollar often has been considered a safe ... | 248 |
fomc | 2,003 | Well, the staff members who deal with the domestic side of the economy might be better able to answer that question. As a preliminary comment on your question, I would have to say that we've thought about this a fair amount, and we really don't have any answers. But one of the things that we think helps the thought pro... | 777 |
fomc | 2,003 | Karen, that's a very important issue that you've just pointed out. Would you have somebody write a short memorandum encompassing the thesis and the evidence supporting it? In other words, there's a differential here in terms of the flexibility of adjustment in the United States and the rest of the world. It would be us... | 76 |
fomc | 2,003 | We will look into it and do what we can. | 11 |
fomc | 2,003 | Governor Bernanke. | 4 |
fomc | 2,003 | Your decomposition of multifactor productivity into permanent and temporary components is, I guess, largely statistical. I wanted to push you a bit more as to whether you had direct evidence on the permanence of MFP growth and on technological dynamism in the U.S. economy more generally. You do have that graph on R&D s... | 292 |
fomc | 2,003 | We don't have a ton of direct evidence. Basically that R&D graph was an attempt to get at the idea that technology has continued to advance in recent years but perhaps not as rapidly as the rate of advance in the late '90s. If one digs a little deeper into the statistics, it is apparent that the growth in R&D over the ... | 330 |
fomc | 2,003 | Could I make a two-handed intervention here? I'm rather surprised, Sandy, that in response to Governor Bernanke's important question you didn't talk a little about developments in the world of semiconductors. If one listens to folks in that industry, they cite a number of, I think, reasonably credible but yet-to-be-pro... | 176 |
fomc | 2,003 | There are obvious cases like that in biotechnology also. What strikes us is that today these tend to be more evolutionary in the structure of technology than revolutionary the way they were perhaps in the 1990s, when a whole new industry and way of doing business came into being. | 55 |
fomc | 2,003 | That's fair, but there are still some in the industry--and this will be my last comment--who would argue that there's still further to go. | 30 |
fomc | 2,003 | I'm not saying that there isn't further to go. That will happen. But over our forecast period, given the other conditioning assumptions, this is what we view as the most likely scenario. | 37 |
fomc | 2,003 | Do you do any kind of sectoral breakdown of your MFP projections? | 15 |
fomc | 2,003 | No. | 2 |
fomc | 2,003 | Thank you. | 3 |
fomc | 2,003 | Vice Chair. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. Let me shift to the international arena. I think two very important events occurred yesterday that affect which of the likely Iraq scenarios will play out. One was obviously the State of the Union speech by the President. The other, which may be equally important, was that President Putin of Ru... | 205 |
fomc | 2,003 | We're getting on a bit from that period! | 9 |
fomc | 2,003 | The West, after being subservient to a predominantly and powerful Islamic world, began to modernize. The Islamic world had a choice of either competing or of retreating into religion and an unwillingness to modernize. That has continued ever since. Iraq is the seat of civilization as we know it, never mind Islamic civi... | 155 |
fomc | 2,003 | The Saudi's Abdullah last week started to raise the question of Arab reform. | 15 |
fomc | 2,003 | Indeed. That's exactly where I'm going. If there is a successful modern regime and there is reform, that would be wonderful. The question is, Will the reform be benign? Will it take place over an orderly period of time, therefore allowing that part of the world to modernize and become a seat of stability and of growth ... | 636 |
fomc | 2,003 | You've painted the picture in its extreme form, shall we say, for the sake of the discussion. | 20 |
fomc | 2,003 | Deliberately. | 4 |
fomc | 2,003 | It sounded factual to me! [Laughter] | 10 |
fomc | 2,003 | The sad part is that it's exaggerated but factual. | 10 |
fomc | 2,003 | Yes. Let me put one additional fact on the table and then try to give some kind of answer. Brazil's biggest debt problems are the debts that the Brazilians owe to other Brazilians. So the consequences for Wall Street or the industrial countries of default by Brazil vis-a-vis Uruguay differ. Default by Brazil doesn't re... | 760 |
fomc | 2,003 | We can have an amendment to the Sarbanes-Oxley bill to the effect that the accounting is to apply to the IMF as well as everybody else! | 32 |
fomc | 2,003 | Well, it's a tough situation. | 7 |
fomc | 2,003 | Just as a footnote, I think Karen's answer is what one would have to say; it's the right answer. In these countries when you forbear, you appease the worst of their politicians, and you discourage the ones--they may be somewhere--who are sensible enough to do the right thing. So the likely next president of Argentina p... | 102 |
fomc | 2,003 | You know, an actual default changes nothing. A good part of the issue involves the internal politics of the IMF and the need to replenish capital in the event of loss, which gets to the taxpayers of the G-7, and that is not an insignificant element in their decision. I am correct that the staff at the IMF was not enthu... | 72 |
fomc | 2,003 | The staff at the IMF wanted a real program. If it was going to be called a program, they wanted it to have teeth. Indeed, the managing director had been told originally, when he first took office, that the IMF was going to have smaller programs and that it was going to be more realistic and firmer in conducting these t... | 99 |
fomc | 2,003 | President Hoenig. | 4 |
fomc | 2,003 | Thank you. Circling back from those lofty questions, I have a relatively mundane one on the risks to your forecast and the outlook. It has to do with the consumer, who has been very important to our economy's ability to maintain itself through this difficult time. If one looks on chart 3 at what I'll call the debt burd... | 183 |
fomc | 2,003 | Well, the simplest answer is that empirically we've never actually been able to find a relationship between debt burdens and consumer spending at the aggregate level. We attempt to look at some of these data at a more disaggregated level, and the bottom left panel is one way of trying to do that. As I pointed out earli... | 286 |
fomc | 2,003 | Obviously, from a broader perspective, one can say that there are some downside risks associated with the consumer sector. We are expecting a very weak labor market over the first part of the year. There are already some signs of concern in the household sector, and those concerns could be compounded by a continuing ri... | 289 |
fomc | 2,003 | Thank you. | 3 |
fomc | 2,003 | President Poole. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. After these very large issues I have a rather mundane one. I've been struck in recent weeks and months by the movements in commodity prices, and I noted particularly the chart on commodity prices on page 36 in Part 2 of the Greenbook. It looks as if the commodity price increases really took hol... | 138 |
fomc | 2,003 | Well, it's certainly true that commodity prices are up a bit in some categories. I don't have them corrected in an SDR basket or the like, although I could do that at some point just to see what it shows. But we would suggest that the increases are occurring selectively in certain categories where for the most part we ... | 191 |
fomc | 2,003 | Steel scrap is a major one--its spot prices have risen dramatically--in the metals components of the general Commerce index. | 24 |
fomc | 2,003 | President Poole, we also think that it's probably an indication that the very modest improvement we believe is occurring in industrial production is in fact happening. In some sense, I think it reflects more than just the dollar effect. Our sense is that it's also signaling that the softness we saw in industrial produc... | 86 |
fomc | 2,003 | President Minehan. | 4 |
fomc | 2,003 | I have some mundane issues as well. First, I guess I'm struck by how much stronger the second half of this year and 2004 are in the Greenbook forecast than in the majority of other forecasts, such as that of DRI. Particularly for 2004 the staff's numbers are way out there. Second, each of the factors in chart 2 that La... | 406 |
fomc | 2,003 | I'll start, and others can join in. First, let me make a brief comment on our forecast versus those of many outsiders. It's hard to know exactly, but I think one of the main differences between our forecast and many of the outside forecasts--especially when we're talking about 2004--is our productivity assumption. We c... | 80 |
fomc | 2,003 | Yes. | 2 |
fomc | 2,003 | Let me go through a couple of the other issues you raised and try to address some of them. The main question you asked was, in effect, where are the upside risks in this forecast. If I were to go through the upside risks, an important one would be capital spending. The point of chart 4 on capital spending was to show t... | 180 |
fomc | 2,003 | Compared with other forecasts of P&E, the staff forecast already has a strong number. | 17 |
fomc | 2,003 | Granted. But you're asking for the upside risks, and I'm just saying that I think there is some upside risk there. | 24 |
fomc | 2,003 | So you think it could be even stronger. | 9 |
fomc | 2,003 | It certainly could be stronger, and that would be an important risk I would point to. Is there a possibility that we've been low-balling productivity growth? Perhaps. I wouldn't put a lot of weight on that one. As for the stimulus associated with past changes in monetary policy, we still have some stimulus in train. I ... | 265 |
fomc | 2,003 | Actually, on the fiscal policy side, I see the risks as more to the upside than the downside. We've built in less stimulus than the Democrats have proposed and less than the Administration has proposed. If our forecast is correct, we will have an economy in which the unemployment rate is going to be rising. In that cir... | 650 |
fomc | 2,003 | Right. | 2 |
fomc | 2,003 | We just don't have a lot of science that we can bring to bear here. | 16 |
fomc | 2,003 | Okay, any further questions? If not, who would like to start our roundtable? President Parry. | 22 |
fomc | 2,003 | Thank you, Mr. Chairman. The Twelfth District economy continued to expand in recent weeks but at a very modest pace. Consumers turned in a disappointing performance during the holidays, and early numbers for January suggest that they remain hesitant and price conscious. One retail consultant characterized the current e... | 1,107 |
fomc | 2,003 | President Broaddus. | 5 |
fomc | 2,003 | Thank you, Mr. Chairman. Our District economy has been fairly sluggish overall since the last meeting, and I have a sense that there probably has been some deterioration in both household and business confidence. The cold weather may be part of it. It was colder in Myrtle Beach the other day than in Anchorage, if I'm n... | 1,034 |
fomc | 2,003 | President Hoenig. | 4 |
fomc | 2,003 | Mr. Chairman, my comments are going to sound fairly familiar. The situation hasn't changed much since the last time we met. The District economy has been and continues to be sluggish. There aren't a lot of signs of improvement since our last meeting. Manufacturing activity, from what we've observed in the region, actua... | 609 |
fomc | 2,003 | President Guynn. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. Economic activity remained sluggish in our Southeastern region through December and early January this year. Many of our regular contacts in those sectors that are still seeing little or no rebound are saying, "What recovery?" Someone I talked with recently dusted off an old Southern country bo... | 1,270 |
fomc | 2,003 | President Moskow. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. Economic activity in the Seventh District generally appears to have remained soft in December and January. Our contacts' expectations for 2003 are mixed, although perhaps a little better than a month ago. So let me start with the good news. The automobile industry ended another very strong sale... | 887 |
fomc | 2,003 | President Minehan. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. Not a lot has changed in the New England region. Labor markets remain relatively weak with continuing job losses mostly in Massachusetts. Such losses continue to be most severe in manufacturing, with other industries showing marginal gains and losses. Unemployment did trend down slightly in Nov... | 1,118 |
fomc | 2,003 | Governor Kohn. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. The economy remains suspended between ongoing weakness in the here and now and prospects for future strength, and we've seen a bit more evidence supporting each of these sides over the intermeeting period. There's a long list of factors pointing to a strengthening trend for economic growth over... | 1,007 |
fomc | 2,003 | Governor Gramlich. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. I'm an avid reader of the "news clips," and I had seen reports about several of your talks mentioning lights at the end of the tunnel, the economy being well positioned for recovery, and that sort of thing. I was going to add some moderately downbeat comments today. Now that I have actually hea... | 813 |
fomc | 2,003 | President Stern. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. Let me begin with a quick rundown of what has been happening in terms of the readings on the District economy. All in all the reports remain mixed, but I would say that on balance they may be a bit better. A couple of sectors aren't better. One is agriculture, where the combination of unfavorab... | 661 |
fomc | 2,003 | Okay. Let's take a relatively short break | 8 |
fomc | 2,003 | Governor Gramlich and I had a fascinating discussion over coffee about the Revolutionary War. I will spare you that conversation. SPEAKER(?) Which revolution? | 29 |
fomc | 2,003 | The American Revolution. | 4 |
fomc | 2,003 | I couldn't go back to the sixteenth century! [Laughter] | 14 |
fomc | 2,003 | The Second District economy has been mixed but generally weaker since the last report. The labor market has softened noticeably. Housing activity has retreated, but manufacturing conditions have improved a bit. Retailers report that holiday season sales were generally sluggish, marked by very steep discounting but dece... | 481 |
fomc | 2,003 | President McTeer. | 5 |
fomc | 2,003 | The economy in the Eleventh District has continued its lackluster expansion. If we use employment as our measure, Texas is having a jobless recovery in which output grows while employment slows. As best we can tell, given the lags in regional data, income and output have been growing--assuming our productivity growth m... | 598 |
fomc | 2,003 | President Poole. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. Unlike Ned Gramlich, who used a football metaphor, I'm going to use a boating metaphor. I think the economy is like a high-powered speedboat moving forward; however, we don't know how far forward the throttle is. There's a rope over the stern--this is the war anchor--but we don't know how big t... | 959 |
fomc | 2,003 | President-presumptive Pianalto. | 7 |
fomc | 2,003 | Thank you, Mr. Chairman. I'll begin my remarks with a report from La Paz, Mexico, where Jerry Jordan is taking possession of his new sailboat. He sent me an e-mail a few days ago saying that he had found a dollar store there--sort of. [Laughter] It is called "Uno Precio," and everything in the store is priced at 10 pes... | 871 |
fomc | 2,003 | Governor Ferguson. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. One of the things I've observed in various committees I've been on and in other decisionmaking situations is the difficulty of knowing what you know and knowing what you don't know. This meeting strikes me as one of those cases where understanding that difference is key. Just to review what we ... | 445 |
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