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State of the Economy

State of the Economy. Robert P. Murphy Mises Academy August 12, 2011. I. Monetary Policy. A . The Bubbly Stock Market. B. The Stock Market & the Fed. C . Interest Rate Signals?!. D. Fed & Housing Bubble. E . Unprecedented. II. Puzzling Price Inflation?.

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State of the Economy

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  1. State of the Economy • Robert P. Murphy • Mises Academy • August 12, 2011

  2. I. Monetary Policy

  3. A. The Bubbly Stock Market

  4. B. The Stock Market & the Fed

  5. C. Interest Rate Signals?!

  6. D. Fed & Housing Bubble

  7. E. Unprecedented

  8. II. Puzzling Price Inflation?

  9. A. Has “Money Supply” Exploded?

  10. B. Reserves Sitting At Fed

  11. C. “Official” Consumer Price Inflation

  12. D. But Producer Prices…

  13. E. Dollar Resumes Free Fall

  14. VS. F. Dangers of Aggregation

  15. If lent out all excess reserves, commercial banks could create ~$16 trillion in money held by the public, about a 9-fold increase. Even if this didn’t affect demand to hold USD, would mean gas prices in ballpark of $30/gallon. G. Time Bomb?

  16. H. Fed’s Exit Strategy?

  17. III. The Fiscal Mess

  18. A. Digging In Fast

  19. Present-value of long-run shortfall in total government obligations (Social Security, Medicare, etc.) versus projected receipts runs anywhere from $60 - $100 trillion. B. Accrual Versus Cash Acc’ting

  20. C. CBO Baseline Projections

  21. D1. What About Tea party Deal?!

  22. D2. Tea Party Deal (Cont’d)

  23. IV. The Future

  24. Expect sluggish “real” growth (high unemployment), with sharply rising consumer prices eventually. Stock market may crash again, but in long run (after Eurozone implodes) U.S. bonds leave holder vulnerable to price inflation. A. Batten Down the Hatches

  25. B. Don’t Despair!

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