1
Everything You Wanted to Know About the Current
Financial/Economic Crisis, but were Afraid to
AskOr Where are we, how did we get here and
where are we headed?

• Professor Michael Palmer
• Leeds School of Business
• Presentation to Eastside Residential Brokers
• Bellevue, Washington
• December 5, 2008

2
Quick Bio

• Michael Palmer, Professor of Finance, Leeds
  School of Business, University of Colorado.
• Education Ph.D. University of Washington, 1967
  (Finance and Macro-economics)
• Visiting Professor Status Kansai Gaidai
  University, Osaka, Japan Jiao Tong University,
  Shanghai, China Semester at Sea
• Academic Director London Seminar in
  International Finance

3
Ben Bernankes View and My View

• Ben Bernanke (April 10, 2008)
• "We now know the lessons from the Depression.
  We are certainly going to make sure that the
  financial system remains in good functioning
  order.
• My view
• We are in an unprecedented economic slowdown,
  caused by a combination of (1) a historically
  financial market freeze, (2) a massive negative
  wealth effect resulting from a dual real estate
  and stock market collapse and (3) a collapse of
  consumer confidence.
• In this unique environment, the past is probably
  not a particularly good road map for the present
  nor the future.
• True for policy makers and forecasters.

4
Goal of this Presentation

• Three primary issues to be covered today
• (1) The Past How did we get here aka How Did we
  Get into this Mess in the First Place?
• (2) The Present Where Are we Today?
• (3) The Future Where Might we be Going?
• With focus on the national and global economies.

5
Theme of Presentation

• The country is caught in an unprecedented crisis
  involving a
• (1) lack of confidence in its financial markets
  and financial institutions.
• Affecting interbank and external lending and
  essentially freezing these critical markets.
• (2) a collapse of stock prices and real estate
  prices.
• Resulting in massive negative wealth effects.
• (3) a collapse of confidence of consumers in the
  economy and in their situation.
• Affecting household spending

6
What we Must do

• We cannot let the financial system fail.
• The financial system is the grease that keeps the
  economy going.
• We need to shore up financial market liquidity
  and provide direct lending where markets are not
  functioning.
• We need to address mounting home foreclosures.
• Currently in foreclosure (2.97 of all mortgages)
  and 30 days overdue 6.99 both figures at the
  highest level since data was collected 29 years
  ago.
• We need to restore consumer confidence.
• No magic bullet here, but it is likely a
  combination of political and fiscal stimulus.

7
Issue 1 How Did We Get Here

• How did this happen?
• The 2002-2006 period was characterized by
  over-stimulative monetary and fiscal policies
  which contributed to a surge in (1) financial and
  real asset prices along with (2) skyrocketing
  consumer debt.
• And created unsustainable Super Bubbles
• The first bubble to burst was the housing bubble.

8
Housing Leads the Way

• August 2007, the sub-prime mortgage market
  surfaces as a potential issue.
• A combination of economic and financial factors
  results in rising home foreclosures.
• Foreclosures in 3Q06 223,223
• Foreclosures in 3Q07 446,726 (100)
• Foreclosures in 3Q08 765,558 (71) and the
  highest since records began in January 2005.

9
And Housing Continues to Suffer

• Housing prices, starts and sales slide.
• New house prices 3Q08 -16.6 from 3Q07 (Median
  price of 218,000 in Oct is lowest since
  September 2004)
• Existing house prices Oct 08 Median price
  183,000, down 11.1 from a year ago.
• Housing starts Oct 08 791,000 annual rate
  (lowest since records began in 1959).
• Sales of new homes Oct 08 -5.3 annual rate to
  433,000 annual units (lowest since January 2001
  and 40 lower than a year ago)
• Sales of existing homes Oct 08 -3.1 annual
  rate to 4.98 million units

10
Enter Securitization

• Financial institutions were also involved in the
  securitization (i.e., pooling and distribution)
  of loans (sub-prime mortgage loans, commercial
  real estate loans, consumer loans, student
  loans).
• This took place at the same time that rating
  services were unable (or unwilling) to
  successfully evaluate the risk associated with
  these loan packages.
• Regulations, unfortunately, did not keep pace
  with changing financial structure.

11
Financial Market Freeze

• While there were sub-prime market danger signs
  as far back as August 2007, U.S. financial
  markets really began to freeze up in early to
  mid-September 2008 around the time of
• the Fannie Mae/Freddie Mac bailout (Sept 8),
• Lehman Brothers failure (Sept 12),
• Merrill Lynch take-over by BofA (Sept 15),
• AIG 85 billion rescue plan (Sept 16th)
• Washington Mutual take-over by JPMorgan (Sept
  25th)
• Federal Reserve rescue of commercial paper
  markets (Oct 7).

12
Manifestations of Financial Market Freeze

• Freeze was manifested in
• Spreads of investment grade corporate bonds
  (e.g., Aaa and Baa) over Treasury bonds rising
  to record levels.
• Commercial paper market and investment grade bond
  markets shutting down.
• Money market fund outflows (some broke the
  buck).
• Increasing interbank lending spreads to default
  free returns (in the Fed funds and LIBOR markets)
• Reflecting a lack of confidence in financial
  institutions and over-all risk aversion

13
Corporate Spreads

• Baa Aaa and Baa- Govt

• Basis Point Spreads

• Both a measure of risk aversion and confidence.
• Baa-Aaa average spread (1977 to Present)
  107basis points.
• Dec 2, 2008 349
• Baa-10 yr Govt average spread (1977 to Present
  208 basis points.
• Dec 2, 2008 612

14
TED Spread Interbank Markets Lack of Confidence
in One Another

• TED Spread

• 2007 - Present

• TED Spread (another measure of confidence and
  risk aversion)
• TED 3-month LIBOR rate
• 3-month T-Bill rate
• January 1990 to July 2007 the TED spread averaged
  41 basis points.
• In October 2008 the spread reaches 464 basis
  points (the highest since data collection began
  in 1971.
• Reflected a frozen interbank market.

15
Response of U.S. to Freeze

• U.S. responded with 700 billion bailout package
  (Troubled Asset Relief Program, Oct 3rd ) and
  Federal Reserve interest rate reductions and
  Federal Reserve emergency loans/liquidity
  injections.
• TARP program has thus far injected 350 billion
  (250 billion to buy equity states in banks and
  100 billion to AIG).
• On November 24, the Government announces it
  (Treasury and Fed) is prepared to lend more than
  7.4 trillion to rescue financial markets.
• This is roughly equal to 50 of nominal U.S. GDP

16
Result of U.S. Credit Freeze on Financial Players
and Markets

• Bailouts or sales of financial institutions
  (Fannie Mae, Freddie Mac, AIG, Merrill Lynch,
  Citigroup)
• Disappearance of stand-alone U.S. investment
  banking firms.
• Bankruptcies of long standing financial
  institutions (Lehman Brothers and Bear Sterns)
• And, within a short period of time, the U.S.
  credit freeze spreads to overseas financial
  markets.

17
Freeze Spreads to Real Economy

• The ripple effects of the credit freeze quickly
  spread to the consumer sector where we saw a
  rapid decline in consumer spending.
• The combined freezing of credit and the decline
  in consumer spending become the main drivers in
  pushing down the real economy.
• At the same time, and in response to the crisis,
  an erosion of confidence in the financial system
  and in the economy itself takes hold.
• Further affecting consumer and business spending.

18
But how Did We Get to this Point?

• Enter Alan Greenspan

• Fed Funds Rate

• Federal Reserve responds to the 2000 dot-com
  stock market crash and terrorist- attack
  induced recession of 2001.
• NASDAQ loses 72 of its value SP 500 loses 46
  DJ loses 29
• Greenspan pushes Fed funds rate to 1.0 (levels
  not seen since the 1950s)

19
Greenspan Pushes Real Interest Rates Below Zero

• Concept of Real Rate

• Real Fed Funds Rate

• The real rate of interest is the market rate
  adjusted for the rate of inflation (or market
  interest rate inflation)
• A high real rate is regarded as a very
  restrictive policy stance, while
• A low or negative rate is seen as very easy
  policy stance.
• Why? Lenders will pay back loans with cheaper
  money.

20
And Real Interest Rates Fall on Long term Debt as
Well

• Corporate Bond Rates

• Mortgage Rates

21
Creation of Super Bubbles

• Seeds of the Bubbles

• Economic Growth

• Excessively expansionary monetary policy, results
  in
• Falling real rate of interest
• Which in turn over-stimulates borrowing and
  economic activity.
• And creates the seeds for the super bubbles!

22
Creation of The Super Bubbles

• Stock Market 2003 2007 Dow Up 76.5

• Housing Market 1998-2006 Real House Prices Up 8
  per year

23
And Super Debt Bubbles

• Total U.S. Debt as a of GDP Over 325

• Debt Market Household Debt Rising to 130 of GDP
  (While Savings Falls)

24
U.S. and the Rest of the World

• U.S. Debt with the Rest of the World Current
  Account Deficit 200 Billion a Year by 2007

• And our Dollar Starts to Fall

25
End of the Super Bubbles Negative Wealth Effects

• Stock Market Oct 2007 to Present 44 (-100
  - 3 in consumer spending)

• Housing Prices Peak 2Q06 - 18 (-100 -13 in
  consumer spending)

26
Consumer Confidence Goes South

• Consumer Confidence Index (CCI)

• CCI October 07 95.6
• CCI October 28 -23.04
• CCI November 25 44.0

• This is probably the most widely reported
  consumer confidence measure.
• The index is released by the Conference Board on
  the last Tuesday of each month (ever since 1967).
• CCI is a mail survey of about 5,000 households.

27
And Consumers Cut Back on Spending

• Why is this Sector Important?

• Consumption Excluding Real Estate (monthly data)

• Household spending represents 68 of GDP
• Household spending peaked in 2Q08 (May 2008).
• Consumer spending fell by 3.7 in the 3Q08 (which
  was the first quarterly negative change since
  1991)

28
But As Noted Slowdown Started Earlier in
Residential Real Estate

• Why is this Sector Important?

• Real Residential Investment, Billions of

• While residential housing represents about 3.5
  of real GDP, it is one of the most volatile
  components in GDP (fluctuations of /- 20 in one
  year).
• This sector has a large economic spillover effect
  (indirect effects) which is estimated at from /-
  .5 to 1.1 percentage points to GDP growth.
• GDP account peaked in 4Q05

29
Spillover to Business Sector

• Producers Durables

• Peaked in early 2008

• Producers durable equipment (machinery, trucks,
  communications equipment, etc) represents about
  11 of real GDP.
• It is regarded as a derived investment.
• Based on final demand.
• Peaked in 2Q08

30
Quick Review of Current Situation

• U.S. in a housing lead slowdown
• Financial crisis spilling over to real economy
  through
• Growing loss of confidence resulting in
• Frozen financial markets
• Falling asset prices (Good-bye Super Bubbles)
• Negative wealth effects from equities and real
  estate continue.
• Consumers cutting back and,
• Negative GDP growth (NBER 12 month to date
  recession)
• Now nicknamed the Great Recession.
• Weakened financial institutions requiring ongoing
  government assistance.
• Weak household balance sheets (too much debt).
• Global contagion effect (economic slowdowns in
  Europe and Asia) which complicate U.S. recovery

31
Impact of Credit Freeze and Spending Reductions
Issue 2 Where are We Today?

• In a Recession!!!

• Real GDP

• Traditional definition
• Two consecutive quarters decline in real GDP.
• In the 3rd quarter of 2008, GDP fell -0.5, after
  rising 2.8 in the 2rd quarter.
• NBER data
• Put the beginning of this recession as December
  2007.
• Which would put us 12 months into current
  recession.

32
What Has been the Federal Reserves Monetary
Policy Response to the Financial Crisis?

• Lowered Interest Rates From 5.25 to 1.0

• Injected Liquidity Monetary Base Oct 33

33
Observations on Interest Rate Changes

• While lower interest rates might make us feel
  better -- they have done little up to now to
  stimulate buying or lending or to restore
  confidence.
• Questions regarding interest rate policy
• (1) Are we getting dangerously close to a
  Keynesian liquidity trap where low interest
  rate discourage lending? And if so,
• (2) Has the Fed really adopted a quantitative
  easing policy whereby injecting financial
  markets with liquidity become the overriding
  policy? And if so,
• (3) Is the Fed setting the stage for the next
  bubble?

34
Whats the Problem with Lowering Interest Rates
Even More?

• Keynesian Liquidity Trap

• Elastic Demand for Liquidity

• We may be facing a form of the Keynesian
  liquidity trap?
• Liquidity-preference may become virtually
  absolute in the sense that almost everyone (i.e.,
  banks) prefers cash (reserves) to holding a debt
  (a loans) which yields so low a rate of
  interest....
• John M. Keynes, General Theory (1936)
• Monetary policy will not work at this point
  because lenders are not willing to make loans.

35
And if we are at this point, has the Fed Adopted
Quantitative Easing?
36
Effective Fed Funds Rate Versus Target Rate Since
Oct 29th
37
And Whats been Happening to the Real Interest
Rate During this Time?

• Real Fed Funds rate

• Fed Reserve Interest Rate Policy

• With its initial easing of the fed funds rate in
  September 2007, the fed has lowered rates 9 times
  from 5.25 to 1.0.
• In December 2007 the real rate reached 0.
• Since that time it has been negative.

38
Observations on Liquidity Injections

• Fed and Treasury Department have responded with
  injections (actual and announced) of large
  amounts of liquidity into the financial system.
• 3 Issues to think about
• (1) The government is becoming a major
  shareholder in banks and other financial
  institutions.
• Globally, governments have estimated holdings of
  500 billion in their banks, or about 25 of
  current market values.
• Is there a risk of creeping intervention in the
  day-to-day management of these banks (e.g.,
  Japan in the 1990s).
• How will governments sell back such large
  positions?

39
Observations on Liquidity Injections

• (2) How does the government prevent banks and
  other financial institutions from simply choosing
  to shore up their capital base as opposed to
  making loans to sound business firms and
  households.
• This is bank-lending liquidity trap.
• U.S. position thus far has been to encourage
  lending -- but there is not much accountability.
• France has actually mandated lending quotas to
  their banks.
• Should the U.S. do this?

40
Observations on Liquidity Injections

• (3) There is the danger that the Fed and Treasury
  Department will go too far, setting the stage for
  a big rise in inflation or more asset bubbles in
  the future.
• At this point, however, the downside risk with
  this massive liquidity injection is overshadowed
  by the risk that the economy could spiral into a
  deflationary nosedive.
• But at some point, this liquidity will have to be
  neutralized (sterilized or withdrawn).

41
Lets See What the Market Done With Some of this
Liquidity?

• A Flight to Safety

• Impact on Yield Curve July 2007 End of October

• Investing in Safe-Haven financial assets
  because of an increase in risk aversion
• Moving into U.S. Treasury bills and U.S. Treasury
  notes.
• A global movement.
• Biggest impact on shorter segment of U.S. yield
  curve pushing down the short end of the curve.

42
And the Yield Curve Now

• All Maturities are Down

• Early Nov to Dec 4, 2008

• Reflecting
• On going flight to safety
• Continued easing by Fed in fed funds market.
• Expectations for Fed involvement in longer term
  segment of Treasury market.
• http//stockcharts.com/charts/yieldcurve.html

43
Issue 3 Where are we Headed?

• Bloomberg Forecast

• NABE Forecast

• November 17th National Association of Business
  Economists survey found the following GDP
  forecasts
• 3Q08 actual -0.5
• 4Q08 forecast -2.6
• 1Q09 forecast -1.3
• Forecast for 3 quarters decline in GDP

• November 12th survey of 59 economists found the
  following GDP forecasts
• 3Q08 actual -0.5
• 4Q08 forecast -3.0
• 1Q09 forecast -1.5
• Forecast for 3 quarters decline in GDP

44
How Long Might this Recession Last? Recall we are
about 12 months into it

• 1902 2001 Recessions Average length 13 months

• 1973 2001 Recessions Average length 10.8
  months

45
Consumer is an Important Key to the Future of
this Economy

• Consumer spending will be affected by
• Confidence (thus far a negative effect of the
  financial and economic crisis on consumer
  confidence)
• Income levels (thus far negative effects from
  income and unemployment trends)
• Wealth effects (thus far negative effects of
  declining stock market and housing prices)
• Look for signal from upcoming holiday season
• Will the recent reduction in gas prices provide a
  boost to retail sales?
• Black Friday sales up a decent 3 from a year
  ago (smallest since .9 decline in 2005 6.0 in
  2006 8.3 in 2007).
• Cyber Monday (Dec 1) sales were up 15, the
  second biggest increase on record.

46
Follow Consumer Spending and Income

• Consumer Sentiment Index

• Monthly Consumer Data

• Monthly data released by the Commerce Department
  the last Wednesday of the month
• Consumer spending
• September -0.3
• October -1.0, the most since the 2001
  recession.
• Personal income
• September 0.1
• October 0.3
• Difference represents an increase in household
  savings (savings rate now at 2.4 of disposable
  income a 5 year high)

47
Unemployment Rates

• Unemployment

• Unemployment Rate now at a 14 year high (Nov
  6.7 Oct 6.5 Sept 6.1)

• Affects consumer confidence and consumer spending
  decisions.
• Unemployment rates normally lag behind a business
  cycle recovery thus tending to rise even after a
  recovery is underway.
• Average lag since 1949 (7 recessions) has been
  10.4 months, but the variation is very large (1
  to 19 months).
• Nov 2001 recession ended and unemployment peaked
  in June 2003 (19 months later).

48
Follow the Stock Market

• 2001

• Halfway Rule

• Forecasters have noted that historically
  investors start discounting a recovering about
  half way through an average recession.
• Historically, stock prices move up (on average)
  about 5 to 6 months before a recession ends.
• Has the market bottomed out?
• Last week (Nov 24 29) stocks posted their
  biggest weekly gain since 1974

49
Stock Market Signals

• 1970s

• 1980s Early 1990s

50
Follow Important Interest Rates

• TED 464 in October Has TED Peaked?

• Interbank Rates

• Measure the confidence in the interbank markets
  and possible thawing
• TED Spread (3-month LIBOR 3-Month T-bill)
• Dec 3 down to 218Bpts
• Link to daily data at
• http//www.bloomberg.com/apps/quote?ticker.TEDSP
  3AIND

51
Follow Important Interest Rates

• Mortgage Rates October 2 to Present (30 year
  fixed) Weekly Averages

• External Market Rates

• Mortgage rates
• After the Feds Nov 26 announcement to purchase
  600 billion of mortgage related debt, the 30
  year fixed fell to 5.47 from 5.94 the week
  before
• This might help bring housing demand in line with
  supply?
• For the last week mortgage applications soared
  112. (includes both new purchase and
  refinancing)

52
Follow Political Announcements

• Out-going Administration

• In-coming Administration

• No new fiscal stimulus package should be
  expected.
• Perhaps ongoing capital infusions into banks and
  other key financial institutions.
• Expanded debt buyouts and direct market
  involvement as needed.
• Federal Reserve involvement in commercial paper
  markets and more recently in mortgage markets.
• FDIC initiated foreclosure prevention plan
  (involving loan re-negotiations) perhaps
  expanding to Treasury

• Look to team
• Role of Paul Volcker
• Early fiscal stimulus.
• What will it include?
• Need for quick start state by state
  infrastructure projects.
• Business and personal tax cuts.
• Help for the home sector.
• Expanded policies to deal with foreclosure.

53
Follow Fed Policies and Statements

• Statements Worth Noting

• Policies

• Fed funds rate.
• Not likely to move to 0 but still a little
  downward flexibility.
• Also look to spread of effective rate to target
  rate.
• If the effective rate moves closer to the target
  this might signal the Fed is more confident in
  financial situation.
• Any other policy initiatives?
• Look for Fed open market operations in longer
  term Government securities markets. This could
  ease longer term interest rates.

• We are clearly behind the curve on mortgage
  foreclosures.
• Shelia Blair (December 2, 2008)
• Despite good-faith efforts by both the private
  and public sectors, the foreclosure rate remains
  high. More needs to be done.
• Ben Bernanke (Dec 4, 2008)

54
Now Add this to the Mix Recession is Becoming a
Global Phenomenon

• Europe

• Asia and the Americas

• Iceland is bankrupt
• Germany and the rest of the Euro-zone (with the
  exception of France) have experienced 2
  consecutive quarters decline in real GDP.
• The United Kingdom has its own housing mess
  (house prices have fallen for 13 straight
  months).
• Forecasting worse recession in 30 years with a
  turnaround not expected until 2010.

• Japan is in a recession having experienced 2
  consecutive quarters decline in real GDP.
• First recession since 2001.
• China is slowing
• World Bank 2009 estimates 7.5 down from 9.2
• Also experiencing a deflating housing bubble
• Russia is in trouble.
• Canada is forecasting a recession through 2Q09

55
Foreign Central Banks Have Also Lowered their
Interest Rates

• Previous Rates

• Current Rates/Change

• Canada 2.50
• England 3.0
• Japan 0.5
• ECB 3.25
• Switzerland 2.0
• Australia 5.25
• New Zealand 6.5
• Korea 4.25
• China 6.66

• Canada 2.25 Oct 21/08
• England 2.0 Dec 04/08
• Japan 0.3 Oct 31/08
• ECB 2.50 Dec 04/08
• Switzerland 1.0 Nov 20/08
• Australia 4.25 Dec 02/08
• New Zealand 5.0 Dec 04/08
• Korea 4.0 Nov 07/08
• China 5.58 Nov 26/08

56
Are there Foreign Countries that We Should
Monitor?

• Perhaps Asia

• Europe

• Japan
• In recession (consumer spending has fallen for 8
  straight months), but the least G7 affected by
  credit freeze.
• China and India
• GDP slowing (still positive) but recent fiscal
  and monetary stimulus may improve growth.
• Possible kick-starters for global economy
  (through import demand)

• Nothing here to help global economy.
• U.K. expected to suffer its worse recession in 30
  years.
• Germany in recession and government running a
  fiscal surplus.
• Both U.K. and Eurozone have introduced their own
  stimulus packages.
• These will take time to turn these economies
  around.

57
And What About the U.S. Dollar?

• Turn around in July

• In Favor Again

• Over the last 6 months the dollar has taken on a
  global safe haven status
• The Japanese yen has also strengthened due to
  unwinding of carry trades.
• likely to remain strong if global uncertainty
  continues and as long as Europe appears
  relatively weak.
• Will ease U.S. inflationary pressures, but make
  it more difficult for foreigners to purchase U.S.
  real assets.

58
Possible Macro-Economic Scenarios

• Scenario 1 V shape

• Scenario 2 U, W or L shape

• Quick recovery
• Within 2 quarters
• Three of the last 5 recession have ended within 2
  quarters.
• Early on optimism for quick turnaround resulted
  from
• Assumed positive lagged response of Fed interest
  rate cuts and Spring 08 tax rebates.

• Now we are thinking about other possibilities
• U More gradual recovery (e.g., 18 months), or
• W Recovery followed closely by another recession
  (aka double dip e.g., in 1981, or
• L Prolonged recession (e.g., 43 months in 1929
  or Japan in the 1990s).

59
My View U-Shaped 18/21-Month Recovery Most
Likely Scenario

• Caveat The factors underlying a U-shaped
  scenario are notoriously difficult to predict.
• Specifically, exactly when and to what degree
  factors impacting household and business behavior
  will kick in and when they will translate into
  GDP.
• However, a U-Shaped recovery scenario is likely
  based on
• Severity of the financial/real asset bubble
  collapse and the financial market freeze and
  their affect on the real economy.
• Announced and anticipated layoffs (140,000 in the
  financial sector plus lagged unemployment effect)
• Falling retail sales.
• Large household debt burdens
• Little, if any, help from the foreign sector.
• I see this recession ending in the 2Q09/3Q09
  (Summer 09).

60
And What About Seattle?

• Seattle Housing Data
• House prices down 17 a year ago and sales down
  17.5 a year ago (35.8 down from last month)
• Seattle Economic Base
• Increasing unemployment
• October 2008 State unemployment rate 6.3
  (4.8 a year ago) Seattle area 5.4 (4.0 a
  year ago). (see second slide)
• Negative Impacts of recent layoffs (WaMu
  cutting 3,400 Seattle jobs)
• Positive Global links
• Exporting
• Bellevue-Seattle-Tacoma Metropolitan Area is the
  fourth largest export market in the nation (2007
  data) with Japan, China, and Canada the leading
  export destinations.

61
Seattle House Prices More to Come?

• Seattle Price Data

• Nominal Median Housing Prices since Peak

• U.S. peak, 2Q06
• Peak 252,514
• Currently 206,500
• Down 18
• Seattle peak Aug 07
• Peak 501,000
• Currently 415,000 (Nov)
• Down -17
• Source Professor Robert Shillers data base and
  Seattle Post

62
Seattles Unemployment Picture

• Data

• Comparisons

• In October 2008, about 203,820 people were out of
  work and seeking employment in Washington.
• the biggest job declines occurred in retailing
  (down 1,700 jobs), education services (down
  1,700), manufacturing (down 1,300) and
  construction (down 1,100). Economists don't count
  striking workers as unemployed, so the 24,000
  striking Boeing Machinists didn't contribute to
  the unemployment rate.

63
Final Quotes

• An economic forecaster is an expert who will
  know tomorrow why the things he/she predicted
  yesterday didn't happen today.
• Laurence J. Peter
• If past history was all there was to the game,
  the richest people would be librarians.
• Warren Buffett

64
Questions and Answers and Comments and
DiscussionFollow-up Questions/CommentsMichael.P
almer_at_colorado.edu