MaxedOutMama
Friday, January 28, 2005
Behind the scenes
This is the latest issue of FYI, covering the FDIC's roundtable on current economic outlook:
Carl Steidtmann: “One thing that we should be worrying about is real hourly wages. We find real hourly wages to be a pretty good leading indicator of real spending. Again, it’s one of the factors that we look at when we're trying to measure cash flow into the household sector…. Real wages are going down now for a couple of reasons. One reason is we've had a bit of an acceleration in inflation. That, obviously, undercuts purchasing power. We've also had a real sharp increase in [the cost of] benefits. So, in a sense, you’re getting a little bit of a mix shift from the employer's perspective, away from wages and toward benefit costs. I think that's also depressing real wages. The impact falls more on middle- and lower-income households, those households that are more dependent on real hourly wages.”If you click on the link above, you can read the whole FYI or access the entire transcript of the discussion. This is information the regulatory agencies feel bankers must know in order to properly evaluate future trends that may produce risk. One of the oddities about the current situation is that what's being discussed in the papers is completely opposite to what's being discussed by financial institutions (or even the CBO). It's as if we were living in parallel universes.
Allen Grommet: “We're concerned about the effect of interest rates going forward, and it's not likely to get better. The rising rates will ultimately affect the housing market.”
Len Burman: “ … [I]f you adjust tax receipts for extension of the 2001–2004 tax cuts, you fix the [alternative minimum tax], you adjust spending for growth in entitlements and defense … by the year 2013, there's basically nothing left for anything else unless you finance it through deficits. … The problem is that [Baby Boomers] are all getting near retirement age now, and that's going to put immense demands on the budget. … Over the long run, unless we actually deal with these problems, this clearly will have a negative effect on the economy.”
