Regional President Speech

SILAS KEEHN REMARKS ASSOCIATED EMPLOYERS OF THE QUAD CITIES HOLIDAY INN DAVENPORT, IOWA APRIL 3, 1986 "AIL'S WELL THAT STARTS WELL - OR IS IT?" I. INTRODUCTION ur,,~ (\1 ~ A. FIRST VISITED AREA LATE 195OS - 1. PLEASED TO BE BACK - B. DON'T WANT TO BE CAUGHT UP IN EUPHORIA OF THE MOMENT - BUT PARTICULARLY EXCITING TIME .. ~ ~ 1.. ELABORATE IN A FE~M J_N~~:sW~• ~.,h~ _t..,~-, 2. cito~ . UNIQUE OPPORTUNITY"- .ALW~ ~N~"t.._ ~ ~-ll,.f 4f'J c., ' II. BEFORE LOOKING AHEAD - LOOK BACK A. SET STAGE FOR COMMENTS REGARDING THE OUTLOOK f:;trvJQCA..~~f B. LAST YEAR ENDED ON WEAKER NOTE THAN WOULD HAVE HOPED 1. EACH REVISION OF 4TH QUARTER GNP DOWNWARD A. LAST REVISION .7% / .I Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 2 2. ANNUAL BASIS 1985 +2.2% AFTER MUCH STRONGER ( +6 -~) 1984 3. 4TH QUARTER WEAKNESS HAS LED SOME TO CONCLUDE THAT WE'RE HEADED BACK INTO A RECESSION C. INDEED, SOME OF THE EARLY 1986 NUMBERS, PARTICULARLY FEBRUARY, LITTLE ON THE SOFT SIDE 1. UNEMPLOYMENT RATE A. JANUARY/FEBRUARY p.._g · 2. RETAIL SALES - WEAK-~~~/ . -(fl-P ~- F'-k op:r;; ~ r 3. INDusTRIAL PRoDucTroN ~ ~ ~ F°~ 4. NON-DEFENSE DURABLE GOODS -~ 5_?7z-cJJ), AA/~.,;t,,,,../ < III. BUT IMPORTANT TO KEEP THESE IN A BROADER PERSPECTIVE - ON A NATIONAL BASIS WE ARE OPERATING IN A VERY STRONG ECONOMIC ENVIRONMENT A. DESPITE WHAT SEEMS LIKE MODEST GROWTH IN 1985, THE NATIONAL ECONOMY HAS PERFORMED WELL Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 3 1. AT THE END OF LAST YEAR, MAJOR MEASURES OF PERFORMANCE WERE AT RECORD LEVELS A. GNP IN 1982 DOLLARS - 10% ABOVE 1981 PEAK B. INDUSTRIAL PRODUCTION - 11% ABOVE 1981 PEAK v~ srtwNc,.. C. PAYROLL EMPLOYMENT - OVER 8 MILLION HIGHER THAN PREVIOUS PEAK - ,VE RY SIGNIFICANT GAINS ~ 0Q-.1M1..' (1} EMPLOYMENT '&eet WILL GO. THROUGH 100 MILLION EARLY THIS YEAR - ~ ~t_Ru~ ( 2} UffD1PL8\'P1ENT - VERY REAL AND HUMAN (3} EMPLOYMENT PERSPECTIVE - EXPANSION NOT GIVEN FULL CREDIT D. WHILE INCREASE IN INFLATION SMALLEST SINCE 1967 2. NOW INTO THE 4TH YEAR OF ECONOMIC EXPANSION A. ONLY 2 OTHERS SINCE WORLD WAR II HAVE LASTED THIS LONG Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 4 3. FURTHER, IN MANY RESPECTS THIS EXPANSION COMPARES VERY FAVORABLY WITH OTHER POST WORLD WAR II CYCLES A. IF YOU ANALYZE VARIOUS COMPONENTS OF ECONOMY B. FOR EXAMPLE, CAPITAL SPENDING (1) LARGEST INCREASE IN CAPITAL SPENDING FROM BOTTOM OF CYCLE (A) HAVE RANGED FROM 15 TO 25% IN PAST CYCLES (8) THIS TIME ALMOST A 40% INCREASE (C) PRODUCTIVITY NOT CAPACITY EXPANSION - BODES WELL FOR OUR FUTURE COMPETITIVENESS B. GOOD NATIONAL PERFORMANCE A. AMONG GEOGRAPHIC AREAS/AMONG INDUSTRIES 8. HAS BEE~ VERY UNEVEN EXPERIENCE A Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 5 2. PROBABLY GREATEST UNEVENNESS THAT WE'VE SEEN IN POST WORI..D WAR I I PERIQQ { ~ ~ ~ 3. CLEARLY THIS IS NOT SIMPLY A BUSINESS CYCLE PHENOMENON A. REFLECTS STRUCTURAL DIFFERENCES CREATED IN PART BY CHANGING WORLD-WIDE DEMANDS FOR GOODS AND SERVICES B. AS WELL AS CHANGES CREATED BY (1) EARLIER INFLATION (2) FEDERAL SPENDING AND TAXING DECISIONS (3) INTERNATIONALIZATI"ON OF MARKETS - WE ~ \'\,---'----eq....!.-,,1 HAVE BECOM (4) EXCHANGE VALUE OF DOLLAR (A) ALMOST 90% 1980-1985 C. CONSEQUENTLY, RISING TIDE OF ECONOMIC EXPANSION HAS NOT RAISED ALL BOATS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SLow QUAD CITIES 4/3/86 PAGE 6 C. ONE BOAT STRUGGLING TO GET OFF THE BOTTOM HERE IN THE MIDWEST - MANY SECTORS HAVE NOT RETURNED TO LEVELS OF ACTIVITY EXPERIENCED IN 1981 1. AGRICULTURE - DIFFICULT ADJUSTMENT 2. AGRICULTURE SECTOR PROBLEMS SPREAD TO A WHOLE HOST OF OTHER RELATED AREAS A. MANUFACTURING, RETAIL SERVICE, FINANCIAL ACTIVITY B. FOR MANY RURAL COMMUNITIES THIS HAS A /tff' /Ji? PERVASIVE, NEGATIVE INF LUE NC~ ~ D. FAIR COMMENT THAT QUAD CITIES AREA B-ORE TIIE BRUNT 8f• ~~J?r:;s~e~,ev~~ M~ ~~E~ct~EL~MA~~ A. BUT HEAVY ORIENTATION OF THAT SECTOR TO AGRICULTURE 2 I AM WELL AWARE OE THE DIFFICUbT PR08LEP15 IIERE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 7 ~ ~ MANUFACTURING EMPLOYMENT HAS DECLINED L q '€"0 V WI TH YOUR UNEMPLOYMENT RATE REACH I NG ALMOST 15% IN 1983 3. WHILE UNEMPLOYMENT HAS B~EN DECLINING SINCE THEN I~ 'f ~ ~ &L{" ID ~ ~..S,1 A. RECOVERY SLOW AND LAGGING THE NATION 4_ _____E: .-t"iM-Pt:<bO,.,...Y. .M.. E-N:T-+-·-·G....,R-·o-1;i. 1.... H -·•·. . ..1. -N.~ . w..SF i;..iR~V~I~C.!-.E ~;., ..!H~.A~,S::-A:b-%=0~LA :G::G:_::E~D ____ A. 1tA-S- KEPT llNFMPI tlYHENT RATES WEI I ABOVE AVERAGE. IN.:COMf>AittsON WITH &t11ER MET-RQPOI !IAN ...,. ..... ·- _,_ "AREAS 5. ON PLUS SIDE A. THERE HAS BEEN SOME RECOVERY IN THE NONDURABLE GOODS INDUSTRY 8. RE TA IL TRADE EMPLOYMENT HAS SURPASSED 1980 LEVEL '----.~" ,.2_~j -J- ~ C . THERE ALSO HAS BEEN STRON~~N TRANSPORTATION AND UTILITIES ~ff•~ Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 8 IV. SHIFTING BACK TO THE NATIONAL SCENE, LET ME LOOK AHEAD - DESPITE SOME UNCERTAINTY REGARDING THE JANUARY/FEBRUARY NUMBERS (AND STATISTICAL/SEASONAL ABERRATIONS MAY BE AT FAULT) - THE YEAR HAS STARTED OFF WELL~, ~ ~ A. CONDITIONS FOR CONTINUED EXPANSION IN PLACE AND SOME RECENT DEVELOPMENTS ONLY ENHANCE THE POSSIBILITIES - I'LL EXPAND ON SOME OF THESE DEVELOPMENTS IN A MOMENT ~~ ~ ~.r 1. LOWER INTEREST RATES 2. LARGE DECLINE IN EXCHANGE VALUE OF DOLLAR 3. INFLATION CONTINUING LOW 4. EMPLOYMENT GROWTH MAINTAINED A. THOUGH UNEMPLOYMENT INCREASED IN FEBRUARY, PAYROLL EMPLOYMENT INCREASED AGAIN 8. MORE MODEST THAN JANUARY, BUT STILL POSITIVE C. INCREASES IN MANUFACTURING AREA - 4 MONTHS THROUGH JANUARY Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 9 5. STOCK MARKET PERFORMANCE A. POSITIVE FROM STANDPOINT OF EQUITY-FINANCING F~ P ~ ~, v,~ 6 B. ALSO ~PORTANT FROM 3TAltDPOiNT TIIA1 CONSUMER" 12W.- "WEAL THH57 (1) SHOULD MEAN INCREASED POTENTIAL FOR CONSUMPTION 6. CAPITAL SPENDING PLANS BEING REVISED UPWARDS - SAY 3/4% THIS YEAR -+- ..:A,;_,~ A. PRETTY MUCH ACROSS THE BOARD/J..:t~ B. TAX LEGISLATION WILL BE KEY (1) ACCELERATED DEPRECIATION (2) I.T.C. (3) INCENTIVES FOR PRODUCTIVITY V. GIVEN THE GOOD START AND THESE VERY RECENT DEVELOPMENTS - THE OUTLOOK FOR 1986 IS CERTAINLY POSITIVE A. THE EXPANSION WILL CONTINUE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 10 of-J~ 1. REAL GNP A~T 3% A. ABOVE 2-1/4% FOR 1985 B. COULD BE SOMEWHAT HIGHER 2. HOUSING STARTS - WELL OVER l.7MM - 4TH YEAR v~ 3. AUTOS - LESS THAN 1985 - OVER lOMM - ~~ .6u~ 4. INFLATION EXPECTED TO RUN ASlt,IT 3-1/2% ~ {~~ A. RECENT DEVELOPMENTS IN ENERGY SECTOR COULD MEAN INFLATION LESS THAN THAT 5. UNEMPLOYMENT RATE SHOULD BE A LITTLE LESS THAN 7% NATIONALLY ,1~--- Vl. LEST YOU GET TOO COMFORTABLE - THERE ARE SOME SIGNIFICANT d ~,,~ RISKS - IMBALANCES - ~<;~ A. WHETHER REALITY/o\WCHES EXPECTATIONS DEPENDS ON HOW WE DEAL WITH THESE IMBALANCES B. COMMON DENOMINATOR - INCREASE IN DEBT 1. ACROSS ALL SECTORS - PUBLIC ANO PRIVATE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 11 2. INCREASE IN DOMESTIC NONFINANCIAL DEBT HIGHEST IN OVER 30 YEARS C. LET ME START WITH THE KEY ELEMENT IN DEBT PICTURE - THE ONE THAT PERVADES VIRTUALLY EVERYTHING THAT I AM TALKING ABOUT - NAMELY, THE FEDERAL BUDGET DEFICIT 1. OBVIOUSLY A CURRENT AND TOPICAL ISSUE - LITTLE I CAN ADD 2. DEFICITS OF CURRENT MAGNITUDES AT THIS STAGE OF THE ECONOMIC EXPANSION ARE UNPRECEDENTED A. NOT AT ALL UNUSUAL TO RUN SIGNIFICANT DEFICITS AT THE TIME OF RECESSION OR OTHER ADVERSE EVENTS B. BUT WE ARE NOW WELL INTO THE 4TH YEAR OF AN ECONOMIC RECOVERY AND WE HAVE BEEN RUNNING DEFICITS AROUND 4-1/2 - 5% OF THE GNP FOR 4 YEARS NOW Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 12 3. IN THE LONG HISTORY OF OUR COUNTRY WE HAVE ALWAYS· MANAGED TO BRING OUR BUDGETS IN BALANCE A. AFTER AN ADVERSE EVENT HAS PASSED THAT CAUSED THE DEFICIT - CONGRESS HAS TAKEN CORRECTIVE ACTION TO BRING THE BUDGET IN BALANCE - RECORD IS CLEAR B. INDEED, IN THE EARLY 1830S CONGRESS NOT ONLY FULLY REPAID THE THEN OUTSTANDING TREASURY DEBT - BUT RAN SURPLUSES WHICH WERE DISTRIBUTED BACK TO THE STATES 4. IN THE LATE 1960S WE UNDERWENT AN IMPORTANT CHANGE - FROM THIS POINT FORWARD WE APPARENTLY DECIDED TO ACCEPT DEFICITS AS PART OF THE NORMAL OPERATION OF OUR SOCIETY - NOT AS A WAY OF DEALING WITH AN ADVERSE EVENT A. ENORMOUS POLITICAL/SOCIAL CHANGE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 13 {l) NOT SURE WE FULLY APPRECIATED THE MAGNITUDE 5. FEDERAL DEFICITS RESULT IN TREASURY DEBT A. RISING AT AN ALARMING RATE B. DEBT LEVEL IN 1975 $500 BILLION - APPROACHED S2 TRILLION LAST YEAR - RISING INEXORABLY C. OVER $750 MILLION EVERY WORKING DAY - SOME· $3.9 BILLION PER WEEK C)f=.~ 6. INTEREST ON THE DEBT HAS TO BE PAID A. GROWINGLY WORRIED ABOUT COMPOUND INTEREST SYNDROME (1) IS THIS AN ISSUE THAT HAS GOTTEN BEYOND OUR CONTROL? (2) INTEREST ON THE DEBT IS ASSUMING A MUCH LARGER POSITION IN THE ANNUAL BUDGET.- 101 IN FISCAL 1975, ALMOST 20% IN FISCAL 1985 Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 14 (3) EVEN ON THIS BASIS ALONE, THE NEED FOR ACTION ON THE DEFICIT IS VERY COMPELLING 8. BUT, IMPLICATIONS OF CONTINUED HIGH FEDERAL BUDGET DEFICITS GO FURTHER (1) AT STAKE - WHOLE ISSUE OF ALLOCATION OF SAVINGS AND INVESTMENT DOLLARS BETWEEN GOVERNMENT AND PRIVATE SECTORS" &Pf-~ Fi ~ ~ 7±s, "'-1 u-r..1 1,AJ (2) ~ PARTICULARONCERN IS THAT INTEREST ~~(l--'l..J-J-d-~ ~ ~ ~~<:~ 5 - ~ RATES ARE HIGHER AS A RESULT OF BUDGET DEFICIT D. TO SOME VERY LARGE EXTENT, THESE FISCAL DEFICITS ARE BEING SUPPORTED BY THE INTERNATIONAL MARKETS 1. OUR TRADE DEFICIT LAST YEAR - A RECORD OF ABOUT Sl50 BILLION 2. WE HAVE NOW BECOME A NET EXTERNAL DEBTOR 3. POSITION NOT INHERENTLY WRONG IF THE FUNDS ARE BEING USED FOR PRODUCTIVE PURPOSES Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 15 A. WHICH GENERATE THE REPAYMENT CAPACITY TO SERVICE THE DEBT B. WRONG TO USE FUNDS FOR CONSUMPTION PURPOSES - BASICALLY WHAT IS GOING ON 4. AS A RESULT OF LARGE PURCHASES OF U.S. DEBT BY INTERNATIONAL MARKETS (JAPAN) PRESSURE ON U.S. INTEREST RATES HAS TO SOME EXTENT BEEN RELIEVED A. IF THERE IS A CHANGE IN SENTIMENT, WILL HAVE TO FINANCE DEFICIT FROM DOMESTIC SOURCES B. HIGHER RATES THAN OTHERWISE . , (1) ECONOMIC EXPERIENCE MAY WELL BE DIFFERENT ~14 ,:~ ~~ E. CONSUMER INSTALLMENT DEBT HAS ALSO RI SEN TO RECORD LEVELS RELATIVE TO DISPOSABLE INCOME 1. SOME MITIGATING CIRCUMSTANCES WHICH MODERATE THE SHEER MAGNITUDE OF NUMBERS A. BUT PERSONAL DEBT LOADS HAVE BECOME VERY, VERY HEAVY Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 16 B. RAISES THE QUESTION AS TO THE SUSTAINABILITY OF CONSUMPTION AND THEREFORE THE ECONOMIC EXPANSION C. WILL CONSUMERS BE ABLE TO HANDLE THIS DEBT IF PERSONAL INCOMES BEGIN TO FALL? F. CORPORATE DEBT HAS ALSO INCREASED VERY RAPIDLY OVER THE PAST FEW YEARS l. IN 1984 CONSOL I DATED CORPORATE DEBT ISSUED BY NONFINANCIAL CORPORATIONS INCREASED BY OVER $1,B;fr/Q /9 () BILLION - A RECORD 2. THE 1985 NUMBER WAS SOMEWHAT LESS BUT SECOND ONLY TO 1984 3. EXACERBATED BY LEVERAGE BUYOUTS, MERGERS, TAKEOVERS, AND ACQUISITIONS 4. EVEN MORE DISTRESSING IS THE RAPID RETIREMENT OF EQUITY THAT HAS BEEN TAKING PLACE OVER THE PAST FEW YEARS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 17 5. CORPORATE AMERICA HAS BEEN DECAPITALIZING ITSELF 6. AS A CONSEQUENCE, CORPORATE DEBT RELATED TO NET WORTH HAS INCREASED VERY SHARPLY G. CAN T LEAVE THE DEBT ISSUE WITHOUT COMMENTING ON THE 1 VERY LARGE EXTERNAL DEBT POSITIONS OF SOME OF THE LESSER DEVELOPED COUNTRIES 1. VERY DIFFICULT, PARTICULARLY- SO FOR COUNTRIES THAT ARE DEPENDENT ON THE EXPORT OF PETROLEUM PRODUCTS TO GENERATE DOLLAR RESERVES TO SERVICE THEIR DEBT 2. WORKING THROUGH THIS PROBLEM WILL BE VERY CHALLENGING H. AGAIN, THIS BUILDUP OF DEBT ACROSS ALL SECTORS OF OUR ECONOMY, NATIONALLY AS WELL AS INTERNATIONALLY, IS OF GREAT CONCERN Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 18 ~P\..' ft 1. DESTABILIZING ELEMENT - VULNERABILITY OF THE DEBTORS TO SERVICE THE DEBT - MAINTAINING AN ENVIRONMENT OF GOOD ECONOMIC GROWTH IS CRITICALLY IMPORTANT r.(~. ~r 2. MARGIN FOR ERROR VERY NARROW ~-~~~ VII. IMPLICATIONS FOR MONETARY POLICY A. THESE IMBALANCES HAVE CREATED A DIFFICULT ENVIRONMENT FOR MONETARY POLICY 9~i~· 1. A COMBINATION OF IMBALANCES THAT WE HAVEN'T EXPERIENCED BEFORE ... .-ff-.._'~ ~~ 2. UNIQUE AS. IN MAGNITUDE 3. NET RESULT IS A VERY NARROW PASSAGE THROUGH WHICH TO NAVIGATE B. OBJECTIVE OF MONETARY POLICY REMAINS THE SAME 1. CONTINUE PROGRESS TOWARD PRICE STABILITY IN CONTEXT OF GROWING ECONOMY Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 19 A. THOUGH RECENT INFLATIONARY RESULTS HAVE BEEN WELCOME - HARDLY PRICE STABILITY oJ-rL. ~ 2. OVERRIDING ASSIGNMENT - KEEP THE EXPANSION GOING A. BUT IT CANNOT BE AN EXPANSION FUELED BY ESCALATING INFLATION EXCESSIVELY ACCOMMODATIVE MONETARY POLICY ,pf~~~ (1) HISTORY CLEAR THAT SUSTAINABI~~ IMPAIRED BY INFLATION - WE'VE BEEN THERE ~5 v-o~~-~ v--fe,~ 8. BUT A RENEWED RECESSION - THE IMBALANCES I CITED WOULD BECOME VERY DIFFICULT C. CONSEQUENTLY, PRESSURES MAY WELL MOUNT '-o..y /A,,•./Le.l'"I...A.-f 1. TO M-A-l-ttf.ATN AN EVEN MORE RAPIDLY EXPANDING ECONOMY r ·-n-_,r .J.Q. _,.,., / 2. WITHOUT 'CONCERN ABOUT LONGER TERM INFLATION POTENTIAL 3. FED WILL COME UNDER VERY HEAVY PRESSURE TO MONETIZE OUR WAY OUT OF SOME OF THESE PROBLEMS 4. OUR INDEPENDENCE COULD BE THREATENED Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 20 VI I I. CONCLUSION ur,.,,..,,~..,-~ A. SAID AT OUTSET - YEAR HAS STARTED WELL - UNIQUE SET £ ~ ,d i~ w,J1 r.111.h.'V< ~-.,.l OF CIRCUMSTANCES -~H~ +-- ~ ~c, <!--~ °l'<7 ~ B. LET ME JUST REPEAT AND EMPHASIZE 3 S ~•~S 1. MASSIVE REDUCTION IN ENERGY PRICES - FELL OUT OF SKY A. GLASS 7/8'S FULL 8. VERY POSITIVE AND PERVASIVE - NOT ONLY OUR ECONOMY, BUT WORLD ECONOMIES AS WELL C. VERY FAVORABLE IMPACT ON INFLATION D. GIVES FED MORE MANEUVER I NG ROOM - DECREASED INFLATIONARY CONCERNS 2. SIGNIFICANT REDUCTION IN INTEREST RATES - MEDIUM AND LONG TERM £.~ A. YIELDS ON 30 YEAR DOWN A~ 400 BASIS (J"\fa'l_ POINTS IN LAST YEAR - ~"ogr 150 BASIS POINTS SINCE TURN OF THE YEAR Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 21 B. 30 YEAR BOND YIELDING UNDER 8% - FIRST TIME IN OVER 7 YEARS C. AGAIN, VERY PERVASIVE THROUGHOUT OUR ECONOMY - AND WORLD ECONOMIES (1) REDUCED RATES PUT EXTERNAL DEBTS OF LDCS IN MUCH DIFFERENT PERSPECTIVE J}e,,~t,~, (2) MORTGAGE REFINANCINGS - POWERFUL EFFECT ON CONSUMER SPENDING· - 3 . CH ANGE I N VALUE OF DOLLAR AG AI NS T DM AND YEN - ALMOST 30% SINCE THIS TIME LAST YEAR A. SIGNIFICANT AMOUNT HAS OCCURRED THIS YEAR 8. ENORMOUS OPPORTUNITIES FOR OUR EXPORT SECTOR - WILL TAKE A WHILE TO SHOW UP IN NUMBERS - VERY, VERY HELPFUL FOR THE BELEAGUERED EXPORT ACTIVITIES C. BETTER OPPORTUNITIES FOR SUPPLIERS TO DOMESTIC MARKETS - IMPACTED BY IMPORTS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis QUAD CITIES 4/3/86 PAGE 22 C. THUS WHAT HAS STARTED WELL SHOULD END WELL 1. MOREOVER - IF WE CAN DEAL WITH THESE IMBALANCES s~ I' VE ENUMERATED - AND THE P1lSl:J fft ECONOMIC ENVIRONMENT GREATLY FACILITATES MANAGING OUR WAY THROUGH THESE TERRIBLY DIFFICULT ISSUES 2. THE FUNDAMENTALS ARE AT HAND FOR A CONTINUATION OF THIS FAVORABLE ECONOMIC EXPERIENCE FOR QUITE SOME WHILE - AND THIS YEAR MAY WELL ~ ~~ ~ -DEVELOP INTO THE t:i:m:NJNG POINT IN WHAT MIGHT JUST BE ONE OF THE MOST REWARDING ECONOMIC PERIODS OF THE PAST FEW DECADES D. ON THAT POSITIVE NOTE - CONCLUDE * * * * * Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis

Silas Keehn (1986, April 2). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19860403_silas_keehn

@misc{wtfs_regional_speeche_19860403_silas_keehn,
  author = {Silas Keehn},
  title = {Regional President Speech},
  year = {1986},
  month = {Apr},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19860403_silas_keehn},
  note = {Retrieved via When the Fed Speaks corpus}
}