Fed Challenge 2008

Gross Domestic Product

GDP Rate of Change

Industrial Production Rate of Change

Labor Market

Unemployment

Real Wage

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-1

-0.5

0

0.5

1

1.5

2

2.5

Real Wage (% Change 1 Year Ago)

Consumption

Monthly Retail Sales

United States, $mil, SA, YOY%

Consumer Confidence

Supply and Demand for Consumer Loans

Housing Market

New Housing Demand

Price to Rent Ratio

Investment

Demand for Commercial Real Estate Loans

Private Fixed Investment

Capacity Utilization

Government Spending

The Federal Government

Federal Borrowing

Net Exports

Net Exports

Net Exports

Jan Feb Mar Apr May Jun Jul Aug Sep

-4

-3

-2

-1

0

1

2

3

4

2008 Import and Export Prices

% Change Export Prices % Change Import Prices

One M

onth

% C

hange

U.S. Dollar Value

U.S. Dollar Value

U.S. Dollar Index

Inflation

Core CPI and PCE

5 Year TIPS Spread

Financial Markets

LIBOR Rates - 3 Month and Overnight

Moody’s Corporate Bond Spread

TED Spread

TED Spread

S&P 500 Composite

CBOE Volatility Rate

Recent Economic Action

Target & Effective Federal Funds Rate

Newly Created Fed Facilities Term Auction Facility Primary Dealer Credit Facility Term Securities Lending Facility Asset Backed Commercial Paper Money

Market Mutual Fund Funding Facility Commercial Paper Funding Facility Money Market Investors Funding Facility

Monetary Base

Excess Reserves in Depository Institutions

Money Multiplier

Summary

Collapse of the Housing Market

Net Exports Decline

Low Inflationary Expectations

Summary

Policy Proposal

Lower the interest rate earned on excess reserves held by banks to 0%

Lower the target Federal Funds Rate by 0.5%

Policy Proposal