Transcript lewin dos pueblos

The Recession is Over
Haley Araki
Owen Chen
Richard Cheng
Peter Shao
Stock Markets
11,205 on
4/26/10
Up 70%
6,547 on
3/9/09
Up 70%
Interest rate
Money Supply
Interest rate
Investment
Demand
Money
Demand
Quantity of Money
Investment
Nonfarm Employment
Unemployment Rate (%)
(thousands, SAAR)
Labor
Force
Labor Force
(thousands)
(thousands)
155,500
155,000
154,500
154,000
153,500
153,000
152,500
152,000
Apr May Jun July Aug Sep Oct Nov Dec Jan Fab Mar Apr
09 09 09 09 09 09 09 09 09 10 10 10 10
Capacity Utilization Rate
(percent)
April 2010
73.6%
April 2009
69.5%
Retail Sales
($ Billions, SAAR)
Up 6%
New Home Sales
(thousands, SAAR)
U.S. Census Bureau
Building Permits
(thousands, SAAR)
+ 29%
U.S. Census Bureau
Summary
2009
2010
DJIA
6,547 points
10,000+ points
GDP
-6.5%
3.6%
Capacity Utilization
69.5%
73.6%
Retail Sales
$344 billion
$364.6 billion
New Home Sales
337,000
411,000
Building Permits
523,000
685,000
• The recovery is clearly gaining traction as shown by the
indicators above, which are just a representation of the myriad
of indicators demonstrating positive trends.
However, the European debt crisis may slow the recovery
Ventura County Star, May 22, 2010, page A16
What’s Happening in Europe
European Union GDP Growth Rate
Frankfurt Stock Exchange
(DAX index)
Up nearly 30%
European Industrial Production
Index
2005 = 100
PIIGS
Credit-default swaps linked to Greek government bonds have surged to
record highs, signaling investors perceive them to be the world’s
riskiest debt.
•
•
•
•
PIIGS - Portugal, Italy, Ireland, Greece, Spain
Greece’s debt to GDP ratio is at 115%
Germany’s debt to GDP ratio is at 69%
Insurance premiums have increased eight-fold since ‘08
Ten-Year Bond Yield Spreads
Greek 10
year rate up
to 9.76%
Spread to German
Bunds also rises to
over 400 basis points
•
In late April 2010, the 10-year Greek bond yield rose 164 basis
points to nearly 12 percent.
• The spread exceeded 900 basis points over the German
bond yield.
Value of the Euro
$/ €
• Fears of possible
default push Euro down
20% since 2008
• However, the European
Commission forecasts a
comeback after the
bailout
Future of the Euro
•
•
•
May 7 - ECB and IMF approved a $1 trillion bailout
Euro shot up by $0.015 in one day after bailout
announcement
Over time, as fears of default subside, the strength of the
Euro should increase, bolstering US exports to Europe
€/$
$/€
Dollar Supply
Dollar Demand
quantity
Euro Supply
Euro Demand
quantity
Conclusion
• Most US economic indicators are showing
positive trends
• The recovery is gaining traction
• The European debt crisis is causing volatility in
global markets due to uncertainty
• However, the bailout is likely to fix the problem.
The Euro is expected to recover
• US economic growth is unlikely to be
significantly impacted
• The US economy will most likely transition to an
expansionary phase by 2011