"Demythologizing Central Bankers and the Great Moderation"

This is a great little piece by Thomas Palley that I wish I could discuss at greater length (but I have to be up before dawn tomorrow, eeek). Palley takes on the orthodoxy of the so-called Great Moderation, the twenty-year period we’ve just finished that featured relatively mild downturns and steady growth. Observers often attribute it to better monetary management and financial innovation

Palley disagrees, and thinks this pattern instead resulted from policy changes that produced changes in the economy that can be seen as beneficial only if viewed through a narrow lens. And even those gains are not sustainable.

Mark Thoma, in a post on Palley’s piece, adds his own list of largely non-central-banker activities that also contributed to more stable growth:

Better technology, e.g. information processing allowing better inventory control and management

Better policy, e.g. inflation targeting

Good luck so that no big shocks hit the economy

Financial innovation and deregulation

Globalization leading to dispersed risk

Better business practices (this is less common, here’s the link)

Increased rationality of participants in financial markets

Demographic shifts (again, since this less commonly offered as an explanation, here’s the link)

From Palley:

It is often said that the winners get to write history, which matters because the way we tell history frames our understandings. What is true for general history also holds for economic history, and the way we tell economic history affects our expectations and aspirations for the economy.

The last twenty-five years have witnessed a boom in the reputation of central bankers. This boom is based on an account of recent economic history that reflects the views of the winners. Now, with the U.S. economy entering troubled waters that reputation may get dented. More importantly, there is an opportunity to tell an alternative account of recent history.

The raised standing of central bankers rests on a phenomenon that economists have termed the “Great Moderation.” This phenomenon refers to the smoothing of the business cycle over the last two decades, during which expansions have become longer, recessions shorter, and inflation has fallen.

Many economists attribute this smoothing to improved monetary policy by central banks, and hence the boom in central banker reputations. This explanation is popular with economists since it implicitly applauds the economics profession by attributing improved policy to advances in economics and increased influence of economists within central banks. For instance, the Fed’s Chairman is a former academic economist, as are many of the Fed’s board of governors and many Presidents of the regional Federal Reserve banks.

That said, there are other less celebratory accounts of the Great Moderation that view it as a transitional phenomenon, and one that has also come at a high cost. One reason for the changed business cycle is retreat from policy commitment to full employment. The great Polish economist Michal Kalecki observed that full employment would likely cause inflation because job security would prompt workers to demand higher wages. That is what happened in the 1960s and 1970s. However, rather than solving this political problem, economic policy retreated from full employment and assisted in the evisceration of unions. That lowered inflation, but it came at the high cost of two decades of wage stagnation and a rupturing of the link between wage and productivity growth.

Disinflation also lowered interest rates, particularly during downturns. This contributed to successive waves of mortgage refinancing and also reduced cash outflows on new mortgages. That improved household finances and supported consumer spending, thereby keeping recessions short and shallow.

With regard to lengthened economic expansions, the great moderation has been driven by asset price inflation and financial innovation, which have financed consumer spending. Higher asset prices have provided collateral to borrow against, while financial innovation has increased the volume and ease of access to credit. Together, that created a dynamic in which rising asset prices have supported increased debt-financed spending, thereby making for longer expansions. This dynamic is exemplified by the housing bubble of the last eight years.

The important implication is that the Great Moderation is the result of a retreat from full employment combined with the transitional factors of disinflation, asset price inflation, and increased consumer borrowing. Those factors now appear exhausted. Further disinflation will produce disruptive deflation. Asset prices (particularly real estate) seem above levels warranted by fundamentals, making for the danger of asset price deflation. And many consumers have exhausted their access to credit and now pose significant default risks.

Given this, the Great Moderation could easily come to a grinding halt. Though high inflation is unlikely to return, recessions are likely to deepen and linger. If that happens the reputations of central bankers will sully, and the real foundation and hidden costs of the Great Moderation may surface. That could prompt a re-writing of history that restores demands for a return to true full employment with diminished income inequality. How we tell history really does matter.

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21 comments

  1. Juan

    Since post-1973 real global GDP has remained weak v. the 4.9 percent average for 1950-73, the more correct term might be ‘The Great Stagnation’, though that has certainly not been the case for the become stretched-too-far financial sphere.

    See, e.g., Angus Maddison’s OECD work.

  2. doc

    I had been wanting to go back to a post I made here under Bank hearing charade to look up a phrase they used;

    Lombard credit

    http://en.wikipedia.org/wiki/Lombard_credit

    Lombard credit is the granting of credit by banks against pledged items, mostly in the form of securities or life insurance policies. The pledged items must be readily sellable. Lending is via central banks, in particular the securities ‘eligible for collateral’ which are registered on lists; as a general rule, the Lombard rate (interest rate) is more or less one per cent above discount rate.

    Thanks to the work of several bright and influential economists, the Federal Reserve Board of the United States switched to a so-called “Lombard Facility,” in which the Discount Rate is actually higher than the targeted Fed Funds Rate, thus creating an economic incentive for banks to look elsewhere before asking to borrow from the Fed.

  3. Anonymous

    Recession is here and now, regional statisticians say

    http://www.pressofatlanticcity.com/106/story/125237.html

    ECRI, based in New York, made the recession call last week, based on its analysis of economic drivers such as housing, consumer and investor confidence, profits, inventory cycles and various aspects of money and credit.
    But didn’t Ben Bernanke, the Federal Reserve chairman, just say a few days ago that a recession was only possible?
    “Everybody and your mother knows it’s a recession, except for President Bush and Bernanke,” said Lakshman Achuthan, managing director of ECRI. “They know in private, but it’s their role to be cheerleaders for the economy.”

    ECRI’s leading indicator index is widely considered to be the most reliable forecasting gauge. The independent institute was founded by Geoffrey Moore, who developed the first index of leading economic indictors in 1967.
    Achuthan said shocks such as high oil prices and the housing collapse help bring about a recession, but when it begins will be decided by business-cycle drivers.

    This recession probably could have been avoided if the Federal Reserve had begun reducing interest rates when the drivers started to plunge in the fall, Achuthan said.
    “Flatly, the policymakers across the board missed a golden opportunity to avert a recession,” he said.

  4. Anonymous

    Federal Reserve Bank of New York President Timothy Geithner had difficulty explaining how BlackRock would be paid.

    “We have not yet completed our negotiations on the fee,” he said. “It will be a commercially reasonable fee. We will be very careful in setting it.”

    Sen. Jon Tester, D-Mont., asked Mr. Geithner, “Is that typical of how things are done — make agreements and set fees later?” He responded, “Almost nothing is typical about the arrangement we reached.”

    Senate Banking Chairman Chris Dodd asked Mr. Geithner how the value of the assets has changed since the original appraisal March 14. Mr. Geithner did not answer, but he said the senator’s staff could “confidentially review that collateral,” and he pledged to provide quarterly reports so Congress can track how the assets perform over time.

  5. Richard Kline

    I read Palley’s piece, and I agree fully with his appraisal of the situation. In reading Thoma’s postulated addendas to this point, though, I found myself unconvinced or disagreeing with all of them.

    The ‘Semi-good Moderation’ is a phenomenon really seen only in the US of A, in line with the remarks posted above that from a global perspective one could as well speak of a Great Stagnation. The 90s in Europe? Not included. 80s in Latin America? Japan? SE Asia? If Americans don’t suffer, it doesn’t count I guess.

    There is the further problem that in my view as someone who has studied long term social trajectories, macro economic cycles, and yes Kondratiev waves among much else that twenty years is simply an insufficient duration to assess any large-scale phenomena. I wouldn’t even pipe up a postulate for less than sixty years duration examining anything. And moreover, one should at least _double_ the length of the duration one wants to study plus and minus the intended period, because this is the only way to isolate trends coming into the period and changes coming out of it. So to get a look at ‘the last twenty years’ one couldn’t even get started without taking the time period, oh, 1914-present. But let’s leave that on the side for the moment.

    Supposing that we have had a ‘moderation,’ why? Two causes stand out prominently for me. Innovation booms are a highly cyclical phenomena; there is much research on this. What is not understood is that they occur regionally/nationally, not ‘globally.’ The US had such a boom; it coincided with the 90s. This was the major reason that productivity greatly improved over that time. Some technologies were harnessed, and some real increases in wealth achieved. Since cyclical, innovation booms end; ours has. Here’s the bad news: we not only spent every nickle of accrued wealth we acquired over that span on speculation and gewgaws, we borrowed against those gains from the rest of the world and now _owe_ money after the most productive duration we’ll see during most of the rest of our lifetimes. Bummer, I know; that’s what I thought as I watch us do it.

    Second, since the Plaza Accord in ’85, all the liquid, developed economies agreed to overvaule (then severely overvalue) the Yankee dollar because this coincided with everyone’s respective macroeconomic strategies. Thus, the US could ship its debt around the world where it was traded like cash at par because _for the last twenty years_ that worked for everybody. A little down in the dumps at home? No problemo: knock down our interest rates and ship out more debt. We ‘moderated’ our downturns by borrowing from the rest of the world, repeatedly. Only now we are sooo busted. And the sum we need to borrow THIS time is, well, not sane for them to lend us, perhaps not even possible.

    Everybody’s going to rethink their macroeconomic strategies. Not willingly, of necessity. And one factor which will not remain moderate is the tolerance of the rest of the world to take our currency and our debt at its relative valuation hitherto.

    The Great Moderation could better be described as the Debt Abberation. It’s existence has had nothing to do with central bankers getting smarter, much as they and their consultants would like to tell you that this was so. Avoiding bank runs and reflating economies is a _19th century_ innovation. The US was among the last large countries to adopt it, and only under duress after the Panic of ’07 . . . _1907_. As central bankers came to employ these hese macro interventions with more conviction in the 20th century, their use somewhat moderated the severity of economic downturns (which incidentally are only loosely linked to social cyclical processes though there is a correlation). Without preventing those downturns. Now what we need is a similar understanding of the necessity of preventing bubbles to avoid destabilizing _upturns_: this will be the central banking innovation of the 21st century. —Let it begin with us.

  6. Richard Kline

    Just for those keeping an historical scorecard:

    18th century—the use of public scheduled debt as a reflationary ‘floor’ for capital markets

    19th century—the use of ‘lender of last resort’ in bank runs, first privately, than publicly coordinated

    20th century—unemployement mitigation to sustain demand (different policies, different places, same goal)

    21st century??—speculation suppression, especially of off-trend asset inflations, and most definitely of credit bubbles

  7. njdoc

    The collapse of the Soviet Union with the resulting labor supply shock of the ex Soviet Bloc as well as China produced tremendous disinflationary forces by adding 2 billion laborers to the global work force. This allowed the developed nations to keep interest rates low, as wage inflation became non-existent. Outsourcing of high cost jobs and further changes in measuring of inflation via the Boskin Commission continued to keep “inflation” mild, regardless of interest rates. All this liquidity juiced up the asset markets, so there was a massive inflationary boom without “inflation”.

  8. Anonymous

    Hope no one explodes but here is some history:

    http://en.wikipedia.org/wiki/Federal_Reserve_Act

    The 1912 Aldrich Plan called for a system of twelve regional central banks, known as National Reserve Associations, whose actions would be coordinated by a national board of commercial bankers. The Reserve associations would make emergency loans to member banks, create money to provide an elastic currency, and would act as fiscal agents for the U.S. government. State and nationally chartered banks would have the option of subscribing to specified stock in their regional reserve association.

    Since the Aldrich Plan essentially gave full control of this system to private bankers, there was widespread opposition to it because of fears that it would become a tool of certain rich and powerful financiers in New York City, referred to as the “Money Trust.”

    When the Aldrich bill was rejected and the Democrats began to rework the banking bill, the group of bankers that had worked so hard in support of the Aldrich Plan began to split apart, and many of those bankers refused to consider an alternative plan. Warburg was more conciliatory and remained in contact with prominent Democrats, including Carter Glass, chairman of the House banking committee, and H. Parker Willis, the committee expert, and continued to write and speak on the new legislation.

    After months of hearings, debates, votes and amendments, the proposed legislation, with 30 sections, was enacted as the Federal Reserve Act.

    Controversy over the origin of the Federal Reserve Act and the nature of the Federal Reserve System has always been part of its history, such as whether Congress has the Constitutional power to delegate its power to coin money or even issue paper money, or whether the Federal Reserve is a tool of the rich and powerful, or whether the Federal Reserve’s mistakes deepened the Depression of the 1930s, or whether Federal reserve banks are private or public entities. Despite the controversies, however, the Federal Reserve Act is now nearly 100 years old and it has been amended by nearly 200 subsequent acts of Congress.

    >> Isn’t it obvious and axiomatic as to the reality of what drives this mafia collusion (after 80+ years)!

  9. Anonymous

    One more OT footnote:

    http://en.wikipedia.org/wiki/Charles_August_Lindbergh

    Charles August Lindbergh (January 20, 1859 – May 24, 1924) was a United States Congressman from Minnesota’s 6th congressional district from 1907 to 1917. He opposed both American entry into World War I, and the 1913 Federal Reserve Act.

    Famous quotes

    “This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President (Woodrow Wilson) signs this bill, the invisible government of the monetary power will be legalized….the worst legislative crime of the ages is perpetrated by this banking and currency bill.”[4]
    Also quoted as:
    “This Act establishes the most gigantic trust on Earth. When the President signs this bill, the invisible government by the Monetary Power will be legalized, the people may not know it immediately but the day of reckoning is only a few years removed…. The worst legislative crime of the ages is perpetrated by this banking bill.”
    “A radical is one who speaks the truth.”[4]
    “The Aldrich Plan is the Wall Street Plan. It means another panic, if necessary, to intimidate the people. Aldrich, paid by the government to represent the people, proposes a plan for the trusts instead.” – The Aldrich Plan (History of central banking in the United States) was a forerunner to that which spawned the Federal Reserve.
    “To cause high prices, all the Federal Reserve Board will do will be to lower the rediscount rate…, producing an expansion of credit and a rising stock market; then when … business men are adjusted to these conditions, it can check … prosperity in mid career by arbitrarily raising the rate of interest. It can cause the pendulum of a rising and falling market to swing gently back and forth by slight changes in the discount rate, or cause violent fluctuations by a greater rate variation and in either case it will possess inside information as to financial conditions and advance knowledge of the coming change, either up or down. This is the strangest, most dangerous advantage ever placed in the hands of a special privilege class by any Government that ever existed. The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people’s money. They know in advance when to create panics to their advantage, They also know when to stop panic. Inflation and deflation work equally well for them when they control finance.”
    “The financial system […] has been turned over to the Federal Reserve Board. That board administers the finance system by authority of […] a purely profiteering group. The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people’s money.”

  10. Anonymous

    Yves,

    No time for vacation, we need you!

    Bernanke’s new-look Fed
    14 Nov 2007 12:56 pm

    http://clivecrook.theatlantic.com/archives/2007/11/bernankes_newlook_fed.php

    Re1: One questioner asked whether the new releases would include a “fan chart” of the Fed’s inflation forecast, like the one produced by the Bank of England. Bernanke said there would be a chart that looked like that, but that it would be a quite different thing.

    Re2: The questioner, Mickey Levy of Bank of America, pointed out (very much in the spirit of Sir Samuel) that dropping nominal GDP might encourage commentators to believe that monetary policy can independently influence real and nominal quantities (ie, output and inflation), whereas in the short run it acts on both simultaneously, and this is a key constraint on the Fed’s ability to steer the economy. Bernanke said the Fed would wait to see if people missed the nominal GDP number. So far as he was concerned, it didn’t add much to what the Fed would be releasing. Humph, I thought.

    Yves, do you miss nominal GDP???

  11. Anonymous

    Chairman Ben S. Bernanke
    At the Cato Institute 25th Annual Monetary Conference, Washington, D.C.
    November 14, 2007
    Federal Reserve Communications

    http://www.federalreserve.gov/newsevents/speech/bernanke20071114a.htm

    Each of the participants in the FOMC meeting–including the Federal Reserve Board members and all the Reserve Bank presidents–will, as in the past, provide projections for the growth of real gross domestic product (GDP), the unemployment rate, and core inflation (that is, inflation excluding the prices of food and energy items). In addition, participants will now provide their projections for overall inflation. Both overall and core inflation will continue to be based on the price index for personal consumption expenditures (PCE).5

    5: Participants will no longer provide projections for the growth of nominal GDP. These now seem relatively less useful to the public, given participants’ projections for real GDP growth and overall inflation.

    See also: “birth death” model to “estimate” job creation; BLS admits it is faulty in transition periods.

    Also see; Wages adjusted for inflation.

    To wit: The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential structures, state and local government spending, and equipment and software that were largely offset by negative contributions from private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

    The deceleration in real GDP growth in the fourth quarter primarily reflected a downturn in inventory investment and decelerations in exports, in federal government spending, and in PCE that were partly offset by a downturn in imports.

    **

    The City of New York
    Monthly Report
    on
    Current Economic
    Conditions
    March 4, 2008
    Highlights
    http://www.nyc.gov/html/omb/pdf/ec02_08.pdf

    Inflation: In January the core PCE index rose 2.5 percent y/y, well above the Fed’s
    target rate of one to two percent. Inflation in the New York Area continues to trail the
    nation.The January headline and core inflation rates were 3.7 and 2.1 percent.

  12. Anonymous

    Chairman Ben S. Bernanke
    At the Cato Institute 25th Annual Monetary Conference, Washington, D.C.
    November 14, 2007
    Federal Reserve Communications

    http://www.federalreserve.gov/newsevents/speech/bernanke20071114a.htm

    Each of the participants in the FOMC meeting–including the Federal Reserve Board members and all the Reserve Bank presidents–will, as in the past, provide projections for the growth of real gross domestic product (GDP), the unemployment rate, and core inflation (that is, inflation excluding the prices of food and energy items). In addition, participants will now provide their projections for overall inflation. Both overall and core inflation will continue to be based on the price index for personal consumption expenditures (PCE).5

    5: Participants will no longer provide projections for the growth of nominal GDP. These now seem relatively less useful to the public, given participants’ projections for real GDP growth and overall inflation.

    See also: “birth death” model to “estimate” job creation; BLS admits it is faulty in transition periods.

    Also see; Wages adjusted for inflation.

    To wit: The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential structures, state and local government spending, and equipment and software that were largely offset by negative contributions from private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

    The deceleration in real GDP growth in the fourth quarter primarily reflected a downturn in inventory investment and decelerations in exports, in federal government spending, and in PCE that were partly offset by a downturn in imports.

    **

    The City of New York
    Monthly Report
    on
    Current Economic
    Conditions
    March 4, 2008
    Highlights
    http://www.nyc.gov/html/omb/pdf/ec02_08.pdf

    Inflation: In January the core PCE index rose 2.5 percent y/y, well above the Fed’s
    target rate of one to two percent. Inflation in the New York Area continues to trail the
    nation.The January headline and core inflation rates were 3.7 and 2.1 percent.

  13. Dave

    Projections for nominal and real GDP changes are one thing. The reporting of nominal and real GDP is another.

    Since the calculation for Real GDP must start with Nominal and back out the price level changes to derive Real, this is where sleight of hand to increase the value of real output by decreasing the impact of price changes can occur.

    Not that I wear a tin foil hat (I have 6 or 7 of them), but it is well documented that politically motivated “adjustments” to frame the periodic reporting of economic results has distorted the reality of economic activity, price level changes, “real” wage changes, and has generally acted to facilitate the continuing transfer of wealth from the people, to the banking class and the CEO’s and executives. In addition to helping re-elect whoever the incumbent might happen to be.

  14. Richard Kline

    To njdoc:

    I certainly agree that global wage arbitrage has had a major suppressive effect on wage inflation in ‘developed countries;’ Eastern Europe, especially where aggregated to the EU, with Western Europe, and E Asia and C America with the US. In both cases, ultra-low wage economic migration has increased downward wage pressure, from N and C Africa to the EU, and from multiple regions especially C America into the US. (I’m not saying that I oppose labor migration, just considering the facts on the ground.) I am less sanguine than you, however, that such wage arbitrage has been the prime driver in low interest rates.

    I should say here that I profess no marked competence in currency or labor issues; not my primary foci. That said, I would see the primary suppressor on interest rates in ‘developed countries’ having been the willingness of external trade partner to hold onto rather than recycle our debt. Once on a time, we had a petrodollar ‘problem,’ i.e Near Eastern oil exporters recycled our currency and debt to the open market via Europe. In so doing, we had inflation as the US wasn’t producing enough to pay off that debt generated by its demand and rates crept up. After ’85 or thereabouts, though, our trade partners sat on our debt increasingly. Certainly Japan did. Increasingly the Near East did, especially after we had a little war there in ’91, and thereafter told all the Arabian Protectorates how they were to manage their macroeconomic policies (in our interest), i.e. “Oil low, sit on the dough, or hire my cousin Joe.”

    When Russia and China entered the global wage market, they were both desperately poor. China had 800 B peasants with nothing but what they grew, and Russia was in a terrible Depression (which no one seems to talk about; I guess the Russians don’t count, either). They kept our dough to capitalize themselves; oh, Russia leaked a bunch through the mafia, but the state has control of the financial system there now. These new, poor areas were too poor to create a demand pull initially, so their domestic markets created downward pressure if anything. And their governments sat on our debt. In short, as long as demand was low in these emergent and massive labor markets and their governments soaked up our debt and currency to the max, ‘developed interest rates,’ including the US, had relatively little upward pressure—but this doesn’t seem to have been an issue of wage competition in so many words: it was a result of explicit macroeconomic policy _in a situational context_. Again nothing in this was determined by ‘competent management’ from central bank policy in the US, the EU, or the G7. The global context was what it was, and existing players simply wired the situation to maintain their pre-existing policies—and to force new players to adapt to rather than renegotiate those policies. The whole GATT process was micromanaged to petrify this set of policies as a permanent structure, rather like King Canute commanding the tide never to come in but freeze in place.

    Well time and the rive both flow on. By (oh, pick a date) 2005, demand pull from these massive new areas began to drag up prices; they had some wealth, they had many needs; they paid more to get more. Thus, the distortion of excessively low global demand pull disappeared. And now by 2007, we have reached saturation and more in creditor countries for the US to absorb our faux credit at artificially low rates and hence artificially high volume. With the interesting exception of Japan, all our creditors are now feverish with our exported inflation, so hot that our accumulated debt is melting in their vaults. But again, this doesn’t seem to be a direct function of wage arbitrage. That is, we didn’t see wages soar in E Asia or Russia, and that act as a driver for change. Wages are coming up, but the lag the changes, not drive them.

    To my mind, the entry of E Europe and E Asia into global trade interactions which involved the US only served _to extend_ macroeconomic dynamics already in place. Our bargeloads of bad money would have choked Europe, Japan, and the Near East maybe ten years ago, but the arrival of E Europe and E Asia as significant factors by the late 90s just gave us ten more years to stay drunk and louche. It isn’t the US alone which is responsible for all this; everyone bought into the process, and worked their own angle for their own gain, as pushers, enablers, wannabes, or what have you. The WTO is a cement monument to the 20th century, but all its windows look backward not forward.

    It’s a remarkable achievement, though, a world-historical one really, that we the people of the US of A have managed to choke the global maw with our debt. It could be argued that Spain managed to choke the nascent European money economy of the 16th century with its debt; the trajectory didn’t end well for them. The cases aren’t directly comparable of course . . . cold comfort though that may be. Historically, we will likely be viewed as just as stupidly profligate, transforming enormous structural advantages into stupendous strategic and economic failure.

    Will the Great Chicago Vacuum and the earplug set find the spine and the political will to shovel us out from under this one??? Tune in next biennium . . . .

  15. senor doc holiday

    GDP changes update:

    Technical Note
    Gross Domestic Product and Corporate Profits
    Fourth Quarter of 2007 (Final)
    March 27, 2008

    http://www.bea.gov/newsreleases/national/gdp/2008/tech407f.htm

    Sources of Revision to Components of Real GDP

    As a result of largely offsetting revisions to inventory investment and PCE for services,
    real GDP growth in the fourth quarter was unrevised at 0.6 percent (annual rate).
    * Inventory investment was revised down, reflecting the incorporation of newly
    available fourth-quarter Census Bureau Quarterly Financial Report data and
    revised Census Bureau inventory data for December.
    * PCE for services was revised up, mainly reflecting the incorporation of newly
    available Quarterly Services Survey data on medical care services from the
    Census Bureau and newly available data on gas usage from the Energy
    Information Administration.

    The price index for gross domestic purchases increased 3.7 percent in the fourth
    quarter, a downward revision of 0.2 percentage point from the preliminary estimate. The
    implicit price index for imputed financial services was revised down, based on newly
    available Call Report data from the Federal Reserve Board, which showed lower
    charges to consumers on bank loans than had been previously estimated.

    Also See: Bank loans as a percentage of GDP, a common measure of the penetration of financial services in a country, are still in the mid-teens, compared with an average of 25% for the BRIC nations of Brazil, Russia, India, and China, according to the Association of Mexican Banks.

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