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1985 Economic Commentaries

  • How Desirable Is Dollar Depreciation?


    Gerald Anderson

    Abstract

    In September 1985, the Secretary of the Treasury joined his counterparts in the Group of Five (G-5) nations- France, Germany, Japan, and the United Kingdom-in announcing a joint effort to lower the exchange value of the dollar. Read More

  • The Difficulty In Explaining Postwar Stability


    Kim Kowalewski

    Abstract

    Since 1981, business activity has been cycling through high and low points so often that the casual observer might get the impression that the economy has become unstable. Read More

  • Bank Earnings: Comparing the Extremes


    Paul Watro

    Abstract

    Much concern has been expressed in financial circles about bank earnings, credit and interest-rate risks, and bank failures over the last few years. Since 1981, the number of bank failures has escalated because many institutions have been saddled with an increasing volume of bad loans and other problems. Read More

  • Reserve Borrowings and the Money Market


    Richard Mugel

    Abstract

    One of the functions of the Federal Reserve System is to provide loans to depository institutions (generally, banks) in each district through what is figuratively known as the "discount window." Read More

  • International Trade and the Fourth District's Recovery


    Robert Schnorbus

    Abstract

    With the thawing of Lake Erie each spring, a new shipping season opens bringing international trade through the St. Lawrence Seaway directly into the heart of the industrial Midwest. Read More

  • The M1 Target and Disinflation Policy


    William Gavin

    Abstract

    To regulate the nation's money supply, the Federal Reserve System sets target ranges for three measures of money, which are designated M1, M2, and M3. Although there are three different monetary targets, academic researchers and the public focus primarily on the M1 measure, which is announced on a weekly basis. Researchers find it most useful in academic pursuits. The public considers M1 useful for monitoring the Federal Reserve's monetary policy and for predicting the future effects of monetary policy on inflation and interest rates. Read More

  • Interstate Banking: Its Impact on Ohio Banks


    Thomas Buynak

    Abstract

    Interstate banking is rapidly becoming a marketplace reality. The pace of change is so rapid that 1985 may be a watershed in eliminating interstate banking barriers. No state permitted interstate banking until 1975. Today, 27 states allow some type of out-of-state entry by commercial banks. Read More

  • The Dollar in the Eighties


    Owen F. Humpage Nicholas Karamouzis

    Abstract

    Since mid-1980, the dollar has experienced an unprecedented appreciation in foreign-exchange markets. On a trade-weighted basis, the dollar appreciated 77 percent from its low in mid- 1980 to its most recent peak in February 1985. The sharp appreciation of the dollar put U.S. trade-related industries at a competitive disadvantage in world markets and contributed to the record $107 billion trade deficit in 1984. The dollar has since depreciated by approximately 11 percent, but remains high. Read More

  • Medicaid: Federalism and the Reagan Budget Proposals


    Paul Wyckoff

    Abstract

    As the nation's program of medical assistance for the poor, Medicaid, enters its 20th year, many fundamental policy questions about the program are still being worked out. Do steelworkers in Pittsburgh, for example, have an interest in the medical care given to the disabled in California? Are the health needs of the poor the responsibility of their county or state government, or of the nation as a whole? Is it more important to allow local control of the program, or to insure equal access to medical care across the country? Read More

  • Solutions to the International Debt Problem


    Gerald Anderson

    Abstract

    The crisis atmosphere that surrounded the international debt situation during the early part of the 1980s seems to have dissipated. The prospects of a major disruption in servicing international debt seem much smaller now than two or three years ago. Read More

  • Is Manufacturing Disappearing?


    Michael Bryan

    Abstract

    Some policymakers continue to favor the idea of using trade barriers to protect US. manufacturing industries. In some measure, this view is based on a perception of underlying weakness in the US. manufacturing sector. There is a fear that the manufacturing sector is dying-or at the very least, that its importance to the economy is shrinking. This Economic Commentary offers some alternative perspectives on the trends in manufacturing. Read More

  • The Dynamics of Federal Debt


    John Carlson Edward Stevens

    Abstract

    Interest payments on the federal debt have grown faster than the economy since 1974. If this trend were to continue unchecked, by the year 2013 the government would need the nation's entire gross national product (GNP) just to pay interest on the federal debt. Read More

  • Major Trends in Capital Formation


    Robert Schnorbus

    Abstract

    Capital formation in the United States has undergone dramatic changes since the 1960s, particularly for domestic capital-goods producers. Two of many (often related) trends are the overall slowdown in capital formation and the shift in the mix of capital goods being formed. A third major trend, only recently gaining prominence, is the expanding penetration of imported capital goods into domestic capital goods markets. Read More

  • The Financial Distress in American Farming


    Michael Bryan

    Abstract

    The late 1960s and the 1970s were, by most conventional measures, profitable years for American farmers. The domestic economy experienced relatively strong growth. Farm incomes were also greatly influenced by international demand for U.S. food exports. Read More

  • CRR and Monetary Control


    Michael Pakko

    Abstract

    All depository institutions are required by law to hold reserves in proportion to certain deposit liabilities, to be kept either as cash in their vaults, or on deposit with Federal Reserve Banks. Because these required reserves comprise the bulk of all reserves held by the banking system, the demand for reserves in the federal funds market is closely linked to the volume of deposits. Read More

  • The Debt Burden: What You Don't See


    John Carlson

    Abstract

    A day doesn't pass without some public discussion of the federal deficit. Advocates of immediate deficit cutting use terms like 'explosive' and 'unstable' to describe the debt burden, suggesting imminent catastrophe. Others describe this as hysteria, pointing to the current performance of the economy as evidence that nothing serious is wrong. Neither view is quite right. Read More

  • Imports and Domestic Steel


    Amy Kerka

    Abstract

    For U.S. steel manufacturers, 1983 was not a banner year; one-third of U.S. steelworkers were on layoff, it was the industry's second consecutive unprofitable year, and the market share of imports set a record high. Domestic steel manufacturers responded by appealing to the U.S. Congress to set global limits on imported steel and in November 1983, the Fair Trade in Steel Act was introduced. This act calls for setting import quotas at 15 percent of the domestic market supply for five years. (The foreign market share was 26.2 percent in the first three quarters of 1984). In September 1984, President Reagan announced he would push for voluntary restraints on foreign steel producers to limit imports of finished steel products to around 18.5 percent of the American market, and by December 1984, some major foreign steel producers had agreed to a five-year-long limit on exports to the United States Read More

  • Federal Reserve's Response to the Problems Experienced by ODGF Thrifts


    Karen Horn

    Abstract

    I am pleased to appear before the Commerce, Consumer, and Monetary Affairs Subcommittee to discuss the Federal Reserve's response to the recent problems experienced by thrifts insured by the Ohio Deposit Guarantee Fund. This morning I will be reviewing for you the response of the Federal Reserve Bank of Cleveland. Read More

  • Will Taxing Imports Help?


    Michael Bryan Owen F. Humpage

    Abstract

    The United States is currently experiencing the strongest economic recovery since the Korean War, with virtually no increase in the rate of inflation. Uncertainties associated with persistently large federal budget deficits, and with international payments imbalances, however, cloud the outlook for continued prosperity. Read More

  • The 1985 Humphrey-Hawkins Testimony


    Michael Pakko

    Abstract

    In February, the Chairman of the Federal Reserve's Board of Governors made the annual announcement of the Federal Open Market Committee's (FOMC) current monetary growth targets. The Federal Reserve began announcing annual targets in 1975 in response to House Concurrent Resolution 133, and the practice was refined and formalized in the Federal Reserve Reform Act of 1977 and in the Full Employment and Balanced Growth Act of 1978 (better known as the Humphrey-Hawkins Act). Read More

  • Deposit Rates and Local Markets


    Paul Watro

    Abstract

    Commercial banks and thrift institutions have always competed aggressively for deposits, but in today's market they must increasingly rely on rate competition to attract depositors. They have to do this because recent changes in regulations have transformed the deposit market. Read More

  • Recent Changes in the Consumer Bankruptcy Laws


    Kim Kowalewski

    Abstract

    In April 1981, the Subcommittee on Courts of the Senate judiciary Committee began hearings to determine why there was such an extraordinary increase in personal bankruptcies since passage of the Bankruptcy Reform Act of 1978, and to determine appropriate corrective action. The subcommittee rather quickly concluded that the 1978 code, which became effective in October 1979, promoted an excessive number of personal bankruptcies and needed to be amended. Read More

  • Will Adjustable Rate Mortgages Survive?


    Thomas Buynak

    Abstract

    The variety of mortgage loan programs currently available to home buyers has made choosing a mortgage loan as difficult as choosing a house. One of these mortgage loan options, the adjustable rate mortgage, became so popular in 1983-84 that it supplanted the traditional fixed-rate mortgage as the dominant type of home mortgage financing. Read More

  • Ohio's Electricity Prices


    Philip Israilevich

    Abstract

    The energy crisis of the 1970s had a dramatic effect on the comparative costs of electrical utilities across the nation. Triggered by the emergence of OPEC, oil prices in the United States rose 175 percent between 1973 and 1982 (after adjusting for inflation). Over the same period, natural gas prices increased 350 percent, while coal prices rose only 85 percent. The prices of primary energy sources (oil, coal, and natural gas) are a major cost component in the production of electricity. As a result, electrical utilities that use coal as the major fuel to generate electricity experienced much smaller increases in production costs than oil- or gas-dependent utilities. With 90 percent of their electricity generated from coal, Ohio's utilities have been major beneficiaries, along with Ohio's businesses and consumers, of a decline in coal prices relative to other natural fuels. Read More