Edward Guay Phone: Fax: The Connecticut Economy The Connecticut Convention Center Hartford, CT September 9, 2005 Wintonbury Risk Management 10 Birch Road Bloomfield, CT The International Challenges

The Greenspan Succession Paul Volcker was asked to crush inflation, even if that put growth and employment at risk— Inflation Control Alan Greenspan was asked optimize growth relative to contained inflation, while dealing with multiple crises—Risk Management Greenspan’s successor will be asked to balance international trade and domestic demand as well— Ultimate Risk Management Wintonbury Risk Management 1

Shocks and Fears During the 1990s CIA HQ and World Trade Center Attacks, 1993 Chinese Currency Devaluation, Mexican Financial Crisis, Southeast Asian Crisis, 1997 Korean Financial Crisis, Russian Default, 1998 Long Term Capital Management, 1998 Brazilian Crises, Argentine Crises, Y2K Fear, Technology Bubble, World Trade Center and Pentagon Attacks, 2001 Wintonbury Risk Management 2

How the World Responded Other countries devalued, pegged currencies, and accumulated foreign exchange reserves, mostly in dollars. The United States maintained relatively easy fiscal and monetary policies. The combined effect was unusually easy credit in the United States, strong domestic demand, and large trade imbalances Wintonbury Risk Management 3

Asian Currencies Indexed to December 1993 Yuan, Korean Won, New Taiwan Dollar 4

Growth of U.S. Official Credit Sources Percentage Change from the Year Before Wintonbury Risk Management 5

The Real Federal Funds Rate Plotted with Average and Cyclical Normal Wintonbury Risk Management 6

Real Housing and Consumer Durable Spending As a Percentage of Real Gross Domestic Product Wintonbury Risk Management 7

Real Exports and Real Imports As Percentages of Trend Wintonbury Risk Management 8

Real Balance of Trade in Goods and Services Plotted with Trend Caused by Systematic Overvaluation of Dollar Chain Weighted 2000 Dollars 9

Saving as a Percentage of Disposable Personal Income Plotted with Average 10 Wintonbury Risk Management

U.S. Cost of Imported Crude Oil U.S. Dollars per Barrel; Plotted with Adjusted Normal Price 11 Wintonbury Risk Management

United States Exports Fifteen Largest Export Markets, $Millions 12 Wintonbury Risk Management

United States Imports Fifteen Largest Import Sources, $Millions 13 Wintonbury Risk Management

United States Merchandise Trade Balances Listed by Fifteen Largest Import Sources, $Millions 14 Wintonbury Risk Management

The Real Treasury Yield Curve Plotted with the "Normal" Real Yield Curve 15 Wintonbury Risk Management

Federal Reserve Open Market Meetings September 20, 2005 November 1, 2005 December 13, 2005 January 31, 2006 March 28, 2006 May 10, 2006 June 28, Wintonbury Risk Management