1. J.P.Morgan Chase S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L Crisis Response: Crisis Response: Different Aspects Different Aspects Dr. Jacob A. Frenkel Chairman, JPMorgan Chase International Chairman, Group of Thirty (G30) Former Governor, Bank of Israel Panel Discussion II The Seventeenth Dubrovnik Economic Conference Croatian National Bank Dubrovnik, June 29-July 2. 2011

2. 6/20/2011 2 Global Imbalances Global Imbalances Imbalances in International Payments Imbalances in International Payments Imbalances in Macro Policies Imbalances in Macro Policies Imbalances in the Euro-System Imbalances in the Euro-System

3. 6/20/2011 3 International Payments Imbalances Current Accounts Imbalances Current Accounts Imbalances Who Holds US Treasuries? Who Holds US Treasuries? International Reserves International Reserves Savings Imbalances Savings Imbalances

4. 4 J.P.Morgan Chase 6/20/2011 Current Account of Balance of Payments US$ billions, 2011 Source: IMF, last update Apr 03 2011, WEO (2011 Forecast)

5. 5 J.P.Morgan Chase 6/20/2011 Current Account of Balance of Payments Source: IMF, last update Apr 03 2011, WEO (2010 & 2011 Forecast)

6. 6 J.P.Morgan Chase 6/20/2011 Global Treasury Holdings Source: US Treasury, Last Observation: March 2011

7. 7 J.P.Morgan Chase 6/20/2011 Accumulation of Foreign Exchange Reserves (Bill. Usd)

8. 8 J.P.Morgan Chase 6/20/2011 Gross National Savings as a % of GDP, 2010 Source: US Treasury, Last Observation: March 2011

9. 6/20/2011 9 Global Interest Rate Cuts Global Interest Rate Cuts Nominal and Real Interest Rates Nominal and Real Interest Rates Central Bank’s Balance Sheets Central Bank’s Balance Sheets Fiscal Deficits and Public Debt Fiscal Deficits and Public Debt Imbalances in Macro Policies

10. 10 J.P.Morgan Chase 6/20/2011 Coordinated Global Rate Cuts

11. 11 J.P.Morgan Chase 6/20/2011 Global Policy Rates: Developed Markets

12. 12 J.P.Morgan Chase 6/20/2011 Global Policy Rates: Main Rate & Real Rates

13. 13 J.P.Morgan Chase 6/20/2011 Global Policy Rates: Main Rate & Real Rates

14. 14 J.P.Morgan Chase 6/20/2011 Total Assets of Key Central Banks (indexed levels)

15. 15 J.P.Morgan Chase 6/20/2011 Federal Reserve Balance Sheet Assets: Total Assets & Security Holdings

16. 16 J.P.Morgan Chase 6/20/2011 Fiscal Positions: General Government Balance

17. 17 J.P.Morgan Chase 6/20/2011 Fiscal Positions: Net Debt

18. 6/20/2011 18 Unemployment & Productivity Unemployment & Productivity Budget Deficits and Public Debt Budget Deficits and Public Debt Savings and Payments Imbalances Savings and Payments Imbalances Spreads, CDS, and Banks Spreads, CDS, and Banks “Bad Zones” and the Crisis “Bad Zones” and the Crisis Imbalances in the Euro-System

19. 19 J.P.Morgan Chase 6/20/2011 Unemployment Rate (%): Selected Euro Area Countries

20. 20 J.P.Morgan Chase 6/20/2011 Relative Unit Labor Costs, Manufacturing Sector Source: OECD December 2010, Last observation: Q4/2010

21. 21 J.P.Morgan Chase 6/20/2011 Relative Unit Labor Costs, Manufacturing Sector

22. 22 J.P.Morgan Chase 6/20/2011 Fiscal Position: General Government Balance – Select Euro Area Economies

23. 23 J.P.Morgan Chase 6/20/2011 Fiscal Positions: Net Debt – Select Euro Area Economies

24. 24 J.P.Morgan Chase 6/20/2011 Change in Gross National Saving Rate: Select European Counties (2000 – 2010)

25. 25 J.P.Morgan Chase 6/20/2011 Change in Gross National Saving Rate: Select European Counties (2000 – 2010) Change between 2000-2007 Change between 2007-2010

26. 26 J.P.Morgan Chase 6/20/2011 Euro Area Current Account Balance (% of GDP)

27. 27 J.P.Morgan Chase 6/20/2011 Greece, Portugal, Ireland and Spain: Gross Financing Needs

28. 28 J.P.Morgan Chase 6/20/2011 10yr Government Bond Yield Spread

29. 29 J.P.Morgan Chase 6/20/2011 European Sovereign CDS Premia

30. 30 J.P.Morgan Chase 6/20/2011 European Sovereign and Corporate CDS Spreads

31. 31 J.P.Morgan Chase 6/20/2011 Bank Holdings of Domestic Government Securities (% of total bank assets)

32. 32 J.P.Morgan Chase 6/20/2011 Gross Government Debt and Budget Deficit (% of GDP 2010) Source: IMF, last update Apr 03 2011, WEO (2010 Forecast)

33. 33 J.P.Morgan Chase 6/20/2011 Gross Government Debt and Budget Deficit (% of GDP 2010)

34. 34 J.P.Morgan Chase 6/20/2011 Current Account Balance and Budget Deficit (% of GDP 2010) Source: IMF, last update Apr 03 2011, WEO (2010 Forecast)

35. 35 J.P.Morgan Chase 6/20/2011 Current Account Balance and Budget Deficit (% of GDP 2010)

36. 36 J.P.Morgan Chase 6/20/2011 Gross National Saving Rate and Budget Deficit (% of GDP 2010) Source: IMF, last update Apr 03 2011, WEO (2010 Forecast); Eurostat (2010 forecast, EA13)

37. 37 J.P.Morgan Chase 6/20/2011 Gross National Saving Rate and Budget Deficit (% of GDP 2010)