1. Jason Henderson Vice President and Branch Executive Federal Reserve Bank of Kansas City – Omaha Branch www.kansascityfed.org/omaha September 28, 2009 The views expressed are those of the author and do not necessarily reflect the opinions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

2. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division  Financial Crisis  Economic Recession  Inflation and Federal Reserve exit strategy  Financial Risks to Agriculture

3. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Basis Points Source: Federal Reserve Board of Governors LIBOR-OIS Spread 3-month 1-month

4. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Commercial Real Estate Vacancy Rates Source: Torto-Wheaton Research Percent Office Industrial Retail Multifamily

5. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division  Financial Crisis  Economic Recession

6. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Real GDP Growth Annualized percent change from previous quarter Source: Bureau of Economic Analysis and Blue Chip Economic Indicators Blue Chip Forecast

7. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division U.S. Monthly Retail and Food Sales Billion dollars Source: U.S. Census Bureau 2006 2007 2008 2009

8. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Change from previous month (Thousands) Job Change (Left Scale) Unemployment Rate (Right Scale) Source: Bureau of Labor Statistics U.S. Non-farm Job Growth and Unemployment Rate Percent

9. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Trillion dollars Source: Federal Reserve Board of Governors Assets Held by Households and Nonprofit Organization

10. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Personal Savings as a Percent of Disposable Income Source: Bureau of Economic Analysis Percent

11. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Percent change from previous year Source: USDA 2009 data are year-to-date through August U.S. Food Sales

12. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Percent change Calculations based on Bureau of Economic Analysis data * The National Bureau of Economic Research indicates the recession started in Dec. 2007. At the time of publication, the end of the recession has yet to be specified. U.S. Per Capita Expenditures on Beef, Pork, Poultry, and Milk Products

13. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Source: Bureau of Economic Analysis Billion dollars Real Net Exports of Goods and Services

14. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Annual percent change, constant dollars GDP Growth Source: International Monetary Fund, April 2009 China World U.S. Projection

15. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Estimated Budget Impact of American Recovery and Reinvestment Act (ARRA) of 2009 Source: Congressional Budget Office, February 13, 2009 Billion Dollars

16. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division  Financial Crisis  Economic Recession  Inflation and Federal Reserve exit strategy

17. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Central Bank Short-term interest rates Bank Reserves Bank CreditExcess Reserves Long-term Interest rates Economic activity 12 3 Source: Gordon Sellon (2003) “Monetary Policy and the Zero Bound: Policy Options When Short-Term Rates Reach Zero” Economic Review http://www.kansascityfed.org/Publicat/ECONREV/PDF/4q03sell.pdf

18. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Federal Reserve Balance Sheet: Assets Billion Dollars Source: Federal Reserve Board of Governors

19. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Percent Source: Federal Reserve Board of Governors and CME Group Fed Funds Rate

20. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division  Financial Crisis  Economic Recession  Inflation and Federal Reserve exit strategy  Financial Risks to Agriculture

21. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Percent Source: Federal Reserve Board of Governors Charge-off and Delinquency Rates on Agricultural Loans

22. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Months Source: Federal Reserve Bank of Kansas City and Agricultural Finance Databook Collateral Requirements and Loan Maturity on Non-Real Estate Loans Diffusion Index Collateral Required Tenth Federal Reserve District (Left Axis) Average Maturity of Non-Real Estate Loans – U.S. (Right Axis)

23. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Dollars per acre Source: USDA U.S. Farmland Values

24. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division Percent of GDP Source: Federal Reserve Board of Governors Domestic Debt Outstanding Nonfinancial Business Financial Business Household

25. Federal Reserve Bank of Kansas City – Omaha Branch Regional, Public and Community Affairs Division  The financial crisis and recession appear to be ending.  Risks surround the recovery.  The outlook hinges on consumer spending.  As the recovery strengthens, questions will switch from growth to inflation.  Will the recovery lift agricultural demand in 2010?

26. For More Information Federal Reserve Bank of Kansas City – Omaha Branch www.kansascityfed.org/omaha