Arm Hayseed
03-13-2004, 01:58 AM
I’ve recently began researching the Federal Reserve Board and how and when they move the Fed Fund Rates. From what I am reading, the Federal Reserve, as a rule of thumb, will raise the Fund Rate to slow inflation or lower them to fight unemployment. Other factors may come into play but these two seem to be primary factors.
The Federal Reserve provides the Effective Fed Fund Rates (EFFR) on their web site:
http://www.federalreserve.gov/releases/H15/data/m/fedfund.txt
The data for the complete 4-year term of each president goes back to Eisenhower’s second term.
The Bureau of Labor Statistics provides Cost Price Index data on this web site:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
The Bureau of Labor Statistics provides employment data on this web site:
http://data.bls.gov/cgi-bin/surveymost?bls
The Bureau of Economic Analysis provide Gross Domestic Product data on this web site:
http://www.bea.gov/bea/dn/gdplev.xls
I was creating charts on the movement of the EFFR over the term of the various presidents when I noticed something that I thought was unusual.
There were five Democratic terms and five times the rates were higher at the end of the 4-year term than the beginning.
There were seven Republican terms and six times the rates were lower at the end of their 4-year term than the beginning.
Does this seem odd to anyone else or could it be just extreme coincidence?
Using the information provided by the Bureau of Labor Statistics I calculated the accumulated inflation over each 4-year term by taking the C.P.I. on the Jan of each President’s inauguration and the C.P.I. on the Jan. that ended their term and calculating the percent of change. Once again starting with Eisenhower’s second term. Following is a list sorted in descending order of the accumulated inflation with each President’s name, percent increase in C.P.I. and the change in the Effective Fed Fund Rate over their 4 year term.
Carter(D) 48.72 14.47
Nixon/Ford(R) 37.32 -1.33
Reagan(R)(1st) 21.26 -10.73
Nixon(R) 19.66 -0.36
Bush 41(R) 17.75 -6.10
Reagan(R)(2nd) 14.79 0.77
Johnson(D) 14.10 2.40
Clinton(D)(1st) 11.57 2.23
Clinton(D)(2nd) 10.83 0.73
Eisenhower(R) 7.97 -1.39
Kennedy(D) 4.70 2.45
Bush 43(R)* 2.00 -4.98
*(avg. of first 3 yrs.)
In the top half of the field (those with the highest inflation) there are 5 Republicans. With four of them the rates were lower at the end of their 4-year term than the beginning.
In the bottom half of the field there are 4 Democrats. With all of them the rates were higher at the end of their 4-year term than the beginning.
Does this seem odd to anyone else or am I just being too suspicious?
Unemployment figures can be found at the Bureau of Labor Statistics web site. The following list is sorted in descending order of the median of their monthly unemployment numbers over the 4-year term and the change in the Effective Fed Fund Rate over that term. The usual suspects and the same time frame.
Reagan (1st) 8.3 -10.73
Nixon/Ford 7.4 -1.33
Reagan (2nd) 6.6 +0.77
Bush 41 6.4 -6.10
Carter 6.3 +14.47
Bush 43 5.8* -4.98
Clinton (1st) 5.7 +2.23
Kennedy/Johnson 5.6 +2.45
Eisenhower 5.5 -1.39
Nixon 5.5 -0.36
Clinton (2nd) 4.4 +0.73
Johnson 3.8 +2.40
*(thru Dec ’03)
Once again, ‘Different strokes for different folks.’ For instance, Bush 41 entered office with an unemployment rate of 5.4%. Within 2 months it hit a low of 5.0% then began a steady climb to 7.8% by 06/92 then fell to 7.4% by 12/92 and the EFFR was 6.10% lower at the end of his term.
Contrast that with Carter who had an unemployment rate of 7.5% when he entered office. Unemployment began a slow fall till it reached 5.7% in 06/79 then moved up to 7.8% before settling back to 7.2% by 12/80 and the EFFR was 14.47% higher at the end of his term.
Does this seem odd to anyone else or am I just being cynical?
While I was looking at the Gross Domestic Product I noticed another oddity. (The B.E.A. has more data so I went back a little over 50 years to Eisenhower’s first term.)
Since Eisenhower was elected in 1952 there have been 10 different presidents over 13 terms.
Since Eisenhower was elected in 1952 there have been 8 recessions.
Here is a list and the year and quarter that the recession began.
Eisenhower…..1953 4th Q
Eisenhower..…1958 1st Q
Nixon..…….…..1970 1st Q
Ford….………...1974 3rd Q
Carter……..…..1980 3rd Q
Reagan…....….1982 1st Q
Bush 41……..…1991 1st Q
Bush 43..………2001 2nd Q
Eight recessions and seven of them occurred during a Republican’s presidency.
Every Republican president since Eisenhower has had a recession and he had two.
After the Republicans seemingly benefit from favorable EFFR moves they still have recessions. This really seemed odd to me. The only term that they didn’t have a recession was Reagan’s second term.
Does this seem odd to anyone else or am I just becoming paranoid?
While reading this news release I found the following quote:
http://www.whitehouse.gov/news/releases/2001/07/20010719-4.html
“The usual lag in monetary policy is 12 to 18 months. Thus, the interest rate cuts in the early portion of this year should have their maximum impact on the economy during 2002.”
From "Remarks by Dr. Lawrence B. Lindsey at the Federal Reserve Bank of Philadelphia". (Dr. Lindsey is a former member of the Board of Governors of the Federal Reserve System and a former Resident Scholar at the American Enterprise Institute. He is currently Assistant to the President for Economic Policy and Director of the National Economic Council.)
If the Fed Fund Rates are moved for political reasons it would be more obvious over eighteen months as opposed to twelve. Also the most obvious place to look would be pre-inauguration and post-inauguration.
I looked at the patterns of the rate moves over the three year period surrounding the inauguration and found 4 different patterns. I named them ‘Peak’, ‘Valley’, ‘Ramp Down’ and ‘Ramp Up’.
‘Peak’ is good for the incoming President. The rates are moving up before inauguration, slowing the economy, and then move down after the inauguration, improving the economy. A Peak would be very effective in the first term of a President.
‘Valley’, being the opposite, is not good for the incoming President.
‘Ramp Down’ is good for a President for obvious reasons.
‘Ramp Up’ is not good for a President.
Here is a table with the following data: The President’s name, the date of inauguration, the type of pattern, the Fed Fund Rates at 18 months prior to the inauguration, the month of the inauguration, and 18 months post inauguration.
Eisenhower(R) 01/57 Peak 1.68 2.84 0.68
Kennedy(D) 01/61 Valley 3.47 1.45 2.71
Johnson(D) 01/65 Ramp Up 3.02 3.90 5.30
Nixon(R) 01/69 Ramp Up 3.79 6.30 7.21
Nixon(R) 01/73 Ramp Up 5.31 5.94 12.92
Ford(R) 08/74 Peak 6.58 12.01 4.84
Carter(D) 01/77 Valley 6.10 4.61 7.81
Reagan(R) 01/81 Peak 10.47 19.08 12.59
Reagan(R) 01/85 Ramp Down 9.37 8.35 6.56
Bush 41(R) 01/89 Peak 6.58 9.12 8.15
Clinton(D) 01/93 Valley 5.82 3.02 4.26
Clinton(D) 01/97 Valley 5.85 5.25 5.54
Bush 43(R) 01/01 Peak 4.99 5.98 1.73
None of these charted a smooth course over the three data points but the relative positions of the three data points and their patterns were what I was concerned with.
Here’s the Scorecard:
Republicans Democrats
Peaks 5 0
Ramp Down 1 0
Valley 0 4
Ramp Up 2 1
(That’s 6 moves good for Republicans and 5 moves bad for Democrats. The Republicans scored twice on the worst kind of moves that can be inflicted by the Fed. This is counter to my expectations and I can’t explain it. All that I am sure is that both times it was Nixon. I have read that there was tension between Nixon and the Chairman of the Fed at the time but I can’t find what that was. Maybe someone in this group has more information.)
While I was gathering all of this I noticed that for two inaugurations, if the time frame was extended to two years or so, there was two occasions where the swing in rates exceeded 5 points.
26 months prior 10.06
Carter(D) Valley 01/77 4.61
24 months post 10.07
24 months prior 10.07
Reagan(R) Peak 01/81 19.08
24 months post 8.68
If there is someone on this board that can offer a logical explanation for all these ‘long shot’ coincidences I would greatly appreciate it.
(Sorry the data is so messed up. I created this in MSWord using tables and it used to look a lot better.)
:thumpdown
The Federal Reserve provides the Effective Fed Fund Rates (EFFR) on their web site:
http://www.federalreserve.gov/releases/H15/data/m/fedfund.txt
The data for the complete 4-year term of each president goes back to Eisenhower’s second term.
The Bureau of Labor Statistics provides Cost Price Index data on this web site:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
The Bureau of Labor Statistics provides employment data on this web site:
http://data.bls.gov/cgi-bin/surveymost?bls
The Bureau of Economic Analysis provide Gross Domestic Product data on this web site:
http://www.bea.gov/bea/dn/gdplev.xls
I was creating charts on the movement of the EFFR over the term of the various presidents when I noticed something that I thought was unusual.
There were five Democratic terms and five times the rates were higher at the end of the 4-year term than the beginning.
There were seven Republican terms and six times the rates were lower at the end of their 4-year term than the beginning.
Does this seem odd to anyone else or could it be just extreme coincidence?
Using the information provided by the Bureau of Labor Statistics I calculated the accumulated inflation over each 4-year term by taking the C.P.I. on the Jan of each President’s inauguration and the C.P.I. on the Jan. that ended their term and calculating the percent of change. Once again starting with Eisenhower’s second term. Following is a list sorted in descending order of the accumulated inflation with each President’s name, percent increase in C.P.I. and the change in the Effective Fed Fund Rate over their 4 year term.
Carter(D) 48.72 14.47
Nixon/Ford(R) 37.32 -1.33
Reagan(R)(1st) 21.26 -10.73
Nixon(R) 19.66 -0.36
Bush 41(R) 17.75 -6.10
Reagan(R)(2nd) 14.79 0.77
Johnson(D) 14.10 2.40
Clinton(D)(1st) 11.57 2.23
Clinton(D)(2nd) 10.83 0.73
Eisenhower(R) 7.97 -1.39
Kennedy(D) 4.70 2.45
Bush 43(R)* 2.00 -4.98
*(avg. of first 3 yrs.)
In the top half of the field (those with the highest inflation) there are 5 Republicans. With four of them the rates were lower at the end of their 4-year term than the beginning.
In the bottom half of the field there are 4 Democrats. With all of them the rates were higher at the end of their 4-year term than the beginning.
Does this seem odd to anyone else or am I just being too suspicious?
Unemployment figures can be found at the Bureau of Labor Statistics web site. The following list is sorted in descending order of the median of their monthly unemployment numbers over the 4-year term and the change in the Effective Fed Fund Rate over that term. The usual suspects and the same time frame.
Reagan (1st) 8.3 -10.73
Nixon/Ford 7.4 -1.33
Reagan (2nd) 6.6 +0.77
Bush 41 6.4 -6.10
Carter 6.3 +14.47
Bush 43 5.8* -4.98
Clinton (1st) 5.7 +2.23
Kennedy/Johnson 5.6 +2.45
Eisenhower 5.5 -1.39
Nixon 5.5 -0.36
Clinton (2nd) 4.4 +0.73
Johnson 3.8 +2.40
*(thru Dec ’03)
Once again, ‘Different strokes for different folks.’ For instance, Bush 41 entered office with an unemployment rate of 5.4%. Within 2 months it hit a low of 5.0% then began a steady climb to 7.8% by 06/92 then fell to 7.4% by 12/92 and the EFFR was 6.10% lower at the end of his term.
Contrast that with Carter who had an unemployment rate of 7.5% when he entered office. Unemployment began a slow fall till it reached 5.7% in 06/79 then moved up to 7.8% before settling back to 7.2% by 12/80 and the EFFR was 14.47% higher at the end of his term.
Does this seem odd to anyone else or am I just being cynical?
While I was looking at the Gross Domestic Product I noticed another oddity. (The B.E.A. has more data so I went back a little over 50 years to Eisenhower’s first term.)
Since Eisenhower was elected in 1952 there have been 10 different presidents over 13 terms.
Since Eisenhower was elected in 1952 there have been 8 recessions.
Here is a list and the year and quarter that the recession began.
Eisenhower…..1953 4th Q
Eisenhower..…1958 1st Q
Nixon..…….…..1970 1st Q
Ford….………...1974 3rd Q
Carter……..…..1980 3rd Q
Reagan…....….1982 1st Q
Bush 41……..…1991 1st Q
Bush 43..………2001 2nd Q
Eight recessions and seven of them occurred during a Republican’s presidency.
Every Republican president since Eisenhower has had a recession and he had two.
After the Republicans seemingly benefit from favorable EFFR moves they still have recessions. This really seemed odd to me. The only term that they didn’t have a recession was Reagan’s second term.
Does this seem odd to anyone else or am I just becoming paranoid?
While reading this news release I found the following quote:
http://www.whitehouse.gov/news/releases/2001/07/20010719-4.html
“The usual lag in monetary policy is 12 to 18 months. Thus, the interest rate cuts in the early portion of this year should have their maximum impact on the economy during 2002.”
From "Remarks by Dr. Lawrence B. Lindsey at the Federal Reserve Bank of Philadelphia". (Dr. Lindsey is a former member of the Board of Governors of the Federal Reserve System and a former Resident Scholar at the American Enterprise Institute. He is currently Assistant to the President for Economic Policy and Director of the National Economic Council.)
If the Fed Fund Rates are moved for political reasons it would be more obvious over eighteen months as opposed to twelve. Also the most obvious place to look would be pre-inauguration and post-inauguration.
I looked at the patterns of the rate moves over the three year period surrounding the inauguration and found 4 different patterns. I named them ‘Peak’, ‘Valley’, ‘Ramp Down’ and ‘Ramp Up’.
‘Peak’ is good for the incoming President. The rates are moving up before inauguration, slowing the economy, and then move down after the inauguration, improving the economy. A Peak would be very effective in the first term of a President.
‘Valley’, being the opposite, is not good for the incoming President.
‘Ramp Down’ is good for a President for obvious reasons.
‘Ramp Up’ is not good for a President.
Here is a table with the following data: The President’s name, the date of inauguration, the type of pattern, the Fed Fund Rates at 18 months prior to the inauguration, the month of the inauguration, and 18 months post inauguration.
Eisenhower(R) 01/57 Peak 1.68 2.84 0.68
Kennedy(D) 01/61 Valley 3.47 1.45 2.71
Johnson(D) 01/65 Ramp Up 3.02 3.90 5.30
Nixon(R) 01/69 Ramp Up 3.79 6.30 7.21
Nixon(R) 01/73 Ramp Up 5.31 5.94 12.92
Ford(R) 08/74 Peak 6.58 12.01 4.84
Carter(D) 01/77 Valley 6.10 4.61 7.81
Reagan(R) 01/81 Peak 10.47 19.08 12.59
Reagan(R) 01/85 Ramp Down 9.37 8.35 6.56
Bush 41(R) 01/89 Peak 6.58 9.12 8.15
Clinton(D) 01/93 Valley 5.82 3.02 4.26
Clinton(D) 01/97 Valley 5.85 5.25 5.54
Bush 43(R) 01/01 Peak 4.99 5.98 1.73
None of these charted a smooth course over the three data points but the relative positions of the three data points and their patterns were what I was concerned with.
Here’s the Scorecard:
Republicans Democrats
Peaks 5 0
Ramp Down 1 0
Valley 0 4
Ramp Up 2 1
(That’s 6 moves good for Republicans and 5 moves bad for Democrats. The Republicans scored twice on the worst kind of moves that can be inflicted by the Fed. This is counter to my expectations and I can’t explain it. All that I am sure is that both times it was Nixon. I have read that there was tension between Nixon and the Chairman of the Fed at the time but I can’t find what that was. Maybe someone in this group has more information.)
While I was gathering all of this I noticed that for two inaugurations, if the time frame was extended to two years or so, there was two occasions where the swing in rates exceeded 5 points.
26 months prior 10.06
Carter(D) Valley 01/77 4.61
24 months post 10.07
24 months prior 10.07
Reagan(R) Peak 01/81 19.08
24 months post 8.68
If there is someone on this board that can offer a logical explanation for all these ‘long shot’ coincidences I would greatly appreciate it.
(Sorry the data is so messed up. I created this in MSWord using tables and it used to look a lot better.)
:thumpdown