Economic Letter

During the past 30 years, the economies of several East Asian nations grew on average by about 8% per year. Such rapid growth over such a long period of time is historically unprecedented.

In early January, the Advisory Council on Social Security published a review of the system and reported that it is in jeopardy. Although the system is currently accumulating a surplus, actuaries at the Social Security Administration forecast that the present value of future obligations far exceeds the present value of future revenues.

National labor market conditions are a central concern for both economists and policymakers. Traditionally, macroeconomists have not paid attention to patterns of job creation and job destruction but have tried to understand the labor market in terms of the behavior of economy-wide aggregates, such as interest rates or aggregate wage levels.

Although the federal trigger date for allowing interstate branching is June 1, 1997, about half the states, including eight of the nine in the Twelfth District, already have gotten a jump on interstate branching. These states took advantage of a provision in the federal law that allows states to opt in early, so that banking organizations can operate interstate through branches of a single bank, and not just through separately chartered banks.

The Consumer Price Index, our most common measure of consumer inflation, has been the subject of controversy recently. Most of the headlines reflect the debate about whether the CPI overstates inflation, but there are other disagreements about this measure as well, especially in the context of monetary policymaking.

In recent years, policymakers in the Asian Pacific Basin have paid increasing attention to the possibility of the sudden depreciation of their currencies, in sharp contrast to their traditional concern with currency appreciation. This attention is a response to a number of developments, most notably: speculation against the currencies of Hong Kong, the Philippines, and Thailand in the wake of the Mexican peso crash of December 1994; uncertainty on the part of some observers about the maintenance of the peg of the Hong Kong dollar to the U.S. dollar after the July 1997 transfer of sovereignty to China; and concerns voiced in the financial press about the sustainability of relatively large current account deficits in some Southeast Asian economies.

In recent years, many middle-income developing countries have experienced impressively large inflows of financial capital. The net capital inflow to developing Pacific Basin countries between 1990 and 1993 alone totaled $151 billion.

Since 1933, the Glass-Steagall Act has stood as a wall between commercial banking and investment banking in the U.S. financial system. But the wall is not perfectly solid.

A vibrant middle class is often cited among the benefits of our competitive economic system. It is argued that a large and growing middle class is an antidote to poverty, an incentive for individuals to work and improve their economic position, and an answer to those who worry that the disparity between the top and bottom of the income distribution in the U.S. is too large.

Bank managers, policymakers, and bank investors all are concerned with how efficiently a bank uses its labor and capital inputs to produce the cluster of financial products. Is a bank using the right level and mix of inputs?