Outlook Projection FY 2023-24

Black Swans... "Black Swans" are typically low probability, high impact events, but the term also refers to ideas that are perceived impossibilities that may later be disproven. The events below are relative to the current estimating conference forecasts. The realization of co-occurring risks that could be handled individually, but not in combination. This would be a stress not just on reserves, but also on human capital and technical resources. Mixed economic signals leading to a serious Federal Reserve miscue that causes unabated inflation and a deep recession. Inflation Reduced Savings Household Debt Reduced Spending on Taxable Goods The current adopted forecast has a controlled and relatively soft landing- but that assumes that the cause of inflation is a temporary mismatch between supply and demand. This assumption comes with significant risk: "...the trend in inflation is still high, inflation is broad-based, uncertainty is considerable, and policymakers will continue to raise interest rates until there is a string of reports pointing to a substantial moderation of inflation." IHS Markit/US Economic Outlook, August 2022. EDR's alternative forecaster also emphasizes the risk: "The soft landing that the Federal Reserve is attempting to engineer combining fewer job openings and little destruction to existing jobs is a difficult balancing act, and the risk of a policy mistake is rising." Moody's Analytics / Economic View, August 23, 2022. Further, not all analysts agree on the root causes of inflation, and the ramifications differ: "By analyzing the money supply during the global financial crisis, which started in 2008, and our current inflation, we can see why the U.S. economy and inflation behaved differently in those two periods. It's all about money, not fiscal policy, supply chains or energy prices...M2 has risen by $6.3 trillion since the start of 2020, of which $4.8 trillion has come directly from the Fed and a net $1.5 trillion has come from the banks. M2 has increased an incredible 41% in only 2½ years—an average annual growth rate of 16.3%." John Greenwood and Steve H. Hanke, WSJ Opinion, July 7, 2022. 21

View entire presentation