1.Image pageU.S. Q412 Economic Overview and OutlookBloomberg BRIEF: EconomicsJoseph BrusuelasOctober 2012

2. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookImage page Summary Executive Growth is tracking at 1.5 percent in the third quarter of 2012 Q412 growth of 1.5 percent vs. 2 percent consensus forecast 10-year rate likely range bound between 1.5- 2 percent EUR/USD depreciation. $1.28 at year end Recession risk due to approaching fiscal cliff The U.S. economy is downshifting amid broadening globaldeceleration Job growth around 100,000 per month with slight risk of unemployment rate rising to 8 percent by end of year Risks to the outlook: External Sector: Euro zone, Middle East tensions Public policy: 2012 impact from 2013 fiscal cliff Political Economy: U.S. presidential electionEmail jbrusuelas3@bloomberg.net or call 212-617-7664 2 3. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminal U.S. Q412 Economic Overview and OutlookImage page Cyclical Growth Scenario Remains Intact Core Scenario: Below Trend (2.5 percent) Growth Structural adjustment continues Fiscal drag, household and public sector deleveraging Elevated unemployment persists Modest consumption and low inflation Email jbrusuelas3@bloomberg.net or call 212-617-7664 3 4. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminal U.S. Q412 Economic Overview and OutlookImage page Cyclical Growth Scenario Remains Intact Alternative: The Long Malaise Liquidity trap ensnares economy Policy Mistake: Premature fiscal & monetary tightening Persistent deflation and deleveraging Low Probability: Cyclical Outperformance Policy directed at 27 percent of first mortgages in negative equity or near-negative equity positions Acceleration in hiring quickly brings down unemployment Corporate sector deploys cash Inflation risk Email jbrusuelas3@bloomberg.net or call 212-617-7664 4 5. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookBloomberg Consensus: Survey of ForecastersQ2 12Q3 12 Q4 12Q1 13 Q2 13 Q3 13Q4 13 Real GDP 1.70%1.80%2.00% 1.90%2.30% 2.50% 2.70% CPI1.90%1.60%1.90% 1.70%2.00% 2.10% 2.10% Core PCE 1.81%1.70%1.80% 1.70%1.80% 1.90% 1.85% Unemployment 8.17%8.07%8.10% 8.10%8.00% 7.90% 7.80% Central Bank Rate0.25%0.25%0.25% 0.25%0.25% 0.25% 0.25% 2-Year Rate0.30%0.23%0.31% 0.37%0.45% 0.56% 0.69% 10-Year Rate 1.65%1.63%1.74% 1.90%2.05% 2.21% 2.41% EUR/USD 1.271.29 1.281.271.261.25 1.25%Email jbrusuelas3@bloomberg.net or call 212-617-7664 5 6. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookImage page Overview U.S. Rates Bloomberg consensus forecast indicates higher 10- and 30-year rates. Fed Operation Twist to continue at $44 billion per month pace Current Rates: 2-Year: .26 percent 10-year: 1.74 percent 30-year: 2.97 percent Fourth Quarter Consensus Survey Rate Forecast 2-Year: .31 percent 10-year: 1.9 percent 30-year: 2.85 percent Risk to that forecast: Slowing U.S. economy Euro zone sovereign crisis U.S. fiscal cliff Email jbrusuelas3@bloomberg.net or call 212-617-7664 6 7. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookJobs and Growth 400 6Q412 Growth Tracking at 200 4Quarterly Average (Percentage)Quarterly Average (Thousands) 0 2-200 0-400 -2-600 -4-800 Total Change in Employment (LHS)Real GDP Y/Y (RHS)-1000-61995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20092010 2011 2012 Source: BloombergR2=.77Email jbrusuelas3@bloomberg.net or call 212-617-7664 7 8. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookLabor Market Slack58 11 Employment to Population Ratio (LHS, Inverted) Unemployment Rate (RHS)59 10 960 861PercentPercent 762 663 564 465 3 1990 1992 1994199619982000 2002 2004200620082010 2012Source: BloombergUSERTOT, USURTOT INDEXEmail jbrusuelas3@bloomberg.net or call 212-617-76648 9. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookEmployment Snapshot Reflects Tough Economy250225200 Includes September Household Survey 175 150 125Thousands 100 75 50 250 -25 -50 3-Month Average6-Month Average12-Month Average -75 Total Change In Employment Private PayrollsHousehold SurveySource: BloombergNFP TCH, NFP PCH, USEMNCHG INDEX Email jbrusuelas3@bloomberg.net or call 212-617-7664 9 10. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookSlow Grind Back To Full Employment Scenario 1: Structural Break Scenario 2: Cyclical Recovery 7% NAIRU7% NAIRU5.5% NAIRU5.5% NAIRUMonthly Job Gains 151,000 151,000151,000 151,000Labor Force Participation 63.50%63.50%63.50%63.50%RateAverage Annual 0.92%0.50%0.92%0.50%Population GrowthYears to Full Employment 3 Years1.5 Years 7 Years 4 Year Email jbrusuelas3@bloomberg.net or call 212-617-7664 10 11. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookPolicy Uncertainty 300Policy Uncertainty Index1985-2007 Average=95.2European Sovereign Debt Crisis2008-Present Average=164.3US Debt Ceiling Dispute 250Banking Crisis/Obama Elected Lehman Bros/TARP9/11 200Balanced Budget Act 2nd Gulf War Index 1St Gulf WarClinton EraFed Rate 150Cuts, StimulusBlackMondayLTCM 10050 19861988 1990 19921994 1996 19982000 2002 2004 2006 20082010 2012 Source: policyuncertainty.comEmail jbrusuelas3@bloomberg.net or call 212-617-7664 11 12. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookProjected Path of Long- and Short-Term Rates 5.50 5.00 4.50 4.00 3.50 Percent 3.00 2.50 2.00 1.50 1.00 0.50 US 10-Year (LHS) 3-Month, 2-Year Forward (RHS) 0.00 Oct-07 Oct-08Oct-09Oct-10Oct-11 Oct-12 Source: BloombergUSGG10YR INDEX, G0025 2Y3M BLC2CURNCY Email jbrusuelas3@bloomberg.net or call 212-617-766412 13. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminal U.S. Q412 Economic Overview and Outlook FX OverviewImage page Dollar appreciation versus euro- and-trade weighted basket of currencies eases: Near-term test of $1.30 against the euro Likely to move toward $1.28 by end of the third quarter Euro zone recession supports modest USD appreciation Risks to the outlook: Fiscal concerns at year end Weak labor market outlook More forceful Fed actionEmail jbrusuelas3@bloomberg.net or call 212-617-766413 14. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookEUR/USD: Likely Test of $1.28 600 1.18 1.23 500 1.28EUR/USD (RHS, Inverted) 400Basis Points 1.33 300 1.38 200 1.43 100 1.48German-Italian 10-Year Spread (LHS)EUR/USD (RHS, Inverted) 0 1.53 2011 2012Source: BloombergEUR Curncy, GDBR10, GBTPG10 INDEXEmail jbrusuelas3@bloomberg.net or call 212-617-766414 15. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookReal Trade Weighted Broad Dollar Index 115QE 1 Begins QE 2 QE 3 110 105 Index 100 95 90 20062007 2008 2009201020112012 Source: Bloomberg USTWBROA INDEX Email jbrusuelas3@bloomberg.net or call 212-617-766415 16. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminal U.S. Q412 Economic Overview and OutlookImage page U.S. Manufacturing Outlook Manufacturing growth slowing Noticeable pullback in capital expenditures Slower external demand US fiscal cliff Global production decelerating Weak U.S. aggregate demand European recession China recessionEmail jbrusuelas3@bloomberg.net or call 212-617-766416 17. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookManufacturing Growth Slowing Noticeably Industrial Production and Growth6.010.05.0 Y/Y Percentage Change (Quarterly Average)4.05.0 3.0Y/Y Percentage Change2.0 0.0 1.00.0 -5.0-1.0-2.0-3.0 -10.0-4.0GDP CYOY Industrial Production-5.0 -15.0 1996 1998200020022004 200620082010 2012 Source: Bloomberg IP YOY, GDP CYOY INDEXR2=.76Email jbrusuelas3@bloomberg.net or call 212-617-7664 17 18. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookSlower Manufacturing Growth ISM Manufacturing, Services and Growth65.0 6.0 5.060.0 4.0 3.0GDP Y/Y Percentage ChangeIndex (Quarterly Average)55.0 2.0 1.050.0 0.0 -1.045.0 -2.0 -3.040.0 -4.0ISM Manufacturing Survey (LHS)Weighted ISM Manufacturing & Non-Man (LHS) -5.0GDP Y/Y (RHS)35.0 -6.0 1998 2000200220042006200820102012 Source: BloombergNAPMPMI, GDP CYOY INDEXEmail jbrusuelas3@bloomberg.net or call 212-617-766418 19. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookCapital Expenditures Falling: Slower Growth Capital Goods Orders Excluding Aircraft 25 2015Year Over Year Percentage Change1050-5 -10 -15 -20 -25 RecessionsCapital Goods New Orders Non-Defense Excluding Aircraft and Parts -30 2000 200120022003 20042005 2006 20072008 20092010 2011 2012 Source: BloombergCGNOXAY% INDEXEmail jbrusuelas3@bloomberg.net or call 212-617-7664 19 20. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookGlobal Manufacturing Cools65 160 0Y/Y Percentage Change (Index)55 050Index 045 040 035MSCI World Index (RHS)US ISM (LHS) China PMI (LHS)30Euro Zone PMI (LHS) JP Morgan Global PMI (LHS) -1 200620072008 2009 2010 20112012 Source: Bloomberg Email jbrusuelas3@bloomberg.net or call 212-617-766420 21. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookFinancial Conditions Overview Forceful action by ECB and Fed behind improved financial global financial conditions Improved pace of credit creation Both demand and supply of credit is improving This has not resulted in an increase in monetary velocity Email jbrusuelas3@bloomberg.net or call 212-617-7664 21 22. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookBloomberg Financial Conditions IndicesFinancial Conditions Turn Easing2 10-1 Index(Z-Score)-2-3-4-5US Financial Conditions Index EU Financial Conditions Index-6 2010 20112012 Source: Bloomberg BFCIUS, BFCIEU INDEX Email jbrusuelas3@bloomberg.net or call 212-617-766422 23. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookCredit Markets HealingPrivate Credit Creation & Nominal Growth20% Nominal GDPTotal Credit Creation Private Financial Instiutions15% Year Over Year Percentage Change10%5%0% Adjusted R2=.64-5%19621967 1972 19771982198719921997 2002 2007 2012Source: Federal Reserve, BloombergEmail jbrusuelas3@bloomberg.net or call 212-617-766423 24. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookCredit Markets Healing, Not Translating to Rising VelocityVelocity of Money 2.2 M2 2.12 1.9 1.8 1.7 1.6 1.5 1960 19641968 1972 1976 1980 19841988 1992 1996 2000 20042008 2012 Source: BloombergVELOM2 INDEXEmail jbrusuelas3@bloomberg.net or call 212-617-766424 25. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookHousing Outlook and Overview Modest cyclical recovery Recovery in starts driven by demand for multifamily dwellings Prices have stabilized Some metro-areas experiencing price appreciation Overall housing recovery still years away Inventory Pricing Tight credit Attractive rates support sales albeit at historically low levels Email jbrusuelas3@bloomberg.net or call 212-617-7664 25 26. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookHousing Outlook Shadow inventory rising. Pace of foreclosures key to recovery Housing drag on economy persists 23.7 percent of homeowners have negative equity 4.9 percent near-negative equity Shadow inventory a drag on recovery Negative equity and overhang of supply is blocking themonetary transmission mechanism Likely to need a policy response to target underwaterhomeowners and the shadow inventory to move back towardgrowth path Email jbrusuelas3@bloomberg.net or call 212-617-7664 26 27. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookHousing Starts Stabilize 2.5 Multi-Family StartsSingle Family Starts2Millions (Annualized Pace) 1.5 1 0.50 2000 200120022003 2004 2005 20062007 2008 2009 20102011 2012Source: Bloomberg NHSPS1, NHSPS5 INDEX Email jbrusuelas3@bloomberg.net or call 212-617-766427 28. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookTraditional Buyers Re-entering Market Percentage of Existing Home Sales 35Aug-11Aug-12 30 25 20 15 105 Distressed Sales Foreclosures Short SalesFirst Time Buyers All Cash InvestorsSource: Bloomberg Email jbrusuelas3@bloomberg.net or call 212-617-7664 28 29. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookCentral Bank Policy Outlook and Overview Five Cs of U.S. Monetary Policy Communications Commitment Conditionality Composition Credibility Email jbrusuelas3@bloomberg.net or call 212-617-7664 29 30. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookCentral Bank Policy Outlook and Overview Forward guidance to remain unchanged Maturity extension program continued through 2014 Possible unsterilized treasury purchases due to fiscal cliff Email jbrusuelas3@bloomberg.net or call 212-617-7664 30 31. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookMonetary Policy at the Zero Bound FOMC Projections of Year-End Levels of the Fed Funds Rate (Median Projections as of January, June and September 2012)4.5% January Median FOMC Projection 4.00%4.0% June Median FOMC Projection Sept. Median FOMC Projection3.5%3.0%2.5%Percent2.0%1.5%1.00%1.0%0.5% 0.25%0.25% 0.25%0.0%2012 201320142015 Longer RunSource: BloombergEmail jbrusuelas3@bloomberg.net or call 212-617-766431 32. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookMonetary Policy at the Zero Bound Federal Reserve SOMA Maturity Distribution 300,000 9/22/2011 (Wt Avg Years to Maturity 6.09) 10/3/2012 (Wt Avg to Maturity 9.48) 250,000 200,000Millions 150,000 100,00050,0000 2011202420422012 2013 202120222014 2017 2023 2027 20312032 20332034 2037 2041 2015 2025 2035 2019 2029 2039201620202026203020362018202820402038 Source: BloombergDEBT FEDEmail jbrusuelas3@bloomberg.net or call 212-617-7664 32 33. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookMonetary Policy at the Zero Bound Diminishing Wealth Effects from Fed Purchases 1500 End of QE1End of QE2 1400 Standard and Poors 500 1300 12001100 1000900800 S&P Gains 80% S&P Gains 30%S&P 500 Gains 22% During700 Operation Twist I & II600 2009 2010 20112012 Source: Bloomberg Email jbrusuelas3@bloomberg.net or call 212-617-7664 33 34. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookMonetary Policy at the Zero BoundTaylor Rule Model Estimates of the Fed Funds Rate8 Fed Funds RateHawks Baseline Taylor Rule Estimate Doves Sept. Median FOMC ProjectionBaseline Rudebusch Model642Percent0-2-4-6 2006 20082010 2012 2014 2016 2018202020222024Source: Bloomberg Email jbrusuelas3@bloomberg.net or call 212-617-7664 34 35. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookFiscal Drag Medium-term policy shift Discretionary spending declining Potential fiscal shock in first quarter of 2013 Q113 GDP -2.2 percent Q213 GDP -1.3 percent Email jbrusuelas3@bloomberg.net or call 212-617-7664 35 36. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookFiscal Cliff Impact Estimated ImpactTax ChangesSpending ChangesBush Tax Cuts-221Automatic Sequestration-652% Cut in Payroll Tax -95Expiration of Emergency Unemployment -26 BenefitsPartial Expensing of Investment -65Scheduled Reduction in Medicare Payment-11 RatesTax Provisions: Affordable Health Care Act-18Other Revenue Increases/Spending-105 ReductionsImpact of Tax Changes-400Impact of Spending Changes-207Gross Impact on Spending Changes -607Less Secondary Effects on Economy47Net Impact on Fiscal Deficit -560Potential Hit on GDP4%Source: CBO, Bloomberg Email jbrusuelas3@bloomberg.net or call 212-617-766436 37. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookGrowth Cliff 3.02.7Bloomberg Consensus Forecast Bloomberg Brief GDP Estimate With Fiscal Cliff2.5 2.32.02.0 2.0 1.9 1.91.51.5 1.31.0Percentage 0.5 0.0 -0.5 -1.0-1.3 -1.5 -2.0 -2.2 -2.5Q312Q412Q113 Q213Q313Source: BloombergEmail jbrusuelas3@bloomberg.net or call 212-617-7664 37 38. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookEmployment and the Fiscal CliffUnemployment Rate Likely to Rise 10.0 Bloomberg Consensus Forecast 9.8 Bloomberg Brief Forecast With Fiscal Cliff 9.6 9.4 9.2 9.0 8.8Percentage 8.6 8.4 8.2 8.0 7.8 7.6 7.47.2 7.02010 2011 2012Q312 Q412Q113Q213 Q313Source: BloombergEmail jbrusuelas3@bloomberg.net or call 212-617-766438 39. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookCompeting Fiscal VisionsCompeting Fiscal Visions26 Obama Plan ActualForecast CBO Baseline25 CBO AlternativeFederal Spending as Percentage of GDP Ryan Plan2423222120191817 1990 1994 1998 200220062010 20142018 2022 Source: CBO, OMB, House Budget CommitteeEmail jbrusuelas3@bloomberg.net or call 212-617-7664 39 40. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookCompeting Fiscal VisionsEntitlement Spending vs. Net Fixed Business Investment16 Net Business Fixed Investment Actual Forecast Mandatory Entitlement Spending14Spending as a Percentage of GDP121086420 1962 196719721977 1982 1987199219972002 20072012 2017 2022Source: Bloomberg, CBOEmail jbrusuelas3@bloomberg.net or call 212-617-766440 41. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookFiscal Drag Federal Government Spending12.0Actual Projected11.010.09.0Percentage of GDP8.07.06.05.04.03.0DefenseNondefenseTotal2.0 1972 1977198219871992 1997200220072012 2017 2022 Source: Congressional Budget OfficeEmail jbrusuelas3@bloomberg.net or call 212-617-766441 42. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.comor enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookDeficit DynamicsFederal Deficit: Baseline vs. Alternative -11.0Deficit or Surplus ActualForecast -10.0Alternative Fiscal Scenario -9.0 -8.0 -7.0 Percentage of GDP -6.0 -5.0 -4.0-3.0 -2.0-1.00.0 1.02.03.0 1972 197819841990 19962002 2008 20142020 Source: CBOEmail jbrusuelas3@bloomberg.net or call 212-617-766442 43. Published by Bloombergs Economics Newsletter - Take a free trial at Bloombergbriefs.com or enter BRIEF on Bloomberg terminalU.S. Q412 Economic Overview and OutlookDebt DynamicsFederal Debt: Baseline vs. Alternative120 Debt Alternative Fiscal ScenarioActual Forecast11010090Percentage of GDP80706050403020194019501960 19701980 1990 2000 20102020Source: CBOEmail jbrusuelas3@bloomberg.net or call 212-617-7664 43 44. Free Trial Offer to Bloombergs Economics BriefThis is an exclusive presentation from Bloomberg Brief Economics by JosephBrusuelas.Bloomberg BRIEF Economics is a new, groundbreaking publication written by leading economists in US, Europe andAsia, published by Bloomberg, the premier source of data and analytics in the financial world.Bloomberg BRIEF Economics is already read by thousands every morning and youll soon see why the EconomicsBrief provides a clear, concise snapshot every morning of all the key information you need to know: Valuable insight and independent analysis from our renowned economists whove spent decades on Wall Street including Joseph Brusuelas, Michael McDonough, Tamara Henderson, Richard Yamarone, David Powell and Niraj Shah. Proprietary data and commentary that gets beneath the numbers with eye catching charts. Guest columnists from top-tier firms. 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