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fomc | 1,978 | But you can trace some scenarios here of stability. [With a] regain of confidence and a sudden purge in inflation, [we can get] output that we don't [have forecast]. On the other hand, we can coast over to a very sharp decline very quickly here by consumers pulling in their horns. I'm not sure how much [good] a yearly ... | 110 |
fomc | 1,978 | Dave. | 2 |
fomc | 1,978 | I would agree with Nancy and Chuck. As I indicated before, I think it would be unprecedented to have the kind of slow rates of growth that are being forecast with the very high inflation rates that also are being forecast. So I would see by this time next year some modestly negative rates of growth in GNP with higher u... | 76 |
fomc | 1,978 | Thank you, Dave. Bones. | 7 |
fomc | 1,978 | Mr. Chairman, I still think we'll have slow growth, obviously, but maybe at 1-1/2 to 2 percent. Unemployment this time next year may be about 6-1/2 percent. On prices, I'd say 7-1/2 to 8-1/2. | 64 |
fomc | 1,978 | Thank you, Bones. Larry. | 7 |
fomc | 1,978 | Where I live they predict snow on the degree of woolly worm developments, Mr. Chairman, but we don't have the resources to study that. We believe that there are certain fundamental monetary policy decisions--abruptly to hold down the [growth in the] aggregates to 4 percent or less--that would be about the only factor t... | 109 |
fomc | 1,978 | Roger. | 2 |
fomc | 1,978 | Thank you, Mr. Chairman. We believe that the staff figures are just a bit high--in other words, growth over the third quarter to the third quarter at 1 to 2 percent, hopefully. Part of that comes, again, from the strength that is shown by the staff in the first quarter--which I believe is attributed somewhat to the tax... | 177 |
fomc | 1,978 | Thank you, Roger. Bob. | 7 |
fomc | 1,978 | I find this a difficult scenario to predict at this point. There are all sorts of possibilities. Like Willis, I think we could have in this time perhaps a sharp but brief recession that would still give us 1-1/2 to 2 percent growth over the period here. I am still pessimistic on the price side. Even if we do have such ... | 155 |
fomc | 1,978 | Christmas Eve you'll get a gross of woolly worms from the St. Louis Bank! | 17 |
fomc | 1,978 | I hope that postage is prepaid. On Chuck's point, though, if the size of the crowds and the traffic jams in the shopping centers in Chicago are any indication, the pre-Thanksgiving surge in Christmas sales is tremendous. Now, that doesn't give me a very good basis for [extrapolating] it out beyond Thanksgiving. But the... | 82 |
fomc | 1,978 | Well, Bob, it used to be that every year I looked at State Street the day after Thanksgiving. We really tried to look at it, and it always seemed that it was at capacity. And sometimes they were good years and sometimes they were bad. | 51 |
fomc | 1,978 | Well, State Street after Thanksgiving I think is a poor economic barometer because all the school kids go there. | 22 |
fomc | 1,978 | They don't spend anything; they're just coming out. | 10 |
fomc | 1,978 | That's right, they don't spend anything. | 8 |
fomc | 1,978 | Anything further, Bob? | 5 |
fomc | 1,978 | No. | 2 |
fomc | 1,978 | Thank you. Mark. | 5 |
fomc | 1,978 | You're all talking about a class of models that I don't understand. I feel really quite comfortable with the staff forecast. We don't believe in what we refer to as the geriatric view of business cycles--that just because they're old, they die. I don't think that's necessary. We don't see anything in the current expans... | 458 |
fomc | 1,978 | Thank you, Mark. John. | 7 |
fomc | 1,978 | Well, like Mark, we don't believe that business expansions die of old age. We do believe they die of riotous living and we've had more than a fair amount [of that] in the last couple of years. I'm not going to rule out the possibility of a recession; I think it's a distinct possibility. We'll be lucky if we get through... | 153 |
fomc | 1,978 | Thank you. Ernie. | 6 |
fomc | 1,978 | Mr. Chairman, I find the staff forecast about as acceptable as any forecast that I'm able to visualize this morning. The major difference would be that business fixed investment seems to me likely to be appreciably stronger than is incorporated in the forecast and that inflation is likely to be a bit stronger than is i... | 225 |
fomc | 1,978 | Thank you. Frank. | 5 |
fomc | 1,978 | Well, Mr. Chairman, we've been more pessimistic than the staff for a long time and we're happy to see them approaching [our view] gradually. I think, as Nancy does, that a recession is inevitable. I think the questions--the uncertainty elements--are how big it is going to be and when it will start. The one missing piec... | 373 |
fomc | 1,978 | Would you repeat why it is that there's going to be an increase in the demand for money? I didn't understand the reason for that. | 27 |
fomc | 1,978 | Well, I think, characteristically, as you enter the later stages of a boom, particularly an inflationary boom, you get a rise in demand for money. | 33 |
fomc | 1,978 | You don't mean in the monetary aggregates. I don't think you do, but that's not a fact. | 20 |
fomc | 1,978 | You don't get a rise in the demand for money? | 11 |
fomc | 1,978 | In the monetary aggregates, I don't think so. In bank credit, you may. | 17 |
fomc | 1,978 | Well, I think they are very closely linked. I think to the extent that you control the aggregates by pushing interest rates up, you-- | 28 |
fomc | 1,978 | In the last month we've had a 50 percent rate of increase in CDs, which are not in the monetary aggregates. | 24 |
fomc | 1,978 | Well, I think they will soon be reflected in the monetary aggregates in time. That's going to be our problem in the next three months, as I see it. So I would say, Mr. Chairman, 1 to 2 percent real growth, 6-1/2 to 7 percent inflation and 6-1/2 to 6-3/4 percent on the unemployment rate. | 82 |
fomc | 1,978 | Thank you, Frank. Phil. | 7 |
fomc | 1,978 | Well, I'm tempted to go into a long discussion, Mr. Chairman, but let me just say-- | 21 |
fomc | 1,978 | Resist the temptation! | 5 |
fomc | 1,978 | --2.9, 7.7, and 6.0. | 16 |
fomc | 1,978 | More or less. | 4 |
fomc | 1,978 | Did you round off whole numbers or was there a margin on either side? | 15 |
fomc | 1,978 | Was that exactly 2.9 percent or did you round that? | 14 |
fomc | 1,978 | Absolutely fine-tuned. | 5 |
fomc | 1,978 | Thank you, Phil; that was a good speech. Henry. | 13 |
fomc | 1,978 | The range of possibilities, I think, is widening. I think a growth recession is entirely possible. There is a long history of growth recessions and they don't have to turn into full recessions, although it sometimes happens. And the reason, of course, why expansions don't go on forever is not that they die of old age b... | 233 |
fomc | 1,978 | You see, I knew Henry was going to give that speech for me, so I didn't have to talk. | 22 |
fomc | 1,978 | Thank you, Henry. Yes, you're very close. Well, I want to thank you all for your unanimous agreement that we are going to stay in business for four quarters. What I gather from this is that we will still be here. | 48 |
fomc | 1,978 | What are your figures? | 5 |
fomc | 1,978 | For the first time, I don't have to correct the staff! I think they are in the range, with the usual margin for error that represents a fairly good probability. I've been on the low side of the staff all year and now I think they are coming into the range that I think is reasonable. What we might do now, if you don't m... | 105 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | Thank you, Peter. It's rather interesting to have the November 1 action fall in the midst of a refinancing and turn out the way it did. Tricky to signal in advance so that that was not a problem. Any comments or questions? Yes, Chuck. | 53 |
fomc | 1,978 | Well, I would just offer one alternative explanation for that tipping down on long-term yields that somebody in the market must have felt. And that is that yields were likely to be reaching a peak because of the prospect or the increasing probability of a recession, rather than that there would be success in dealing wi... | 107 |
fomc | 1,978 | I think that could have been a reason on the part of some participants. | 15 |
fomc | 1,978 | May we have your approval to ratify the transactions by the Desk since the previous meeting? You have had the report circulated. Are there any dissents? If not, we will record that as approved. I would suggest a brief break now and we'll reconvene as quickly as we can so that we can complete our deliberations in time t... | 127 |
fomc | 1,978 | Well, ladies and gentlemen, would you like a discussion or are you ready for the vote? | 19 |
fomc | 1,978 | Yes, let's vote. | 5 |
fomc | 1,978 | [Let's turn to] Steve Axilrod. I'll give him one chance and then we will vote. | 21 |
fomc | 1,978 | Thank you, Mr. Chairman. [Secretary's note: This statement was not found in Committee records.] | 21 |
fomc | 1,978 | Did you want to say something, Paul? | 9 |
fomc | 1,978 | [Unintelligible.] | 6 |
fomc | 1,978 | Well, our usual practice is to go through a rather long process with everyone indicating his reasons. Let me start off by suggesting a possible directive and perhaps soliciting comments on whether or not this would be acceptable or whether variations of it are necessary. I would tend to agree with Steve that we might d... | 347 |
fomc | 1,978 | I'll [wait] my turn, Mr. Chairman. | 11 |
fomc | 1,978 | Okay. Paul, would you like to add anything as Vice Chairman before we start this? | 18 |
fomc | 1,978 | Well, I guess I come out slightly differently than you do, Mr. Chairman. I really have one concern when I look ahead at the 4-week period until we meet again, and that is that we adequately back up the program that has already been announced. I think it has had a good effect internationally. I think it has had a good e... | 432 |
fomc | 1,978 | Paul, of course, if we run past our aggregates [figures], we would consult--and I think we have learned to consult--with the FOMC. I'd rather have us consult in an intermeeting period than get locked into motions. It's just a personal preference. It has turned out that our communications have been fairly good. However,... | 86 |
fomc | 1,978 | Mr. Chairman, I'm rather concerned--somewhat along the line that Paul Volcker has mentioned--that if the conventionally observed policy indicators do not rather [unintelligible] continue to show support for the program that we announced in November, we will soon be discredited. And it seems to me that it's quite import... | 229 |
fomc | 1,978 | (?) Ernie, aren't you concerned about the tendency of banks now to issue these CDs--nonnegotiable CDs--in large amounts? | 28 |
fomc | 1,978 | Well, yes. But then we carry over into bank credit and then we begin to get to the question that Frank Morris has raised and which tends to emerge in Paul's comments. We are not projecting much of a slowing in the rate of growth of bank credit for November and December. That growth rate has been pretty fast and it has ... | 268 |
fomc | 1,978 | I think we are going to run short of time now. Could we get your numbers and move on because we do have this memorial service. We have to keep an eye on [the time]. | 39 |
fomc | 1,978 | My preference on M2 would be 6 to 8, and on the federal funds rate 9-3/4 to 10. The other elements of alternative B I can accept as they are presented. | 43 |
fomc | 1,978 | Okay, thank you. Phil Coldwell. | 9 |
fomc | 1,978 | Mr. Chairman the figures you gave are not far from the ones I came out with. I think we have a rather wide diversity of opinion here. I don't see a recession immediately and I think there is too much inflation involved, so I would put a cap on M1--cap it at 5 percent--put a range of 6 to 9-1/2 on M2, and 2 to 6 on M1+ ... | 168 |
fomc | 1,978 | Thank you, Phil. Dave. | 7 |
fomc | 1,978 | It seems to me that we are working 100 percent on a money market basis, so I would certainly cast the directive in those terms. I would also focus attention primarily on the funds rate and hold it at 9-3/4 percent. I'd not let it go below that but have a consultation if it looks as though the aggregates are coming in t... | 95 |
fomc | 1,978 | What did you say on the funds rate? I'm sorry. | 12 |
fomc | 1,978 | A 9-3/4 percent effective rate; a 9-1/2 to 10 percent range is fine with me. | 28 |
fomc | 1,978 | Thank you. Chuck. | 5 |
fomc | 1,978 | I can agree with Dave 100 percent. I believe that this is a time when we want to stand still if we possibly can because there are so many rate relationships that have not yet adjusted. The prime rate probably has another quarter, perhaps another half to go. The mortgage rate is in the process of adjusting in most parts... | 185 |
fomc | 1,978 | Consult, yes. Thank you. | 7 |
fomc | 1,978 | We have a better land line now, don't we? And we can consult better. | 17 |
fomc | 1,978 | I think we are doing better on that, yes. Nancy. | 13 |
fomc | 1,978 | Well, I feel very strongly that we should stand still. I would go for a range of 9-1/2 to 10 on the funds rate and the money market directive, with not all that much attention at this point to the aggregates. However, if they begin to break loose, I think we need to consult. I want to say, though, that I would like to ... | 173 |
fomc | 1,978 | Okay, Nancy. Thank you very much. Henry. | 11 |
fomc | 1,978 | I am particularly concerned that we shouldn't convey a sense of easing inadvertently at a time when that has a balance of payments and dollar implication. So I would begin by starting the funds rate at 9-3/4, but be asymmetrical at 9-3/4. I'd leave it at that point, but if the aggregates come in badly, go up to 10-1/4.... | 115 |
fomc | 1,978 | Thank you, Henry. Mark. | 7 |
fomc | 1,978 | For reasons which Paul and others have talked about, I would like a funds rate range of 9-3/4 to 10-1/4 percent and I would move promptly to 10. I think, frankly, if we don't do that, the market will be quite surprised and disappointed and it will unravel everything that we have done. For M1, I would like a maximum of ... | 153 |
fomc | 1,978 | Join the parade. Thank you. Willis. | 9 |
fomc | 1,978 | I would put a cap of 5 percent on M1, a range of 6 to 9 on M2, and 9-3/4 to 10-1/4 [for the funds] rate, staying at 9-3/4 until we see what's happening here. | 61 |
fomc | 1,978 | All right, let's go through the others quickly. John. | 12 |
fomc | 1,978 | Well, for reasons that have already been spelled out--and I won't repeat--if the important bridging actions of November 1 are not sustained, we are going to lose the effect of that and the credibility. I think we are under particular observation at home and abroad on that right now. So for those reasons, I would put a ... | 126 |
fomc | 1,978 | May I add, Mr. Chairman? I strongly prefer an aggregates directive. | 15 |
fomc | 1,978 | Okay, let's get that marked. Bob Black. | 10 |
fomc | 1,978 | Mr. Chairman, my position is fairly close to that of Mr. Willes and Mr. Balles. It's very important that we don't flash a signal now that we are not backing up what we did on November 1. And as I look at the figures that have been provided by the staff, even on the toughest one, alternative B, that still provides reall... | 232 |
fomc | 1,978 | Thank you, Bob. Roger. | 7 |
fomc | 1,978 | Yes, Mr. Chairman. I would prefer the prescription very much as you described it earlier. I think it's not necessary to say, but maybe I will say it anyway, that we are only three weeks away from a very dramatic move in the markets. They haven't adjusted very well. It seems to me that we ought to sit right where we are... | 123 |
fomc | 1,978 | Thank you. Bones. | 5 |
fomc | 1,978 | Mr. Chairman, I too am concerned about being discredited, but I think we might be able to consult and have no real concern about that. I would like a money market directive with essentially the numbers you have used. If I had any concern, it would be about a 9 percent ceiling on M2. | 64 |
fomc | 1,978 | Bob Mayo. | 3 |
fomc | 1,978 | Mr. Chairman, I would buy the 9-1/2 to 10 [funds rate range] with the 9-3/4 midpoint. I would buy 9-3/4 to 10, for that matter, with a 9-7/8 midpoint. It's getting awfully narrow but I think this is the consolidating, so to speak, that Roger described. I would take a money market directive. I think it is a better judgm... | 218 |
fomc | 1,978 | Frank. | 2 |
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