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fomc
1,978
I come out, Mr. Chairman, very close to Henry Wallich's formula of 9-3/4 to 10-1/4 on the funds rate, with the Manager instructed to stay at 9-3/4 unless we have reached the upper limit [on the aggregates]. I think the Manager ought to have at least a half point to operate with. But the only area where I diverge from H...
138
fomc
1,978
Thank you, Frank. Larry.
7
fomc
1,978
Yes sir, I would recommend a top of 5 percent for M1 and for M2 a range of 6 to 9 percent. I don't have any comment on M1+. I think it would be desirable to have a fed funds range of 9-3/4 to 10-1/4, moving to 10 right away. And I feel that an aggregates directive would be preferable.
83
fomc
1,978
Well, thank you all very much. Looking at the voting members for a moment there seems to be a preference for a money market directive. As far as the immediate action on fed funds, there is a very high consensus for 9-3/4 percent. As far as the range is concerned, it appears to be a tossup between 9-1/2 to 10 and 9-3/4 ...
261
fomc
1,978
That's tight.
3
fomc
1,978
Tight. What would you [change]?
9
fomc
1,978
I would just point out that the M2 midpoint projection is a little over 8-1/2 percent over the two months. So it's tight. There's a good possibility that the 10 percent funds rate will have to be negotiated with a telephone conference call, but I find it acceptable.
59
fomc
1,978
Mr. Chairman, does that mean that you are including the language on page 15 under money market emphasis--that we would add that?
28
fomc
1,978
On page 15? Well, it would be raised or lowered within the range. That's true, because it could go up and come back down.
30
fomc
1,978
I don't really think you need the "in an orderly fashion" if you only have a 1/4 point range.
25
fomc
1,978
I think that would be a great change. All of the people who would track us carefully would notice that change and figure that it has some significance. So why don't we take that out?
38
fomc
1,978
I do think we need more language in here about the international business just to reflect what has been going on.
22
fomc
1,978
I think that's a good idea. Incidentally, I didn't even mention M1+; I think we put it in as a side note. I think 2 to 6 or something like that is maybe the best thing to do.
48
fomc
1,978
It's very hard to predict it.
7
fomc
1,978
Maybe we will just leave it out. Why don't we just leave it out and keep track of it? That will be much better. Then we won't confuse everybody. Would you buy the latest proposal?
40
fomc
1,978
Well, I have the other--
7
fomc
1,978
Come on now, we haven't any time for messing around.
12
fomc
1,978
Let's move the top of M2 down to 9.
12
fomc
1,978
No, we can't. You're biasing the result.
11
fomc
1,978
I want to bias the result.
7
fomc
1,978
Mr. Chairman, I am bothered a little bit about a freeze at 9-3/4.
21
fomc
1,978
You mean you are worried about the down side?
10
fomc
1,978
I'm worried about both the down side and the up side. I'd rather, if we could, buy a 9-7/8 midpoint as the midpoint shown on that range you picked. Actually, I think the range is terribly narrow; 1/4 percentage point gives the Manager very little leeway.
62
fomc
1,978
That's a true money market directive.
7
fomc
1,978
Yes.
2
fomc
1,978
If you really want to nail it, then I would rather nail it at 9-7/8 than 9-3/4.
29
fomc
1,978
That's a very small point.
6
fomc
1,978
It is, but it's a small point on the other side too, Chuck.
16
fomc
1,978
Of course, it hasn't been at 9-3/4; if we put it at 9-3/4, we have put it up from where it was. You want to put it up 1/8 point more, apparently.
51
fomc
1,978
That's right.
3
fomc
1,978
Let's find out. There seemed to be quite a majority for a 9-3/4 funds rate at this point. So let's try this one on a straw vote and see what we have. How many of the voting members would accept--I'm not saying would propose but would accept--the proposition I just tried to get out of this? How many would go along with ...
77
fomc
1,978
Would you just state it again?
7
fomc
1,978
A 5 percent cap on M1, a 6 to 9-1/2 range on M2, and a 9-3/4 to 10 range on fed funds, using 9-3/4 as the initial positioning point and a money market directive--and M1+ just tracked on the side.
68
fomc
1,978
But with a notion that it probably would be within [2] to 6 percent.
18
fomc
1,978
Yes, tracking it to see how good we are at guessing. How many of you would support that? 1, 2, 3, 4, 5.
36
fomc
1,978
5 out of 10.
6
fomc
1,978
I didn't count myself.
5
fomc
1,978
I think it's 6.
6
fomc
1,978
1, 2, 3, 4, 5, well--
16
fomc
1,978
Can we buy my try at it, Mr. Chairman? Leave everything the same but put the midpoint at 9-7/8.
28
fomc
1,978
Sure put it in. The midpoint at 9-7/8. We will take a vote on that. How many would like that?
29
fomc
1,978
With 9-1/2 still on M2?
12
fomc
1,978
Yes, everything else the same.
7
fomc
1,978
And we consult if these aggregates get high.
9
fomc
1,978
Oh, yes. 1, 2, 3, 4, 5, 6. Okay. I think that's a majority. Now let's take a vote. Let's get the others to swing in and realize that like a convention when they are all through they say, "Mr. Chairman, I move that it be unanimous." There's real opportunity here.
74
fomc
1,978
It just shows with Mark that you can't satisfy him very long. We raised [the funds rate] very substantially and he liked it, but now several weeks have gone by and we haven't raised rates anymore.
41
fomc
1,978
Three weeks. All right, I'll vote for the Coldwell compromise.
14
fomc
1,978
Vice Chairman Volcker Yes President Baughman Yes Governor Coldwell Yes Present Eastburn Yes Governor Partee Yes Governor Teeters Yes Governor Wallich Yes President Willes
33
fomc
1,978
Come on, Mark.
5
fomc
1,978
Abstain?
4
fomc
1,978
Keep with the club.
5
fomc
1,978
We've got a little bit more.
7
fomc
1,978
I didn't hear. Did he have an answer?
10
fomc
1,978
He hasn't answered yet.
5
fomc
1,978
He abstained.
4
fomc
1,978
If we would vote for this, we would tolerate almost 12 percent growth in M1 in December before we move.
24
fomc
1,978
Assuming November is right.
6
fomc
1,978
That's right.
3
fomc
1,978
Which we don't know.
5
fomc
1,978
Which we don't know.
5
fomc
1,978
Well, just a minute now, Willis Winn.
10
fomc
1,978
I'll go along with it.
6
fomc
1,978
Now Mark.
3
fomc
1,978
Well, it's not December, but almost. I'll vote yes.
13
fomc
1,978
A vote for Christmas. Thank you. I think that's the most marvelous vote I have had since I have been here.
24
fomc
1,978
What about the language?
5
fomc
1,978
We did take the money market directive, didn't we?
11
fomc
1,978
We did take the money market and we did--
10
fomc
1,978
I have a proposal but I don't [know] whether it's--
13
fomc
1,978
On page 15?
5
fomc
1,978
Well, on page 14 it refers to [the international situation].
14
fomc
1,978
All right, let's look at page 14.
10
fomc
1,978
Well, I just wrote in a different phrase here [beginning with] the "while" for the first sentence. "In the short run, the Committee seeks to achieve bank reserve and money market conditions that are broadly consistent with the longer-run ranges for the money aggregates cited above, while supporting the objective of sta...
79
fomc
1,978
You want to leave in "giving due regard to developing conditions" don't you? And add supporting--
20
fomc
1,978
No, I just left that out and put this in as a substitute.
15
fomc
1,978
You are [not] going to risk any further rise in the dollar?
15
fomc
1,978
Well, stabilizing--
5
fomc
1,978
That's what you say--stabilizing the exchange value. You can stabilize both ways, Paul.
20
fomc
1,978
That's a very considerable departure from past practice.
9
fomc
1,978
Well, that's what we just announced that we were doing.
12
fomc
1,978
I don't think the announcement said that.
8
fomc
1,978
We were countering disorder.
6
fomc
1,978
We said we are going to call it to a halt and reverse it. Now, you could argue that we are allowing some up--
27
fomc
1,978
That's because the whole market was in considerable disorder.
10
fomc
1,978
Why don't we just say "support" the value of the dollar? It might get you away from this "stabilization."
26
fomc
1,978
I don't want to go toward that.
8
fomc
1,978
No, I don't want to go toward that.
10
fomc
1,978
Mr. Chairman, "correcting excessive exchange [market fluctuation]" is what we used.
19
fomc
1,978
I have no hang-up on the word "stabilizing." I just wrote that in there.
20
fomc
1,978
Do we want to leave in this language "giving due regard to developing conditions in domestic markets"?
19
fomc
1,978
It just seems too weak to me. I have no problem [leaving] in domestic markets; I just wanted more prominence to the international. After all, this program is certainly--
37
fomc
1,978
I'd buy Paul's wording, with the word "support" instead of "stabilize."
18
fomc
1,978
"Giving due regard" could mean anything you want it to.
13
fomc
1,978
The trouble is we've used it when we didn't mean much. That's the problem.
16
fomc
1,978
Well, I think "stabilizing" is not helpful. I think "supporting" or "strengthening" or using the announcement [wording]--
33
fomc
1,978
I think the word "supporting" doesn't go very well with a federal funds range of 1/4 point.
24
fomc
1,978
Well, you could say while "supporting" the foreign exchange--or "strengthening."
19
fomc
1,978
What's the strengthening?
4
fomc
1,978
Strengthening instead of supporting it.
7
fomc
1,978
Strengthening what?
4