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fomc | 1,978 | Well, I think that ought to be subject to a straight vote, Mr. Chairman. He is suggesting changing the recommendation to the inverse of whether or not that's-- | 33 |
fomc | 1,978 | I think that might be said about this recommendation, Mr. Chairman. We did look at this thing entirely aside from Humphrey-Hawkins. These last six months, however, have reflected some considerable thinking by the Subcommittee on the Directive, right or wrong, as to what the substance of this should be apart from Humphr... | 70 |
fomc | 1,978 | Dave, you have [a comment]? | 8 |
fomc | 1,978 | Yes, if I may speak just briefly. | 9 |
fomc | 1,978 | Yes, please. | 4 |
fomc | 1,978 | A good deal of what Paul referred to was produced in the Philadelphia Bank because we were concerned about the slippage between short-term and long-term [objectives]. We did a good deal of research on this and we were persuaded that the only way discipline could be introduced into the process was to have some very dire... | 194 |
fomc | 1,978 | Well, how many prefer the-- | 7 |
fomc | 1,978 | May I ask a question before you take the vote, Mr. Chairman? May I ask what in your view, Chuck, Humphrey-Hawkins actually does require? You started out your comment that the new law "does not require" and Larry started his with the spirit of the new law "clearly requires." Maybe you could say literally that yours is c... | 101 |
fomc | 1,978 | Well, he changes a sentence in another part of it. But I think what the new law requires us to do basically is to say what kind of economic results we are going to have--not what kind of monetary aggregates [in terms of] target estimates, but what kind of monetary aggregates we have in mind as a means in the process of... | 109 |
fomc | 1,978 | What do you expect me to say? | 8 |
fomc | 1,978 | Many [times in the] middle of the year it doesn't look as if we are going to have monetary aggregates for the year that we thought in February were appropriate. And the reason is that the way things have developed they are no longer appropriate and, therefore, we are changing our target for the year. I think that is qu... | 90 |
fomc | 1,978 | Is this required? Do we have to have this one way or the other on this matter? | 19 |
fomc | 1,978 | It's subject to change at any time. | 8 |
fomc | 1,978 | I understand that. | 4 |
fomc | 1,978 | But I think there needs to be some understanding on how we are going to be operating. | 18 |
fomc | 1,978 | If we are going to have a fixed rule, we have to have it in place in February. | 20 |
fomc | 1,978 | I'm certainly not prepared to vote for a fixed rule, but I'm not sure I'm prepared to vote for the other one either. | 25 |
fomc | 1,978 | Would there be a way--and this is what I was driving at earlier--whereby those of us who saw fit could communicate to Chuck in writing a point of view on this? [I ask] because I always feel that we have mass resources in our research departments and I would like to have some of our professionals, who can articulate thi... | 115 |
fomc | 1,978 | I have trouble with it on two counts. I don't see how the Committee can lay down a rule that requires future Committee members to vote a certain vote. I don't see how you can do that. As a matter of procedure, I don't see how you can vote today and say that next July every member of this Committee is now committed to a... | 106 |
fomc | 1,978 | How we perform in February in setting the directive will be affected materially by what our attitude is on an issue such as this. All I am saying is that we should have as much background as possible made available to the Committee prior to taking whatever action it takes in February. | 54 |
fomc | 1,978 | Yes, that's fine. It seems to me that what is being suggested is that at each meeting of the FOMC there will be available data as to a track that could return us to our range, if we are off it. And at that point members of the Committee can vote to get on the track or vote not to get on it. I think that's the only proc... | 108 |
fomc | 1,978 | Also, Mr. Chairman, there's a question of what we decide at the meeting as to what we authorize the Manager to do. We think the time for the decisions is at the Committee meetings and not-- | 41 |
fomc | 1,978 | But if you present the choice, the Committee has a choice to decide to return on a 1-month basis, a 3-month basis, a 6-month basis, or to say in its reports that we have decided for factors that have come up to change our long-range objective. | 58 |
fomc | 1,978 | But, Mr. Chairman--and I'll promise I'll hush up after this-- | 15 |
fomc | 1,978 | No, this is very important. Don't hush up. | 11 |
fomc | 1,978 | It seems to me that the very reason that Chuck's committee developed this paper was to give some guidance to this process even though they can't bind future FOMCs. And if there's a purpose in this memorandum being circulated, I think there's a purpose in certain aspects of the memorandum being debated even though we ca... | 69 |
fomc | 1,978 | Yes. Well, I think the point has certainly [been made]. I think Ernie Baughman had a [comment]. | 26 |
fomc | 1,978 | Mr. Chairman, it seems to me that a way of handling this today--and I would propose a motion unless there is already one on the table--is to accept number 6 as an interim posture but not as a policy action at this point in time. That will leave the door open for continuing exploration. | 63 |
fomc | 1,978 | Yes, I think that's right. | 7 |
fomc | 1,978 | [Unintelligible] and a number of others, which I suggested in the conversation. In fact, I'll have to admit that as I read the discussion pertaining to 6, I found it on balance a little more persuasive to come out a little differently on it than this specific recommendation. It seems to me there is something there and ... | 95 |
fomc | 1,978 | Paul. | 2 |
fomc | 1,978 | Well, I think this comment of Ernie's makes half the point I was going to make. I think there was a lot of sympathy, which should not be overlooked, on the subcommittee for paying more attention to the long-term averages. I felt that and I think some others did. That may not come through here very strongly because you ... | 239 |
fomc | 1,978 | Well, what is your pleasure here? Do you want to vote on this or do you want to keep it as an open and continuing discussion from meeting to meeting? Or do you want to settle one? | 41 |
fomc | 1,978 | I like Ernie's proposal. | 7 |
fomc | 1,978 | I do too, Mr. Chairman. And I must say, going back at least three years ago, I have been harping on this lack of getting from the short run to the long run. And one time I suggested a mechanical rule, which got sympathy but no action, and a number of other people around the table have subsequently come up with various ... | 195 |
fomc | 1,978 | Would that be satisfactory to everyone? | 7 |
fomc | 1,978 | It's a big step forward, I think, Mr. Chairman. | 13 |
fomc | 1,978 | To keep it open? | 5 |
fomc | 1,978 | Well, no. To work in the direction that Chuck's committee has given us here. | 18 |
fomc | 1,978 | I think that's absolutely right. And in any case, we will be getting options before us in every meeting. All right, we will proceed to 7--before we have another dissent. | 38 |
fomc | 1,978 | I would like to dissent on number 6, Mr. Chairman. | 14 |
fomc | 1,978 | You dissent on keeping it-- | 6 |
fomc | 1,978 | I'm not prepared to vote on that matter yet. | 10 |
fomc | 1,978 | I don't think number 7 has to be decided. What it means, in effect, if we don't decide it, is that in February we will continue as we have today to have a short-run 2-month growth range that is the trigger range for determining action. We tried simply here to develop an arithmetic equivalent that will be more stable fo... | 181 |
fomc | 1,978 | Before you do that, I'd like to strongly support that. Going back to the predecessor committee on which I served and the ideas that surfaced, we had all sorts of conversations about the instability you get in looking at a 2-month horizon. Not only the weekly numbers but even the monthly numbers are 90 percent random fl... | 114 |
fomc | 1,978 | I feel much the same way, Mr. Chairman. I would say if number 6 was a great step forward, this is even a greater step forward. | 32 |
fomc | 1,978 | Paul Volcker. Go ahead. | 7 |
fomc | 1,978 | I don't want to prolong this, but I think there's a certain confusion here. I agree that looking at the trend over a period of time is the only way to make sense out of the way these numbers are moving. The question here, as I see it, is what you are looking at in a particular decision at a particular Committee meeting... | 238 |
fomc | 1,978 | Let me add, the baloney is what the baloney is, no matter how you slice it. | 21 |
fomc | 1,978 | I won't say anything about [unintelligible]. Frank Morris. | 14 |
fomc | 1,978 | I want to support John Balles. I think this recommendation represents a big step forward. I think it will not only improve our performance and prospective monetary policy by adding a longer period for the short-term objective, but I think it will also make communications to the public much easier to understand. | 58 |
fomc | 1,978 | That is the main intent. | 6 |
fomc | 1,978 | For example, at the current meeting, the 6 to 10 on M2 in the directive for the 2-month period means [something] like 6 to 7-1/2 on the 3-month period. I submit that the latter will be much [easier] for the public to understand and will give us a better perspective of what we are doing than the 6 to 10. So I really str... | 98 |
fomc | 1,978 | The [subcommittee] chairman was about to throw it out. | 13 |
fomc | 1,978 | Yes. | 2 |
fomc | 1,978 | Steve. | 2 |
fomc | 1,978 | Mr. Chairman, I consider the [unintelligible] for M1 as against [M2] at the end-- | 26 |
fomc | 1,978 | I was talking about M2. | 7 |
fomc | 1,978 | Yes, I understand, but it doesn't always come out the favorable way. And without speaking for or against one approach or another, I just wanted to be sure that the Committee understands that there is absolutely no difference between the two approaches. If we have done our math right, the Committee is going to be reacti... | 103 |
fomc | 1,978 | I beg to differ on that point. And the reason is this. In the 3-month period you have three pieces of information plus one guess. That is, you have the one month that's known, the second month where we have a lot of information, and then the third month, which is sheer guess work and for which the information value is ... | 118 |
fomc | 1,978 | There is nothing in this procedure that affects how much information you have. You know every past month, you know half of the present month, and you don't know the next month. Whether you add it up together or not, that's what you know. | 50 |
fomc | 1,978 | It's like putting a constant in an equation; it doesn't make any difference. | 15 |
fomc | 1,978 | I think the difference is that the longer the short-run guideline and the more months of information we have in that guideline, the more likely the Committee is to make up for any past undershoots or overshoots. And that I think is-- | 50 |
fomc | 1,978 | Dave has been trying to get the floor. | 9 |
fomc | 1,978 | I would just like to say that I did, as Chuck indicated, have sympathy to this at the outset. I've had some reservation since and it seems to me it is not central to the whole Humphrey-Hawkins process and procedure. And I would suggest, given the differences that there are, that we not pass it at this time and come bac... | 74 |
fomc | 1,978 | Why not even bring it right up into this text here? | 12 |
fomc | 1,978 | Well, we'll bring it up into the text, then. | 12 |
fomc | 1,978 | All right, now I want to hear from Bones. | 11 |
fomc | 1,978 | Mr. Chairman, many of the regional Banks have [unintelligible] but we, too, heartily support this. I guess if there's anything that hasn't been said, it's that we feel any significant developments during that period would tend to balance out. Any one monthly variation would not have the significant impact, so we do sup... | 90 |
fomc | 1,978 | Well, for something that is being tossed out, it sounds like there is a lot of support. Steve, do you have any preference? | 28 |
fomc | 1,978 | I don't have any preference. I really believe strongly--and we thought about this [hard but] I don't know how to get it through to the Committee--that it makes not one bit of difference. We're narrowing the range to make up for the averaging process. The different multiplication, if we have done our math correctly, sho... | 76 |
fomc | 1,978 | Were you saying that if the aggregates are too high, a longer period will keep them high longer? | 20 |
fomc | 1,978 | No, it won't go as high, but they will be not as high longer. | 17 |
fomc | 1,978 | Bob Mayo. | 3 |
fomc | 1,978 | Mr. Chairman, I think it makes two bits of difference, if I may use the phrase, with regard to Frank's point on communications with the public. I think that is the main advantage of this. I hope we are all smart enough around this table that we can divide by 2 and divide by 3. [If] not, we are in trouble. | 75 |
fomc | 1,978 | It isn't all that clear, because for example this time your M1 would be a very low range. You'd have to explain to the public that really, we are letting the growth in, but the growth is going to be in January. But it's going to be below because we are averaging January with a low November and December; you have that s... | 73 |
fomc | 1,978 | But we always have this problem. Again, I'd rather use it that way--the bigger figure. | 20 |
fomc | 1,978 | I move that we not pass 7. | 9 |
fomc | 1,978 | Is everybody more or less willing to accept that at the moment, despite the preferences? | 17 |
fomc | 1,978 | Just so it doesn't die. | 6 |
fomc | 1,978 | It's not going to die; it's going to be immaterial. All right, put it in the Bluebook someplace. | 24 |
fomc | 1,978 | The last recommendation, Mr. Chairman, is a non-recommendation. It had been proposed by some that we add to the long-term targets specified under the Humphrey-Hawkins bill something like reserves or the monetary base or one of the basic monetary aggregates. We can see no particular purpose for doing so because whatever... | 111 |
fomc | 1,978 | Mr. Chairman, my stomach is too empty to argue vehemently, but I'd like to express a weak disagreement with Chuck. | 26 |
fomc | 1,978 | I'm surprised it's weak. It's only physically weak. Does anybody else have any comment on that? Yes, Willis. | 23 |
fomc | 1,978 | I, too, would share the feeling that this is sort of a back-of-the-hand treatment to a problem. I grant that it's not a good guide and I don't insist that it be in the targets or ranges, but I think we have made a mistake in the past in ignoring the supplemental information that this provides for us. And I'd like to se... | 118 |
fomc | 1,978 | Mr. Chairman, if I may make a suggestion. We have been somewhat neglectful recently in the analysis of reserves and the monetary base in the Bluebook. And actually I think it might be desirable to put, without specific figures even, some analysis of what's going on in there. | 57 |
fomc | 1,978 | That's really all I'm talking about. | 7 |
fomc | 1,978 | Bob, you had a point. | 7 |
fomc | 1,978 | I was just going to say that I agree the committee didn't have time to address this. But I would hope that it would continue to push on and address it not so much as a target but as an operating variable in lieu of, or in combination with, the fed funds rate. | 57 |
fomc | 1,978 | We have been trying to do that. And I must say it's a very complex question. | 18 |
fomc | 1,978 | I know it is. But there's a substantial volume of opinion that this will be a better way to [operate] and I think we need to explore it. | 32 |
fomc | 1,978 | Henry. | 2 |
fomc | 1,978 | I'd like to register some sympathy for reserves, not for the base. Particularly if we should have the Merrill decision going against us, I think we'd have to take a serious look at this. | 38 |
fomc | 1,978 | As an operating variable. | 5 |
fomc | 1,978 | As an operator. | 4 |
fomc | 1,978 | We are going to look at the use of reserves as the operational variable, are we not, Mr. Chairman? | 23 |
fomc | 1,978 | Your committee is going to be looking at that. That's very nice. Bob, is the memo that you circulated being handled in any way? | 28 |
fomc | 1,978 | Well, I think this addresses many of the same questions. | 12 |
fomc | 1,978 | That's what I was wondering. | 6 |
fomc | 1,978 | And I really prefer this method of doing it. The reason I couched it in the form we had it before is that that's the way we've been discussing it. | 33 |
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