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fomc | 1,979 | Well, I stole a page out of the MIT buttons and this reads "MB 10-5 + 1Q = R." Translating that, it says that when the monetary base decreases from 10 percent to 5 percent and remains that way for one more quarter, there is a very real probability of a recession. Inasmuch as we're flooding the Midwest with these button... | 100 |
fomc | 1,979 | MB 10-5? I could read that as more bunk for 10 minutes instead of 5. | 22 |
fomc | 1,979 | In spite of that, I'll proceed! As we analyze the behavior of money, and of course we do place a great deal of weight on the behavior of money, we observe that from December of 1977 through October of 1978, the monetary base grew at about a 10 percent rate. Since October of last year to the present there has been an ab... | 450 |
fomc | 1,979 | It's an historic occasion! Thank you, Larry. Roger. | 12 |
fomc | 1,979 | Thank you, Mr. Chairman. I think I'm also falling into bed with some people that normally I would not have associated with in the past. We have done some of the same work that Steve has described this morning and a couple of conclusions are apparent to me at least. One is that M1 is totally unreadable now and, as a res... | 346 |
fomc | 1,979 | Thank you, Roger. Bob. | 7 |
fomc | 1,979 | Mr. Chairman, I still see considerable economic strength. Though the signs are increasing that we may now have some of the characteristics of the last stages of the boom, I don't think they are as strong as they have been at comparable times in the past. But I still would not be surprised at all if we have a couple of ... | 730 |
fomc | 1,979 | Thank you, Bob. Tom. | 7 |
fomc | 1,979 | Mr. Chairman, the Ninth District economy has been very strong and continues strong. Our District's unemployment rate is lower than that for the country, at 4.4 percent versus 5 . 8 percent. Our help wanted advertising is at a record high in the Twin Cities area. Farm income in our District is up sharply. The inflation ... | 129 |
fomc | 1,979 | I wouldn't think you'd build anything in that weather ! | 10 |
fomc | 1,979 | They built two houses! | 5 |
fomc | 1,979 | On the national level, we continue to be very concerned about inflation. Of course we're uncertain, as everyone is, about the impact of the oil shortage, and we don't fully understand the current state of the monetary aggregates. So in view of the uncertainty about oil, housing, and the aggregates, we would favor holdi... | 69 |
fomc | 1,979 | Thank you, Tom. John | 6 |
fomc | 1,979 | I hope Chuck has a king size bed because I would like to crawl into it too! There is no sense in reviewing in detail the way I come out because essentially I'm in agreement with Chuck's analysis; we were apparently reading the same tea leaves. If that analysis is right, then the strategic problem for us now is how to g... | 419 |
fomc | 1,979 | Thank you very much, John. Ernie. | 10 |
fomc | 1,979 | Mr. Chairman, I suppose I'm as confused as anyone else. A nice warm bed is always attractive but-- | 22 |
fomc | 1,979 | I didn't know it was so warm! | 8 |
fomc | 1,979 | --that particular bed is rather crowded right now anyway. We have worked the numbers, as presumably everyone else has, and come to fairly inconclusive conclusions. By inquiring around I have attempted to get some impression of the activity in mutual fund accounts because, as you know, one can draw checks on most of the... | 330 |
fomc | 1,979 | I didn't know anything was conspicuous in Texas ! | 10 |
fomc | 1,979 | We should have had Ernie here to view those large tractors. | 13 |
fomc | 1,979 | I can see them all back home! It is interesting that we have had a fairly persistent decline in the number of rotary rigs in operation. The decline has been significantly more in Texas and to some extent in Louisiana than in the country as a whole. And this [is occurring] in an environment of obviously short supply of ... | 547 |
fomc | 1,979 | We're running a little low on time and I wonder if you could just conclude. | 16 |
fomc | 1,979 | It seems to me, although based on historical experience it would be a very high risk position, that we should maintain the position we have had in recent months with respect to monetary policy. | 37 |
fomc | 1,979 | Thank you very much. Frank. | 7 |
fomc | 1,979 | Mr. Chairman, I think we're facing an emerging conflict between the domestic and international requirements of monetary policy. In the past year they've been nicely in harmony but, quite clearly, we're moving into a period where they are going to be in conflict, because I think we're approaching a cyclical peak in the ... | 403 |
fomc | 1,979 | Inflation is a factor in my thinking. | 9 |
fomc | 1,979 | But the issue is whether we will be better off in 1980 with a 7 percent unemployment rate or an 8 percent unemployment rate. I'm inclined to believe that in the long run we will be better off with a 7 percent unemployment rate simply because that is likely to be more conducive to the maintenance of the kind of conserva... | 183 |
fomc | 1,979 | My slight [tilt] was to 9-3/4 percent. | 16 |
fomc | 1,979 | I think we ought to move at least to 9-1/2 percent and we ought to move now. | 23 |
fomc | 1,979 | Thank you, Frank. Phil. | 7 |
fomc | 1,979 | Mr. Chairman, I've listened to a lot of wisdom around this table and-- | 16 |
fomc | 1,979 | Do you agree with any of it? | 8 |
fomc | 1,979 | Yes, a good share of what has been said on both sides. I thought after the first two speakers that we had a very well defined two-camp arrangement. The subsequent speakers have blurred it somewhat. I look at this by trying to nail down, at least in my mind, a couple of points. First. looking at the economy, I think we ... | 391 |
fomc | 1,979 | Thanks. Did you indicate which direction? | 8 |
fomc | 1,979 | I did not, Mr. Chairman. I'll wait until after the [break]. | 16 |
fomc | 1,979 | Thank you, Phil. Henry. | 7 |
fomc | 1,979 | I think we're in imminent danger of building into the economy a higher rate of inflation and of putting ourselves into a position, with or without a subsequent recession, of having to work that off and starting from a higher level with less chance [of success] than we had the last time around. It's not true that we can... | 720 |
fomc | 1,979 | Thank you very much, Henry. Well, this has been very helpful. I think the best thing to do is to take a break for a few minutes and come back as near to 11:30 a.m. as we can and see if we can wind this up. | 56 |
fomc | 1,979 | Let me make a couple of observations. One is that in the course of these four years of business expansion, we've had all the elements of a long expansion. And we've had some new territory to explore since we've had only one other period in our lifetimes when there has been high inflation during peacetime in the United ... | 1,530 |
fomc | 1,979 | Tomorrow would be all right. | 6 |
fomc | 1,979 | Larry Roos, err on the side of moving toward ease; Willis Winn. I'm not sure what you came down on, Willis. | 27 |
fomc | 1,979 | Hold steady. | 3 |
fomc | 1,979 | And Tom Gainor, hold the line. So that's the rundown. Now let's see what you'd really like to do. John Balles. | 28 |
fomc | 1,979 | Well, in my tilt toward less restraint--1 certainly wouldn't call it ease--on the specifications I would land somewhere between alternative A and alternative B. Specifically, on M1, the 4 to 9 percent range would be acceptable to me. On M2, I would make the range 5 to 9 percent based on my view that we shouldn't let M2... | 336 |
fomc | 1,979 | Thank you, John. Bob Black. | 8 |
fomc | 1,979 | Mr. Chairman, I guess it's most accurate to say that I want a foot in each bed. I'm worried about both inflation and recession. I'm worried about what a recession might do in speeding up inflation later by causing us to throw in all our chips. So I think we have to be sensitive to both concerns in reaching a policy dec... | 405 |
fomc | 1,979 | That's " B . " | 5 |
fomc | 1,979 | That would be "B." I'd buy those specifications. | 11 |
fomc | 1,979 | Thank you. Phil Coldwell. | 7 |
fomc | 1,979 | Mr. Chairman, I would prefer to do some of what Bob is suggesting, but with a tilt to it. I took your specifications to a degree: for M1, 4 to 8 percent; for M2, 3 to 7 percent; and for federal funds, 10 to 10-1/2 percent, with a midpoint of 10-1/4 percent. A zone to play with between 10-1/8 and 10-3/8 percent will ena... | 129 |
fomc | 1,979 | Thank you, Phil. Bones. | 7 |
fomc | 1,979 | Mr. Chairman, I think Governor Coldwell has just spoken my piece. I would favor exactly the numbers [he proposed1 of 4 to 8, 3 to 7, and 10 to 10-1/2 percent. I would not like to see the funds rate drop below 10 percent; I think that clearly would be misunderstood. In my view the danger is on the side of inflation. And... | 125 |
fomc | 1,979 | Thank you very much. Bob Mayo. | 8 |
fomc | 1,979 | It so happens that I've also jotted down 10 to 10-1/2 percent on federal funds. I would treat it asymmetrically, rather than jump immediately to 10-1/4 percent. But if the market urge tended to push it toward 10-1/4 percent, I wouldn't resist it. For M1 4 to 8 percent is fine and 4 to 8 percent is all right for M2, alt... | 123 |
fomc | 1,979 | Thank you, Bob. Chuck Partee. | 9 |
fomc | 1,979 | Well, if I had the nerve, I would suggest what Frank Morris did because I think that is what's really required if we're to have any chance of avoiding a recession. And [even] that might not do it, but it's a start. But I do think there is more of a signal hazard in the current rate of inflation than that policy would m... | 608 |
fomc | 1,979 | Thank you, Chuck. Nancy. | 7 |
fomc | 1,979 | Well, I can live with a 4 to 8 percent range on M1. And I don't think 4 to 8 percent on M2 would make too much difference; I happen to agree with Phil that if things begin to come apart, we will need to have a meeting. I would like simply to stay where we are and would recommend a federal funds range of 9-1/2 to 10-1/2... | 162 |
fomc | 1,979 | Thank you, Nancy. Paul | 6 |
fomc | 1,979 | I do think we need to make some move in recognition of what has been happening on the inflation front. And I think it's good for the stability of the economy in the long run, as I said earlier. In terms of getting back into the longer-range targets, these figures on page 10 don't look particularly frightening to me in ... | 573 |
fomc | 1,979 | Thank you, Paul. Henry. | 7 |
fomc | 1,979 | Well, I question the meaning of the aggregates. I think we have to add something to them, both for ATS and for shift in the demand curve, so I believe they are much higher than they look on paper. I would, therefore, take the C alternative, 3-1/2 to 8-1/2 percent for M1 and 3 to I percent for M2. And somewhere in the d... | 299 |
fomc | 1,979 | Thank you, Henry. Ernie. | 8 |
fomc | 1,979 | Mr. Chairman, alternative B as presented in the Bluebook is an acceptable prescription for me. | 19 |
fomc | 1,979 | Thank you, Ernie. Dave. | 8 |
fomc | 1,979 | I would keep the funds rate where it is and I would use the bottom of the alternative A range [for Mll as the guide. I'd accept any growth in the aggregates above that bottom. And if the aggregates started to break through that bottom, I would have a telephone conference call. | 58 |
fomc | 1,979 | Thank you, Dave. Roger | 6 |
fomc | 1,979 | I would prefer ranges for both M1 and M2 of 4 to 8 percent--paying little attention to M1 but more to M2. in which I have somewhat more confidence--with a funds range of 9-314 to 10-114 percent, centering on 10 percent, which may or may not be a perceptible move downward. That is 10 or 15 basis points that perhaps the ... | 102 |
fomc | 1,979 | Thank you, Roger. Frank. | 7 |
fomc | 1,979 | Mr. Chairman, as I said earlier, I would move to 9-l/2 percent on the funds rate. When that has been recognized in the marketplace, I think the Chairman ought to hold a press conference and explain this unprecedented development of the Fed moving the funds rate down before we're actually in a recession. | 63 |
fomc | 1,979 | We don't know that for sure. We might actually be in one. | 14 |
fomc | 1,979 | We might actually be in it, yes. | 9 |
fomc | 1,979 | We don't actually know there's going to be one. | 10 |
fomc | 1,979 | But it would be an unprecedented move and I think we would have to explain to the market that with a 10 percent funds rate, we've had no increase in bank reserves in six months and, therefore, no increase in the money supply. We need to explain that although our concern about inflation has not diminished, we also have ... | 163 |
fomc | 1,979 | Thank you, Frank. Larry. | 7 |
fomc | 1,979 | If our concern, Mr. Chairman, is to avoid or at least minimize the recession, and if our concern is about continuing to undershoot the growth ranges for the aggregates we had projected, I think there's no way we should tolerate a range that could possibly entail M1 growth at a rate as slow as 4-114 or 4-112 percent. So... | 227 |
fomc | 1,979 | Thank you, Larry. Willis. | 7 |
fomc | 1,979 | Mr. Chairman, I'd take generally alternative B with a 4 to 8 percent range on both the M1 and M2 ranges and an aggregates directive. | 32 |
fomc | 1,979 | Thank you. Tom. | 5 |
fomc | 1,979 | Mr. Chairman, we would favor alternative B. | 10 |
fomc | 1,979 | Okay. As usual we have complete unanimity! For M1, 4 to 8 percent seems to be the most popular range, with six [members]. And we have for M2 four who said 4 to 8 and four who said 3 to 7; we had one for 3-1/2 to 7-112 and one for 5 to 9. For the funds rate, 5 people want 10 to 10-1/2 percent--six, I guess. | 106 |
fomc | 1,979 | Of the voting members? | 5 |
fomc | 1,979 | I'm talking just about the voting members. Well, I have Phil Coldwell, Bones Kimbrel, Bob Mayo, Paul Volcker and Henry Wallich. That's five. I miscounted, excuse me. ME1. COLDWELL. The 10-1/2 percent is at least a ceiling on all the ranges. | 69 |
fomc | 1,979 | Yes, nobody was over 10-112 percent. | 11 |
fomc | 1,979 | There was variation on the bottom, though. | 9 |
fomc | 1,979 | Yes, one of us, Nancy, had a 10-112 percent top limit but that was with a 9-112 percent bottom. Chuck had 9-112 to 10-1/4, Bob Black had 9-3/4 to 10-112, and John Balles had 9-1/4 to 10-1/4. But on the low side we had five with a lower limit of 10, two at 9-1/2, and one each at 9-3/4 and 9-1/4 percent. I haven't said a... | 127 |
fomc | 1,979 | It averages Out to 9-314. | 9 |
fomc | 1,979 | Yes. It looks to me as if we could cut this on a 4 to 8 percent on M1. I don't know quite what to make of M2, but 3-1/2 to 7 - 1 1 2 percent looks to be a mid-range [preference] And the compromise area might be 10 to 10-1/4 percent on fed funds. | 83 |
fomc | 1,979 | And then just have a money market directive. | 9 |
fomc | 1,979 | Yes, and just have a money market directive--stay or more less where we are. That's what would seem [to be closest to a consensusl. How many would favor that? | 37 |
fomc | 1,979 | A question first, Mr. Chairman: What is your reading on the consensus view for the midpoint of the federal funds range? | 25 |
fomc | 1,979 | As I look at this, I'd say the consensus is to stay at about the prevailing rate, which is 10 percent plus. Five were for the prevailing rate. One--that was you--was for a lower rate. And Phil and Bones were for just a slight firming--I would say something a little over 10, maybe 10-1/8 percent. Some wanted higher. | 80 |
fomc | 1,979 | It is just four weeks until the next meeting, is that right? | 14 |
fomc | 1,979 | That's correct. Well, let's try that one in a quick straw vote: On MI, 4 to 8; on M2, 3-1/2 to 7-1/2; on the fed funds rate, continue in a 10 percent plus mode. It has really been about 10-1/8 percent, hasn't it? So let's say around 10 or 10-1/8 percent, in that range. Paul, how would you feel about that? | 101 |
fomc | 1,979 | No. I can buy the ranges for the aggregates but the one for the funds rate I can't. | 20 |
fomc | 1,979 | You can't buy the funds range, all right. But you can buy the aggregates. John? | 19 |
fomc | 1,979 | If we're talking about preferences, it's a little too tighz for me. I would say no. | 21 |
fomc | 1,979 | The aggregates bother you? | 5 |
fomc | 1,979 | The aggregates directive is what I'd like and I failed to mention that. | 14 |
fomc | 1,979 | I mean do the aggregates numbers that were suggested concern you also? | 13 |
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