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fomc | 1,979 | No, but you-- | 5 |
fomc | 1,979 | I think we are getting ourselves here in the spirit of [believing that1 in a recession we've got to accelerate the aggregates. Now, that way, there will never be a reduction in inflation. In a recession interest rates should come down, but at constant rates of expansion of the aggregates: otherwise prices will go up in... | 66 |
fomc | 1,979 | Historically, the aggregates virtually always come down-- | 10 |
fomc | 1,979 | That is what gives you assurance that you [can] ease; if you just keep the aggregates growing at a constant rate, you get very low interest rates. | 32 |
fomc | 1,979 | What is the pleasure of the Committee? Let's just take a quick poll. | 15 |
fomc | 1,979 | Is this just for '79, M r . Chairman? | 12 |
fomc | 1,979 | Just for '79 to start with, and then we'll turn to ' 8 0 . The proposition is to report that we have decided to stand pat on ' 7 9 , but with a clear explanation that there is an inaccuracy in the M1 range. That is, we will make clear that the M1 range has been adjusted for estimates of ATS and will have to be adjusted... | 116 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | Well, I had a preference for the adjusted range of 3 to 6 percent. I would go along with anything that makes your job of explanation easier, so-- | 34 |
fomc | 1,979 | It's our mutual job MR. ALTMA". President Black Yes Governor Coldwell Yes President Kimbrel Yes President Mayo Yes Governor Partee Yes Governor Rice Yes Governor Teeters Yes Governor Wallich NO | 39 |
fomc | 1,979 | Okay. I think that is strong enough that we should just probably stick with that. How about 1980? What is your pleasure for that? Again, looking at the rundown here, it looks as if we have about the same lineup. Practically everybody who specified [numerical rangesl was at 5 to 8 and 6 to 9 percent, or very close to it... | 222 |
fomc | 1,979 | That's our present plan | 4 |
fomc | 1,979 | That's our present plan. And I'd say that because of the number of uncertainties, the Committee could expect revisions to this when we re-present [our ranges] in February. | 34 |
fomc | 1,979 | Mr. Chairman, I don't want to dissent on this and I wonder if you could throw a few crumbs to those of us who would like to see some little move toward slowing because of our oft stated position that we want to get growth of the aggregates down over the longer run. | 56 |
fomc | 1,979 | Well, I'm open to suggestions. Can you give us a-- | 13 |
fomc | 1,979 | Well, if we just knock a half point, say, off the top on each one of those [ranges], I think that would psychologically give us a big boost in the market. We might want to change the ranges later on, but I would certainly like to see something in that general direction. | 60 |
fomc | 1,979 | I would leave the figures the way they are, Mr. Chairman, but say in your text that we are still firm in our desire over the longer run to see the aggregates [slow]. | 38 |
fomc | 1,979 | But if we did only that, wouldn't people say why didn't you put the ranges a little lower? | 20 |
fomc | 1,979 | Because we were in a recessionary period. | 9 |
fomc | 1,979 | Oh, you're just saying depart from that during the recession. | 12 |
fomc | 1,979 | Well, I was going to parallel somewhat what Bob Black said. I think the first question you'd get--and you're much more experienced than I in appearing before those people [on the Congressional Committees] is: Mr. Chairman, you've said repeatedly that gradually over the years you are going to try to phase down inflation... | 117 |
fomc | 1,979 | I would say in response that the record shows that we have had two years in a row of reduction in growth of the aggregates. And, within the ranges that have been specified, the prospect for a further year of reduction would still be available if economic conditions make it possible. Therefore, we are able to pursue our... | 163 |
fomc | 1,979 | You know, strange as it may seem, I think we've decelerated a bit too rapidly, and I wouldn't like to see it continued. I think the market is going to be watching that very carefully. | 42 |
fomc | 1,979 | Yes, M2 [has gone down] from 9.8 to 8.4 to probably 6-3/4 percent. | 29 |
fomc | 1,979 | That's pretty darn fast, really. | 7 |
fomc | 1,979 | It's fast, yes. | 5 |
fomc | 1,979 | It's faster than I would like. | 7 |
fomc | 1,979 | That's why we could moderate [the decline] a little next year and still keep it in the right-- | 21 |
fomc | 1,979 | Mr. Chairman, if I just might add a comment. In no way am I trying to interrupt the decisionmaking process nor am I claiming to be a market psychologist, but it's my impression that in 1977 the credibility of the System was undermined more for having set low ranges that it didn't hit than for having set [unintelligible... | 86 |
fomc | 1,979 | I wouldn't be prepared to support anything except an expression of hope, in much the way you did. Frankly, I don't think we'll be able to do it. | 33 |
fomc | 1,979 | I don't believe the figures anyway. The figures are going to jump around and ATS account adjustments are going to jump around. | 24 |
fomc | 1,979 | But we're going to have a new definition of PI1 and it's going to affect this. Well, again, it's a very hard thing for us to do. If we get very specific, we run the risk that Steve just pointed out. Our credibility would be hurt [morel if we put out some very specific n d e r s and can't come near them than if we put o... | 100 |
fomc | 1,979 | well, I think maybe we can improve the faulty procedures of the past and do a little better in hitting what we say we [want]. That's what really deserves criticism rather than the other, I think. | 41 |
fomc | 1,979 | Certainly. | 2 |
fomc | 1,979 | Well, the band is wide enough to encompass almost anything we can do. | 15 |
fomc | 1,979 | It really is. If [growth] came to the low side of the band, we can satisfy all of one group and if it came to the top we can satisfy all of another group. So all of you can be satisfied. | 47 |
fomc | 1,979 | We'd be better off just to stay where we are. | 12 |
fomc | 1,979 | It's [going to be] a low-keyed report as I see it: Not "we are out there to do so and so," but we need some time to observe how the real economy behaves and to complete our study of the components of the money aggregates, how they [should be defined], and what their proper alignment is. | 67 |
fomc | 1,979 | Mr. Chairman, could we point out pretty clearly that we've had a rather rapid deceleration [in the growth of the aggregates] and that, as you indicated before, maybe we can pause a little for now? But we still have that goal. | 50 |
fomc | 1,979 | Steve, it seems to me that what we were planning--we haven't seen that chapter [of the report1 yet, but I think you and I talked about this--was to have a long-range chart on each aggregate to show what we have done to bring each one down as well as a shorter-term focus. We need to focus on the year because it gets los... | 102 |
fomc | 1,979 | If we can show that clearly, I can live with what you are suggesting, but-- | 18 |
fomc | 1,979 | I think we ought to cover the whole decade. Isn't that what we're going to do on these? | 20 |
fomc | 1,979 | Well, at least back to the early ' 7 0 s so it can be-- | 19 |
fomc | 1,979 | Well, yes. We want to go back so we catch the earlier cycle too and show how the money growth came up and then we have been bending it downward. And the ranges that we're suggesting, if we say we are going to continue the same ranges, allow us to continue that trend. I don't want to get locked into promising that. I th... | 123 |
fomc | 1,979 | Verbalize steadying the boat. | 8 |
fomc | 1,979 | Do we need a vote on [the ranges for 19801? Perhaps yes. | 17 |
fomc | 1,979 | Steadying the boat with a hope that in time we will get [money growth] down. | 20 |
fomc | 1,979 | Okay. MR. ALTMA". Chairman Miller Yes Vice Chairman Volcker Yes President Balles Yes President Black Yes Governor Coldwell Yes President Kimbrell Yes President Mayo Yes Governor Partee Yes Governor Rice Yes Governor Teeters Yes Governor Wallich Yes | 49 |
fomc | 1,979 | May we consider those votes now? Henry. would you like to go unanimous with the first [vote on the 1919 ranges]? There's always a chance. | 32 |
fomc | 1,979 | I'd like to stick with that because I disagreed on that one the last time. | 17 |
fomc | 1,979 | Foolish consistency is the hobgoblin of a little mind and everyone knows that you're a big mind! | 23 |
fomc | 1,979 | You should say, therefore, that it isn't foolish inconsistency. | 13 |
fomc | 1,979 | I was going to ask, M r . Chairman, whether you wanted to worry about the wording of this matter now that the vote is settled. Or should we settle that with you later? | 38 |
fomc | 1,979 | I think we can do the wording [later]. And if we feel we should circulate it to the Committee, we can do that. I don't think we should take the time now to do it. We need to turn now, I think, to the next issue. Perhaps it would be worthwhile to circulate the wording early, even before we put out the whole-- | 73 |
fomc | 1,979 | Normally we would be sending this directive to the New York bank today. But I suppose we could leave that portion out: it's not operational for the short run. CHAIF" MILLER. It's not operational until it goes into the report next week. MR. ALTMA". What I'm saying is that normally this directive is transmitted today. | 67 |
fomc | 1,979 | But this [part of the1 directive is concerned with the long-term ranges: it has no operational effect. So we could have time to consult with the Committee. On the short-term directive [regarding operations] until the next meeting, yes, it must be precise. NOW let's turn to the next item on the agenda, which is the ques... | 92 |
fomc | 1,979 | Well, Mr. Chairman, to be very brief it seems to me that alternative I1 on page 10 in the Bluebook would be quite consistent with the long-run decision the Committee just made. The federal funds rate range we show there is the one currently in place, 9-3/4 to 10-1/2 percent. But of course the operating funds rate level... | 113 |
fomc | 1,979 | Well, why don't we just go around the table the same way quickly and get your individual recommendations. We will start again with Henry on this. | 29 |
fomc | 1,979 | [I'd prefer that you] don't start out with me, Mr. Chairman; I haven't had the benefit of education around the table. | 27 |
fomc | 1,979 | You want us to skip you and come back to you at the end? | 15 |
fomc | 1,979 | Well, I think I lean more to alternative 111, although modifying the funds rate there downward. My thought is this: If we have a crisis in the exchange market, we should be free to move. I don't think it's worth a great deal getting the funds rate up in the absence of such overriding necessity, but I think we may very ... | 184 |
fomc | 1,979 | You could have "giving due regard to the domestic side" overriding attention. | 15 |
fomc | 1,979 | If we have a major boil-up, there is no way of putting together a package this time, as was done last time. And we can't do it with intervention; I don't think we should do it with intervention. So we then just have to face a possibly substantive decline in our currency, adding to inflation and adding to the problems o... | 147 |
fomc | 1,979 | Yes, Phil. | 4 |
fomc | 1,979 | Henry said a good share of what I was going to say, so I won't pursue it. I wouldn't put the words quite the way he did, in an "overriding"sense, although I think the dollar depreciation risk is a high one in any policy that portrays any picture of ease. Curiously enough, we came out precisely the same on the fed funds... | 167 |
fomc | 1,979 | Let me just put out a thought. It seems to me that an international disturbance is a serious [concern]. It could require that we take some action. I don't know what that action would be. To try to [address that] in the short-term directive is almost impossible. It seems to me that we should get on the phone and we shou... | 164 |
fomc | 1,979 | Well, Mr. Chairman, this Committee has traditionally overstayed policy both in the direction of ease and of restraint and I would like to see us violate this tradition once. It seems to me, with the economy clearly in a recession, that we ought to start moving to try to mitigate the amplitude of the recession--to try t... | 263 |
fomc | 1,979 | Thank you, Frank. Ernie. | 8 |
fomc | 1,979 | Mr. Chairman, alternative I1 seems acceptable to me. | 12 |
fomc | 1,979 | Thank you. John. | 5 |
fomc | 1,979 | Well, even though I dissented in May because I wanted the funds rate down to 10 percent, I find myself in a position now where I think the rate ought to be up to 10-1/4 percent. That's more or less fortuitous and it's because of the recent surge in the aggregates. The level of M2 is now near the midpoint and is forecas... | 450 |
fomc | 1,979 | Thank you very much, John. Mark. | 9 |
fomc | 1,979 | I would find alternative I1 acceptable. | 8 |
fomc | 1,979 | Thank you. Bob. | 5 |
fomc | 1,979 | Alternative I1 is fine with me. I don't share the position that we should try to adjust the ranges to reflect the possibilities of an international crisis of any kind, basically for the reasons that you have outlined. It seems to me that to try to do it just by jiggling up the upper [limit of the funds rate] by a 114 p... | 132 |
fomc | 1,979 | Thank you, Bob. Roger. | 7 |
fomc | 1,979 | Alternative 11, Mr. Chairman. Just a comment with regard to the international situation: If I heard Scott Pardee correctly this morning, he suggested that any move by the Federal Reserve, whether in the discount area or an upward movement in the funds rate, would have some salutary effect [in countering1 any weakness i... | 115 |
fomc | 1,979 | Larry? | 2 |
fomc | 1,979 | I'd just like to suggest that we broaden the fed funds range symbolically to 1 point, and I would be perfectly happy with alternative I1 and 9-3/4 to 10-3/4 percent. But if we are going to signal a substantial and real interest in controlling the aggregates in any way, somewhere along the line we will have to move towa... | 84 |
fomc | 1,979 | Thank you, Larry. Bones? | 7 |
fomc | 1,979 | The activity in the foreign exchange markets continues to disturb me, Mr. Chairman, but I believe the suggestion that you made deals with that directly and forthrightly. Meantime, alternative 11 just as it is shown [in the Bluebook] is acceptable to me. | 56 |
fomc | 1,979 | Thank you very much. Dave? | 7 |
fomc | 1,979 | Alternative I1 | 3 |
fomc | 1,979 | Willis has alternative 11, also. Bob | 10 |
fomc | 1,979 | M r . Chairman, I guess my preference is based more on intuition than anything else. My inclination is to hold the funds rate where it is and hope that the aggregates do slow from the excessive pace that they recorded in June. But more than most people around here, I think our [actions] ought to be guided by the behavi... | 184 |
fomc | 1,979 | Okay, alternative I1 with money market. Emmett. | 12 |
fomc | 1,979 | Alternative 11. | 4 |
fomc | 1,979 | Thank you. Nancy. | 5 |
fomc | 1,979 | iw. Chairman, if it were not for the international markets, I would be recommending alternative I. What I am worried about is that we are never going to get to a point that we start easing that the money markets are not going to get upset. It's just a matter of picking our time, and- | 62 |
fomc | 1,979 | When we want to upset them. | 7 |
fomc | 1,979 | When we want to upset the foreign exchange markets and how much of an upset is going to occur, even if we keep with a constant policy at the present time. And as I said earlier, I think our first move is going to have the most impact. When we start moving [rates] down, subsequent moves aren't really going to have the a... | 111 |
fomc | 1,979 | Well, we don't have to take the week in which the Bundesbank is going to raise their discount rate. | 22 |
fomc | 1,979 | well, you'll always find someone who's moving up. If it's not the Bundesbank it'll be England or something. I would go with alternative 11. It is not my preference; my preference is alternative I. | 42 |
fomc | 1,979 | All right. Chuck. | 5 |
fomc | 1,979 | Well, I agree with Nancy. But in deference to the international situarion, I would postpone the reduction in the funds rate until next week. [But] the fact of the matter is it's going to get worse and worse and worse. And if those people are going to follow a policy of deliberate appreciation in their currencies, which... | 84 |
fomc | 1,979 | Very, very reluctantly, they are doing it | 9 |
fomc | 1,979 | Well, I don't think we ought to get dragged along with them into a worldwide depression. And I think we ought to stop it. So I agree, but what I would do is take the aggregates specifications--. Well, I would take all of the specifications. | 53 |
fomc | 1,979 | In which [alternative]? | 5 |
fomc | 1,979 | Those of alternative 11, but I'd call for an immediate reduction in the funds rate to 10 percent. | 22 |
fomc | 1,979 | Okay. | 2 |
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