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fomc | 1,979 | A reduction in the funds rate next week | 8 |
fomc | 1,979 | Now we got it. Next week--in one week or I days. You want the President to get a speech off first. | 26 |
fomc | 1,979 | We have had one of the sharpest declines [in retail sales], as far as I can recall, over 4 or 5 months. It's really staggering when you consider the size of that component in GNP, to have a 6 - l / 2 or 7 - 1 / 2 percent decline over a 5-month period. | 72 |
fomc | 1,979 | Think of what people are going to be buying once they get gasoline again. | 15 |
fomc | 1,979 | They can't afford anything else | 5 |
fomc | 1,979 | At $1.25 a gallon. | 8 |
fomc | 1,979 | Paul. | 2 |
fomc | 1,979 | If that's really the explanation for the declining retail sales--and there must be something to it--I don't think the remedy is monetary policy but rather fiscal policy. My main concern here would be that we not move right away on the funds rate without some considerable provocation. I think we have to keep in mind the... | 310 |
fomc | 1,979 | Okay, thank you. Phil did we get your specifications on M1 and MZ? | 18 |
fomc | 1,979 | I took all of alternative 111, Mr. Chairman. | 12 |
fomc | 1,979 | Alternative 111, okay. Let's get those in there. Now, let me ask two questions first. [Unintelligible] even with the specifications of leaving the funds rate at 10-1/4 percent. One is that we didn't get a complete indication--though I believe we covered everyone--of preferences for a money market or an aggregates direc... | 112 |
fomc | 1,979 | Aggregates. Okay. Bob Black, you said a money market directive, I believe. | 18 |
fomc | 1,979 | I tend to think we ought to have different ranges when we have a money market directive than when we have an aggregates one because the trigger points are different. Others apparently don't see that distinction, which I see. | 42 |
fomc | 1,979 | It is supposed to be that way. We haven't operated that way much, recently. Phil, you wanted which one? | 24 |
fomc | 1,979 | Money market. | 3 |
fomc | 1,979 | Money market. And Bones you wanted an aggregates? | 10 |
fomc | 1,979 | I have a slight preference for a money [market directive]. | 12 |
fomc | 1,979 | I'm sorry, we just got it down wrong. See, that's why we need to check these. Bob Mayo is for money market. | 27 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | And Chuck. | 3 |
fomc | 1,979 | Well, I guess I'll take money market this time. | 11 |
fomc | 1,979 | Emmett. | 3 |
fomc | 1,979 | Money market. | 3 |
fomc | 1,979 | Nancy. | 2 |
fomc | 1,979 | Money market. | 3 |
fomc | 1,979 | And Paul said money market. Henry MR. WALLlCH. Money market. | 16 |
fomc | 1,979 | Well, that's very interesting. So it looks like everybody is for a money market directive except John Balles--or me, and I haven't said what I'm for. | 33 |
fomc | 1,979 | It's clear I'm out-voted. | 7 |
fomc | 1,979 | I don't know that I'll add too much to this conversation. I do think that one of the things that will affect our actual short-term policy, as distinguished from what we direct today, is the outcome of the President's announced program. If it is a powerful program that causes a positive reaction in markets, it may give ... | 256 |
fomc | 1,979 | Well, I take it on the fact that we don't know what the President is going to say on the oil crisis. | 24 |
fomc | 1,979 | Okay, then that gives us everybody standing still here. There's an overwhelming preference for a money market directive. This gives us on M1 a preponderance of preference for the 2-1/2 to 6-l/2 percent range. On M2 there is a preponderance of 6-1/2 to 10-1/2 percent and on the range for fed funds a preponderance of--it... | 157 |
fomc | 1,979 | Mr. Chairman, before the Committee Votes on that, I ought to bring to their attention special factors in this area. The most obvious is that what will affect M 2 particularly is whether the 6-month bill rate happens to be just below 9 percent or above 9 percent. That has turned out to have a very pronounced effect. | 69 |
fomc | 1,979 | Increased M2 | 4 |
fomc | 1,979 | That's right | 2 |
fomc | 1,979 | Now it's back to where there is no rate advantage. | 11 |
fomc | 1,979 | If it goes below 9 percent, then the S&Ls will have a greater advantage which can take funds away [from banks]. If it goes above 9 percent, the banks have an advantage. There's considerable uncertainty in our projections in that area. I just wanted to explain that. | 58 |
fomc | 1,979 | Nevertheless, with that caveat and all the other things [involved], what is your preference? Let's just go down [the list]. Paul, would you want to change the weight? | 38 |
fomc | 1,979 | I think not. | 4 |
fomc | 1,979 | We heard from John. Bob Black. | 8 |
fomc | 1,979 | No, in view of Regulation Q. If that were removed, I think I would. | 18 |
fomc | 1,979 | Phil. | 2 |
fomc | 1,979 | No. | 2 |
fomc | 1,979 | Bones. | 2 |
fomc | 1,979 | I think not. It might be difficult. I'd rather have no change at the moment. | 18 |
fomc | 1,979 | Okay. Bob Mayo. | 5 |
fomc | 1,979 | I'd have no change. We are going to redefine the aggregates in January or sometime soon, anyway, and I think this would just be confusing. But John's point is basically correct. | 36 |
fomc | 1,979 | Chuck. | 2 |
fomc | 1,979 | I think that's right. I wouldn't do it now. | 11 |
fomc | 1,979 | Emmett. | 3 |
fomc | 1,979 | No change. | 3 |
fomc | 1,979 | Nancy | 1 |
fomc | 1,979 | No change. | 3 |
fomc | 1,979 | And Henry. | 3 |
fomc | 1,979 | I'd like to see it examined because the idea has merit but I wouldn't do it now because I can't [assessl the implications. | 27 |
fomc | 1,979 | Okay, it looks as if the preference is to stay with equal weight. Now having done that, let us see what our vote would be on alternative I1 as is with the fed funds rate at 10-1/4 percent and a money market directive. | 53 |
fomc | 1,979 | With the same range [for fed funds1 of 9-3/4 to 10-1/2 percent? | 25 |
fomc | 1,979 | Yes, 9-3/4 to 10-1/2 percent, the range we now have. Correct. | 25 |
fomc | 1,979 | Is this a formal vote? | 6 |
fomc | 1,979 | No, a straw vote. Let's get things going. | 11 |
fomc | 1,979 | All right. Vice Chairman Volcker | 7 |
fomc | 1,979 | I find it very difficult with those ranges that high especially. It depends on how permanently fixed that 10-114 percent rate is or how much provocation it takes to move it. | 37 |
fomc | 1,979 | You would like to lower the bottom side of that? | 11 |
fomc | 1,979 | Yes, I think so. | 6 |
fomc | 1,979 | Okay. John. | 4 |
fomc | 1,979 | I'll gulp and say yes. MR. ALTMA". President Black Yes Governor Coldwell I have some reservations, but I'll go with it President Kimbrel Yes President May0 Yes Governor Part.ee | 39 |
fomc | 1,979 | Well, I'm right on the edge. I can vote for it; it's lower ranges that I'd have to vote against. | 24 |
fomc | 1,979 | That's on account of Paul. MR. ALTMA". Governor Teeters Yes Governor Wallich | 18 |
fomc | 1,979 | Are we going to stick by your suggestion, M r . Chairman, that if the exchange markets destabilize, we will have a meeting? | 28 |
fomc | 1,979 | We will have a meeting, yes. | 8 |
fomc | 1,979 | ~ l right. l If we will have a meeting, then I will go along. | 18 |
fomc | 1,979 | Okay, that means at the moment we have everybody voting for this except Paul, who could gulp and [unintelligible] you can do it without a gulp. | 34 |
fomc | 1,979 | I can gulp and vote with it, if you gulp several times before changing the funds rate. | 19 |
fomc | 1,979 | You've noticed how we have gulped all year long. If Paul will go with it, I will go with it. That will make a demand on us. I think that's pretty good. That's fantastic. I knew we would be unanimous this month! Remember, 1 told you that on the phone. Now do you believe me? Please don't change your votes now. There is o... | 99 |
fomc | 1,979 | No, the swap drawings that we have outstanding are simply from this last month, so there's nothing-- | 20 |
fomc | 1,979 | We don't have any renewals. We have the Mexican swap line situation on which you received a memo. We have made no promises except to get [the Committee's] sentiment. If you've read the memo, the consideration is do we signal to the Mexican central bank that we'd be willing to expand the swap line to $700 million from t... | 223 |
fomc | 1,979 | I have great doubts about it, Mr. Chairman, because it is a political move. If we do this, I fear we will find ourselves approached by the State Department and maybe the Treasury on behalf of other countries. That has already been the case at a very low level of planning. One person from the State Department has raised... | 80 |
fomc | 1,979 | Could it be foreign policy that-- | 7 |
fomc | 1,979 | [Unintelligible] foreign policy and developmental and so forth, I think, if we do what is probably sensible to improve relations with And I think we ought to resist this. | 37 |
fomc | 1,979 | The request to us did not come from the State Department. | 12 |
fomc | 1,979 | No, this came from the Mexicans. | 9 |
fomc | 1,979 | Directly from the-- | 5 |
fomc | 1,979 | But if we do it for a reason that the State Department plainly understands to have a political element, I think they will want to have some say in future swap changes. Now, unless you've indicated to the Mexicans a great degree of good will and intention, I would suggest that we say we'll raise the swap line if appropr... | 204 |
fomc | 1,979 | Phil. | 2 |
fomc | 1,979 | Well, I have some of the reservations Henry does. I see it not costing us anything to add more onto their swap line. And if this were a crucial position of the State Department and foreign policy--that we add to the Mexican swap line--1 guess I'd swallow and do it just because it doesn't cost me anything at the moment.... | 143 |
fomc | 1,979 | Any other sentiments? | 4 |
fomc | 1,979 | My conclusion happens to be the same as Governor Coldwell's. I think I would do it if it serves some sort of positive purpose. I don't know about just doing it without getting some confirmation that it is some kind of useful signal. I suspect they have some real purposes in mind, along the lines that Governor Wallich s... | 109 |
fomc | 1,979 | I agree with Paul's statement. | 6 |
fomc | 1,979 | I agree, too, but I think the purpose that it serves from our point of view is perfectly obvious. And I think it would help us at the present time to seem to be willing to be forthcoming to the Mexicans. Because I would be willing at this time to be forthcoming, that does not mean that I would be willing to see it poli... | 100 |
fomc | 1,979 | We've had a Venezuelan request too, as I recall. | 12 |
fomc | 1,979 | Well, that depends again on whether it costs us anything and whether it would be helpful in future relations. | 21 |
fomc | 1,979 | Technically, these things are limited to countries that have convertible currencies so that those we mentioned here, including ones I myself mentioned, aren't really eligible. My concern is that once we get into the political game of doing this to pursue a U.S. political advantage we won't be able to hold to that line. | 62 |
fomc | 1,979 | Is there a possibility, Mr. Chairman, of saying to the Mexicans that we will consider this at the year-end renewal of these lines and in the meantime do some checking around in this government to find out if this is an important element-- | 49 |
fomc | 1,979 | Ted? | 2 |
fomc | 1,979 | Mr. Chairman, in preparation for the meeting, I checked with the Treasury Department on two points. One was whether they had been approached to increase their swap line. They have not been approached, in a conversation down there. Their reaction on the question of whether there is political interest--and I only checked... | 125 |
fomc | 1,979 | You triggered one other thing I meant to ask, Ted. What is the Treasury line now? | 19 |
fomc | 1,979 | It's $ 3 0 0 million though only half of it is drawable [under normal circumstances]. | 21 |
fomc | 1,979 | Maybe Treasury ought to-- | 5 |
fomc | 1,979 | It might be logical for both of us [to act1 or for Treasury by itself-- | 18 |
fomc | 1,979 | The Treasury was not pushing us. I asked the political questions since they're a little closer to those. I did not check with the State Department on this case. | 32 |
fomc | 1,979 | The reason I'm pushing a bit on this, Mr Chairman, is that we had a discussion with We sent him over to the Treasury Department saying that it's their job if they want to make loans for political purposes. He was pleading his [case] on the basis that we had led him and his poor country into a democratic election and th... | 74 |
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