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fomc | 1,979 | That's a record level. | 5 |
fomc | 1,979 | But the peak was reached last fall. It has been drifting down ever so slightly. | 17 |
fomc | 1,979 | Consumer installment credit particularly has leveled off but I think the mortgage debt is still drifting up. | 19 |
fomc | 1,979 | The article in the New York Federal Reserve [publication] makes a point that the simple view of this probably overstates the burden of debt. | 28 |
fomc | 1,979 | Demographics. | 3 |
fomc | 1,979 | It argues that there are many more families now in heavy debt bearing categories, and if you adjust for that and adjust for the credit card debt--which would be a different kind of debt--the figures don't look as high as they do absolutely. | 49 |
fomc | 1,979 | The issue is whether the debt burden seems significant [enough] or not to affect consumer behavior and perhaps create a slower response on the part of the consumer in the upturn than we have been accustomed to in the past. | 45 |
fomc | 1,979 | The conclusion of that article is that [the debt burden] is high but not so high as it looks on the surface. It therefore moderates the conclusion; they still may be [unintelligible]. Chuck Partee. | 46 |
fomc | 1,979 | I just wanted to ask for your interpretation of the retail sales figures, Jerry. [The article] in the paper was a little confusing. The July increase looked very small to me but then there was some talk of a revision in May and June and I couldn't really make it out. | 57 |
fomc | 1,979 | Yes, that's correct. The July increase was quite small--0.4 both for total sales and sales ex-autos. Both May and June were revised up, which suggests that the second quarter consumption figures will not be as weak as we had thought earlier. | 52 |
fomc | 1,979 | But were they revised very much? This is just a question of fact. | 15 |
fomc | 1,979 | Other things equal, they probably would revise GNP up by 1 percent or so. | 18 |
fomc | 1,979 | One percent? | 3 |
fomc | 1,979 | It's fairly significant. But as I pointed out, the pattern is still a relatively weak one. | 19 |
fomc | 1,979 | Just another question quickly, Mr. Chairman, on the fiscal policy matter. Jerry, earlier this year you may remember we called attention to some startling differences between your projections of the high employment surplus and those of the Council of Economic Advisers. They were much different magnitudes and even differ... | 78 |
fomc | 1,979 | Well, we still have differences in the level, and those differences are a reflection of a different approach in calculating the figures. We tend to move generally in harmony, however, with the Council's movements at this point. | 44 |
fomc | 1,979 | They both show a rising surplus? | 7 |
fomc | 1,979 | We both show a rising surplus, yes. I think that's really the most significant way of assessing these numbers. To come back to this issue of how much of a loss as a result of the recession, the projected decline in the deficit increases in our projection between '79 and '80 by about $10 billion and the high employment ... | 114 |
fomc | 1,979 | Mr. Axilrod. You want to give us a survey of what are called financial relationships. | 20 |
fomc | 1,979 | [Statement--see Appendix.] | 6 |
fomc | 1,979 | Thank you, Steve. I am conscious that without an egg timer time has been passing. But I thought it might be useful if I just set out a few thoughts of my own at this point before we have a coffee break. I don't intend to make it a habit particularly, but this is a meeting that is perhaps of more than usual symbolic imp... | 2,119 |
fomc | 1,979 | I'm not a clockwise, counterclockwise, or protocol man, so if you want to talk at this stage, get on Mr. Zeisel's list--I mean Mr. Altmann's list. I'm sorry, I was looking at the wrong end of the table. I know which way interest rates go even if I don't know which end of the table I'm at! Go ahead, Mark. | 80 |
fomc | 1,979 | Thank you, Mr. Chairman. I found your comments very helpful and I am very sympathetic with them. I guess the only thing I'd like to do is to make you feel a little less insecure about the impact of where I think you are heading and what that would imply in terms of the real economy and recession. It seems to me that as... | 646 |
fomc | 1,979 | Dave Eastburn. | 4 |
fomc | 1,979 | Paul, I was very much interested in your recital of the almost upside down economy that we are in, where usual roles really have reverse implications. There is one, however, that occurs to me that you didn't mentioned and that is the possibility that in this kind of world a recession of any magnitude can be inflationar... | 333 |
fomc | 1,979 | Given the recession we have projected, which is slightly under 2 percent [negative GNP], and the degree of inflation, I guess I have the normal lack of confidence, but not any more than that. But I would think that [those projections] might be too low rather than too high if the nominal GNP we have forecast develops. I... | 131 |
fomc | 1,979 | Thank you. | 3 |
fomc | 1,979 | Mr. Balles. | 5 |
fomc | 1,979 | Well, Mr. Chairman, I find myself very sympathetic to the approach that you outlined in your assessment of the immediate and longer-run problems. It might seem odd in a way since last May I was in the distinct minority that thought we ought to ease a bit in view of an impending recession, which our staff had been forec... | 507 |
fomc | 1,979 | Tom Timlen. | 4 |
fomc | 1,979 | Mr. Chairman, I'm generally in agreement with your comments in the areas of concern that you referred to. Having been trained in the traditions of Benjamin Strong, Allan Sproul, and Paul Volcker, I may have some shadings of view. | 50 |
fomc | 1,979 | Sounds like a tight money man! | 7 |
fomc | 1,979 | I don't think I will comment in depth on all the areas you touched on, but certainly [foremost] in my mind are the level of inflation, the strong growth in the aggregates, and the tentative position of the dollar in the foreign exchange markets. Sure, we have to be concerned about the prospect of a recession and high [... | 152 |
fomc | 1,979 | Mr. Black. | 4 |
fomc | 1,979 | Mr. Chairman, were you not more original and more articulate than I, I would have assumed that you had borrowed my notes to make that talk of yours. I guess the only point on which I might differ with you is that I tend to attribute more of the oncoming recession--if that's in fact where we are headed--to inflation tha... | 365 |
fomc | 1,979 | Governor Wallich. | 4 |
fomc | 1,979 | Well, I'm very much aware of the need to balance the considerations of recession and inflation. I think if we tighten up a little now, which is my inclination, we probably will add something to the depth of the recession but not much. And I would not consider that this may provoke such ill-timed and ill-thought-out res... | 558 |
fomc | 1,979 | Governor Coldwell. | 4 |
fomc | 1,979 | Mr. Chairman, the situation as I view it has a couple of interesting quirks. As you recall, last fall we talked about the real economy expanding while the monetary economy held quiet. We are now looking at a monetary expansion with a presumption that the real economy is flat. I didn't believe the one last fall, and I d... | 589 |
fomc | 1,979 | Mr. Kimbrel. | 6 |
fomc | 1,979 | Mr. Chairman, from my vantage point we are indeed beginning to recognize some slower growth. That may be somewhat less evident in the Southeast than in other parts of the country, but with all of this we are also observing some [developments] that do not provide a great deal of encouragement, specifically in the area o... | 457 |
fomc | 1,979 | Mr. Winn. | 4 |
fomc | 1,979 | Mr. Chairman, I have a great deal of sympathy with the identification of the box, which you so aptly described. I personally believe that we haven't started to feel the social costs of inflation and that they are going to surface to an increasing extent this fall, with more attention on them. But in thinking of how we ... | 411 |
fomc | 1,979 | Mr. Morris. | 4 |
fomc | 1,979 | Well, Mr. Chairman I agree on the nature of the box we're in as you described it. It seems to me that we can work our way out of the box if we gear our policy to the aggregates in the next 6 or 8 months. I think we're in a situation very similar to the second quarter of '74 when we had declining final demand. The decli... | 396 |
fomc | 1,979 | Mr. Baughman. | 6 |
fomc | 1,979 | Mr. Chairman, I must join the chorus that has been sung pretty much around the table thus far, although I guess I would have to say I'm not a singer, as John Balles reminded me at the last meeting. Coming from an area where labor markets are [tight] and the turnover of labor is high because of that, [my singing] really... | 113 |
fomc | 1,979 | We could make it into a coffin. | 8 |
fomc | 1,979 | A little latent optimism! | 5 |
fomc | 1,979 | I'm not unaware of the [concern] that is bothering quite a few of us, namely that the historical record seems to say rather unequivocally that we have usually acted late in both up and down periods of the cycle. And insofar as there is an argument in support of a heavier reliance on the monetary aggregates, it is large... | 371 |
fomc | 1,979 | Mr. Mayo. | 4 |
fomc | 1,979 | Mr. Chairman, I'd like to look at this as an opportunity rather than a box. | 18 |
fomc | 1,979 | Good. | 2 |
fomc | 1,979 | Inflation is our number one enemy. This has been declared far and wide, by the President of the United States and the leaders of the Congress as well as by the Federal Reserve. This may not always be the case. There may be some folding on the fiscal side. In fact I would be willing to bet a Suzie to a penny--well, I've... | 505 |
fomc | 1,979 | Mr. Partee. | 5 |
fomc | 1,979 | On balance I guess I agree with Frank Morris more than anyone, although there are points of similarity [with other views]. I think the economic outlook is so bad that I wonder whether I'm missing something. That is, it seems to me that a substantial drop in consumption will have more effect than any other factor on cap... | 863 |
fomc | 1,979 | Mr. Rice. | 4 |
fomc | 1,979 | Mr. Chairman, I listened with interest to your comments at the beginning of the discussion, and I appreciate a good deal what you had to say. I agree [with what you said on] economic policy, increasing prices, and credibility. I also agree that if there were some action or set of actions that we could prescribe that wo... | 494 |
fomc | 1,979 | That's not, of course, keeping the ranges where they are. | 13 |
fomc | 1,979 | No, I realize that. | 6 |
fomc | 1,979 | Mr. Guffey. | 6 |
fomc | 1,979 | Thank you, Mr. Chairman. I, like everybody else around the table who has [spoken] this morning, am mindful of the balance needed between the [potential] depth of the recession and the need to fight inflation. Over recent months, my attention has been more focused on trying to moderate the depth and the length of any re... | 691 |
fomc | 1,979 | Mrs. Teeters. | 5 |
fomc | 1,979 | I'm glad to find we're all in agreement that we don't know what's going on or what to do about it. I can live with a minor tightening at the present time, given a 10-1/2 to 11 percent range on the federal funds rate and some reduction, possibly, in the ranges for M1 and M2. However, I would like to join Frank Morris in... | 434 |
fomc | 1,979 | Mr. Roos. | 5 |
fomc | 1,979 | Yes, sir. I purposely waited until the end of the batting order because up until the last few expressions of opinion I was so wholeheartedly in agreement with everything that was said that I didn't want to express that agreement until everyone was committed verbally to that position. I didn't want to drive others off! ... | 277 |
fomc | 1,979 | You made one mistake at least, Mr. Roos. Vice Chairman Schultz has not yet spoken. | 20 |
fomc | 1,979 | I eliminate my remark from the record! | 8 |
fomc | 1,979 | He carefully husbanded his [remarks at his] first meeting. He participated at the very beginning and this won't be the very end, Fred, unless you're so dramatically persuasive that we immediately-- | 38 |
fomc | 1,979 | Well, I want you to know that I shall protect my position as the caboose with fervor! My feelings are pretty much the same as I expressed to you yesterday, Mr. Chairman. It seems to me that inflation and credit demands, the difficulty in projecting the aggregates, and the sensitivity of the dollar would argue very clea... | 449 |
fomc | 1,979 | In view of the hour and the fact that a number of people were very specific in their comments, I wonder whether it's not appropriate for me to try to put something quite specific on the table and let you shoot at it. First, let me make a couple of comments that occurred to me in listening to you--some points of agreeme... | 653 |
fomc | 1,979 | I don't think so. There is a tremendous amount of sympathy on the Hill to roll back the payroll taxes. And for the first time there was constituency pressure of an enormous amount on the payroll tax increases last year. I think the people have become terribly sensitized to them with the rapid increases of recent years.... | 150 |
fomc | 1,979 | Well, that is my hope too. Nobody can project how it will come out, but I think they are in the same box--to return to that--as we are. But it's premature to begin suggesting that kind of thing now until we're right up against it. It's inherent in the position that we're in. | 63 |
fomc | 1,979 | I have not thought of a payroll tax cut per se as structurally a very desirable device. I would have thought [more favorably] of something that undoes the great increase in the corporate tax resulting from under depreciation. If all they did was to remove that, by replacement costs depreciation-- | 59 |
fomc | 1,979 | I think what they basically have in mind is a payroll tax [cut] because it would reduce pressure on prices and reduce costs directly on the employers' side. There's also a possibility of some adjustment on depreciation--accelerated depreciation or investment tax credit. | 50 |
fomc | 1,979 | Also, if you're going to give something to business, you've got to give something to the consumer. | 20 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | I think you've got to give something to the consumer, so it may be some combination of that sort with some emphasis on the investment side. Now, I've got a personal problem--other people do, too--with the payroll tax pure and simple because of the linkage between the payroll tax and the benefits. So, I don't know. But ... | 526 |
fomc | 1,979 | Well, that does; but the other range gives you 11 percent. | 15 |
fomc | 1,979 | Yes, and we would treat it asymmetrically low, I think. The asymmetrically low [concept] reflects the fact that we really don't want to have a surprise in the aggregates and move lower too quickly for a couple weeks with some low aggregate figures. My persistent problem with this is that I never know what those aggrega... | 281 |
fomc | 1,979 | A money market directive or an aggregates directive, Mr. Chairman? | 13 |
fomc | 1,979 | I never heard anything that sounds more like a money market directive. CHAIRMAN VOLCKER I have no particular feeling about that, one way or the other. | 32 |
fomc | 1,979 | Well, the trigger points would be very different, as I view it anyway. | 16 |
fomc | 1,979 | I don't have any strong feeling about a money market or an aggregates directive. I suppose an aggregates directive would make me lean more toward the 10-3/4 to 11-3/4 percent range just in case of a fluke and the aggregates came in too quickly on the down side. Governor Coldwell. | 65 |
fomc | 1,979 | Mr. Chairman, I did not express myself on the aggregates or the range for the federal funds rate. I thought we were talking principle more than anything else on the first go-around. I would like to view this as kind of a 3-stage process: that we would lead with a small increase in the federal funds rate, move with the ... | 310 |
fomc | 1,979 | John Balles. | 4 |
fomc | 1,979 | Mr. Chairman, most of what you are suggesting as a possible position here I find--well, let me say acceptable. I'd like to move a touch more promptly to 11 percent on the funds rate. There's one caution I'd like to draw, and maybe I'll be a voice in the wilderness this month as I was last month. We all agree that the a... | 477 |
fomc | 1,979 | Frank Morris. | 3 |
fomc | 1,979 | Paul, I would just say this: Since we're after some symbolism here, I think we'd get a lot more symbolic impact at 11 percent than at 10-7/8 percent. I think a movement of [only] an eighth of a point might produce a perverse reaction from the market. It seems to me that a nice round odd number like 11 percent is what w... | 83 |
fomc | 1,979 | I can understand that argument. | 6 |
fomc | 1,979 | I think we have a choice of either a narrower aggregates range that is likely to be triggered on the up side before we pull it down or being a little more generous on the funds rate. I could go with 4 to 8 percent on M1 and 7 to 11 percent on M2 provided we move to 11 percent on the funds rate and have a 10-1/2 to 11-1... | 211 |
fomc | 1,979 | Would you go down to 10-1/2 percent if the aggregates were within those ranges? | 20 |
fomc | 1,979 | Well, you have to [accept] the logic of this. | 13 |
fomc | 1,979 | You could always make the ceiling higher. I have no name on my list. | 16 |
fomc | 1,979 | Henry made the point that I wanted to make. I would just like to follow up and point out that if we take 4 to 8 percent with a money market directive and if the forecast for August is correct, then M1 growth in September would have to be over 11 percent before we move [on the funds rate]. And that's 11 percent without ... | 152 |
fomc | 1,979 | Mr. Chairman, there is the possibility that the Committee could adopt a mixed directive--and the Committee once had such a directive--that in effect was aggregates on the up side and money market on the low side. That is, you'd move the funds rate up if the aggregates were high in the range but you wouldn't [lower the ... | 89 |
fomc | 1,979 | Mr. Mayo. | 4 |
fomc | 1,979 | Steve's point is one I was going to make. I think we could do that. As far as the figures are concerned, surprisingly, I would support what Henry just said: 10-1/2 to 11-1/2 percent with a central point of 11, and for the aggregates 4 to 8 and 7 to 11. | 74 |
fomc | 1,979 | Mr. Timlen. | 5 |
fomc | 1,979 | Mr. Chairman, I was prepared to vote for one of your first two alternatives: moving the funds rate up to the area of 11 percent with a funds range of 10-3/4 to 11-1/4 percent, M1 at 4 to 8 percent, and M2 at 7 to 11 percent. I think the important thing is the movement of the federal funds rate. And if the general think... | 206 |
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