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fomc | 1,979 | Oh, yes. The Desk is looking at the reserve path. | 13 |
fomc | 1,979 | We've got reserves that are generated by deposits in the aggregate and [we look at] other factors that generate reserves. | 23 |
fomc | 1,979 | If M2 is running slow, it will release some reserves to support M1 and vice versa. But they're not going to be [weighted] equally because of the differences in reserve [requirements]. | 39 |
fomc | 1,979 | I don't think that's responsive to John's question, really. | 11 |
fomc | 1,979 | What I was trying to get at is what you would plan on doing if M1 came in below the 4-1/2 percent we targeted on and M2 came in higher than the 7-1/2 percent. How would you balance those out in trying to construct your reserve path? | 61 |
fomc | 1,979 | We'd be guided by how reserves are coming out in relation to path, president Balles. | 19 |
fomc | 1,979 | You sort of weight it in relation to the average reserves, as I would see it. That is, the components of M2 have less reserve requirements so they don't get equal weight any more. | 39 |
fomc | 1,979 | But you start with the estimate of required reserves for M1 and M2. | 16 |
fomc | 1,979 | Well, President Balles, when M2 was coming in about on track, I don't believe that the staff felt that it had to make a special effort to push up M1 because the Committee had decided that the aggregates [could grow at the target rate] or a little lower. Similarly, if M1 were coming in on track and M2 were running very ... | 113 |
fomc | 1,979 | Simply refresh my memory. I thought M2 was coming in more or less on track. | 18 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | Then why is your projection higher than the track we estimated last time? | 14 |
fomc | 1,979 | Because M1 is coming below. It's the relationship that seems to have changed. CHAIRMAN VOLCKER, M1 is coming in below but M2 is coming in on track. But your current projection for the quarter now is above the track. | 50 |
fomc | 1,979 | Because we're pushing M1 up. | 7 |
fomc | 1,979 | Because you're pushing M1 up. | 7 |
fomc | 1,979 | ~ 2 therefore, , would be running even higher. That's the-- | 15 |
fomc | 1,979 | But M2 is only going to go off track in the second half of the quarter. | 18 |
fomc | 1,979 | Because M1 is going to be pushed up | 9 |
fomc | 1,979 | Yes, as I say, banks may not get all that [projected increase] in time deposits. | 21 |
fomc | 1,979 | Well, I really think we are talking about narrow differences at this point. We just have to reach a consensus on how we phrase this. In listening to all the rest of you, there's a slight predilection for my way of phrasing it. I'd be perfectly happy to phrase it the other way if that's the way people want to do it. I t... | 77 |
fomc | 1,979 | Why don't you take a couple of tests on expressions of preferences. I think it would be very desirable, if we could, to have a large number of people voting for whatever [the decision] is. | 41 |
fomc | 1,979 | As I understand it, we have basically two [alternatives] on the table. And we have the Axilrod alternative, too, so we have three options on the table. We have one that is a straight compromise between "B" and "C,"and $1.7 billion on initial borrowings. That's one way of doing it. Another way of doing it is to specify ... | 108 |
fomc | 1,979 | Does either give you a better assurance as to what Ml will do in December? | 16 |
fomc | 1,979 | I think there's equally little assurance in either case. And the third alternative is staying with " B " on M1 but lowering M2 to something like "C." That's a different compromise between "B" and " C . I' | 47 |
fomc | 1,979 | For path purposes. | 4 |
fomc | 1,979 | But Steve's point could be accomplished, couldn't it, by weighting the average of "B" and "C" on M2 toward "C?" Just have it 8-1/2 percent, say. | 43 |
fomc | 1,979 | Well, let's not make any more-- | 8 |
fomc | 1,979 | I'm trying to simplify it. | 6 |
fomc | 1,979 | One is a straight compromise right down the line between "B" and " C . | 17 |
fomc | 1,979 | What do you mean? Is it 8-5/8 percent for M2? | 18 |
fomc | 1,979 | It's 5, 8-l/2 and [borrowing of $1.7 billion] and the same fed funds range. | 27 |
fomc | 1,979 | 8-1/2. | 6 |
fomc | 1,979 | 8 - 5 / 8 , I suppose, is a straight compromise. | 16 |
fomc | 1,979 | My whole point on all of this is that 8-l/2 percent works in the direction of Steve's suggestion. Why don't we make it 5 percent, 8-l/2 percent, and 1 - 1 / 2 . | 50 |
fomc | 1,979 | That's what we have. | 5 |
fomc | 1,979 | 8-1/2 and 7-1/4 percent, I suppose. | 17 |
fomc | 1,979 | M3 is not-- | 5 |
fomc | 1,979 | And $1.7 billion on borrowing. | 9 |
fomc | 1,979 | And the fed funds range the way it is. | 10 |
fomc | 1,979 | All of these leave the fed funds range where it is. The alternative is alternative B with the understanding that [the specifications in "B"] in some sense are the maximum, within the limits that we can maneuver these things anyway. If November comes in weak, we'd probably be satisfied with "C." And we'd also start out ... | 85 |
fomc | 1,979 | I don't think Steve's alternative is well specified. It would be 5-1/2 percent for M1 and what would M2 be? | 30 |
fomc | 1,979 | M2 I think would be 8-1/4 percent. That's a straight compromise. | 19 |
fomc | 1,979 | No, it would be less than that, I think. It would be an impossible construction. | 19 |
fomc | 1,979 | Well, he's not taking it literally to get it within the target, I take it. I'm just compromising between "B" and "C." I suppose one could say technically--if the staff's estimate is any good--that that is the most awkward one. It's not going to happen. But their estimate may be no good, so-- | 69 |
fomc | 1,979 | Well, I could take the second. | 8 |
fomc | 1,979 | We have alternatives 1, 2, and 3. The borrowing level is the same in all of these for simplicity. So all we're talking about is these other numbers. One is an arithmetic compromise between "B" and "C, half way between " B "and "C" straight out. The other is a more flexible interpretation between "B" and "C" and would d... | 96 |
fomc | 1,979 | That would probably protect better against unexpected drops in the funds rate because we can go all the way to the " C "specifications. | 27 |
fomc | 1,979 | Not necessarily. | 3 |
fomc | 1,979 | It goes in that direction, certainly. It might depend, I think, on how low November came in. | 22 |
fomc | 1,979 | And how rapidly we recognize it. | 7 |
fomc | 1,979 | Then we have this--instead of saying bastardized version, I'll say "hybrid"--which is 5-1/2 percent for M1 and 8-1/4 percent for M2. I myself am not sure that M2 isn't going to fall off. My instinct is that it may fall off and [the 7-1/21 may turn out to be consistent [with what we have for Ml]. Now the only trouble wi... | 142 |
fomc | 1,979 | You're only asking Committee members? | 6 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | The next alternative is two. Four with myself. And the other one is the Axilrod version, which I guess is not [anyone's first choice.] Well, it looks like it's 8 to 4 [in favor of the first one]. | 52 |
fomc | 1,979 | Do you want a "can live with" indication? | 11 |
fomc | 1,979 | Yes. I suppose the next question is can everybody live with one, with its arithmetic purity. IUnintelligiblel but nonetheless pure. Everybody can live with that? | 35 |
fomc | 1,979 | Well, would you be willing to raise [the initial borrowing assumption]? This gives us a little more opportunity for fine-tuning and sharing because we've got the borrowing. Would you be willing to raise that a little? | 43 |
fomc | 1,979 | I thought you voted for it in the first place? | 11 |
fomc | 1,979 | I wanted two. Yes, if you made [borrowing] $1.8 billion. | 19 |
fomc | 1,979 | But that's tougher. The choices were between ,VB" or "C ~ I! You're trying to make it tougher and move it toward "C." | 30 |
fomc | 1,979 | Yes, that's what I'm trying to do. | 9 |
fomc | 1,979 | You people all realize that if you vote for this compromise, this straight arithmetic compromise, and November really comes in low, we're going to be much easier in December than in the other alternatives. | 38 |
fomc | 1,979 | I think that might be appropriate. | 7 |
fomc | 1,979 | It would balance-- | 4 |
fomc | 1,979 | That's why we can live with it. | 8 |
fomc | 1,979 | That's what I don't like. | 6 |
fomc | 1,979 | Well, have we got a consensus for the arithmetic purity? MR. mY0. Sure, let's vote. | 23 |
fomc | 1,979 | If I understand what it is. | 7 |
fomc | 1,979 | It's halfway between " B " and "C." It couldn't be simpler. | 15 |
fomc | 1,979 | Mr. Chairman, how does this look when it's written up? Does it look like-- | 18 |
fomc | 1,979 | Better than it sounds. | 5 |
fomc | 1,979 | Will it l o o k as if we've departed [from our original decision1 in any meaningful way? | 21 |
fomc | 1,979 | Well. I would suggest that we write it up so that it doesn't. It depends upon how one interprets what we said before. It's slightly tighter in some sense, if you interpret it literally [compared with] the number that we gave before. But if you put it in the context that we said we weren't going to be unhappy if growth ... | 91 |
fomc | 1,979 | Do we just write it up as November, December, and January and then it would be 5 or 4-112-- | 26 |
fomc | 1,979 | Well, I think we ought to assume for the moment--we'll decide about the meeting date in a few minutes--that if we decide that the next meeting will be in January, obviously we carry this forward into January. That's the implication; it is until the next meeting. | 56 |
fomc | 1,979 | I would assume, Mr. Chairman, that this is roughly the sentiment that the Committee decided before--that it has got a hair less M1, and a hair more M2. This to me is essentially what it-- | 45 |
fomc | 1,979 | I think what we're talking about is [the period] until the next meeting. | 16 |
fomc | 1,979 | Or unless things fall out of bed and you call a special meeting. | 14 |
fomc | 1,979 | Yes, we can always have a meeting | 8 |
fomc | 1,979 | Okay, let's vote. We are voting for a straight arithmetic average between "B" and "C. 'I | 23 |
fomc | 1,979 | This is for November-December? | 7 |
fomc | 1,979 | Until the next meeting, whenever that meeting shall be. | 11 |
fomc | 1,979 | But that would be no later than January. | 9 |
fomc | 1,979 | We're not going to do it for February and March. | 11 |
fomc | 1,979 | In the normal course of events I think that's expected. We will decide upon the meeting date in a moment. S O , it's until the next meeting. | 31 |
fomc | 1,979 | Chairman Volcker Yes President Balles Yes President Black Yes Governor Coldwell Yes President Kimbrel Yes President Mayo Yes Governor Partee Yes Governor Rice Yes Governor Schultz Yes Governor Teeters Yes First Vice President Timlen Yes Governor Wallich Yes Unanimous. | 52 |
fomc | 1,979 | We have another action to take which, if I understand it correctly, involves me delegating to Governor Schultz and in his absence Governor Coldwell the authority to answer all requests under the Freedom of Information Act, I guess. | 44 |
fomc | 1,979 | No, the appeals from any turned down by the Secretary. | 12 |
fomc | 1,979 | Appeals [of any requests] turned down by the Secretary. | 13 |
fomc | 1,979 | Of which we have had none, I think, since 1975. | 15 |
fomc | 1,979 | Is there a motion to accept that delegation? Without objection, it is so delegated. The next meeting is the remaining item of business. What I would suggest is that we tentatively keep it on December 18, but that you clear your calendars for whatever date seems best among January 8 , 9, or 1 0 . Are there preferences [... | 78 |
fomc | 1,979 | The 10th is a [board] meeting date. | 12 |
fomc | 1,979 | It's a Thursday. | 4 |
fomc | 1,979 | And the 8th is the date I'll be returning from the BIS meeting. | 16 |
fomc | 1,979 | You'd be gone on the 7th too | 10 |
fomc | 1,979 | The 7th and 8th I'll be gone. | 12 |
fomc | 1,979 | What did you say about December, M r . Chairman? | 12 |
fomc | 1,979 | Keep that on your calendars, with a presumption that the meeting will be held on December 18th. But I want the freedom to move it to--let's say the 9th of January if we can be that specific, which is Wednesday. The meeting might be moved because of various developments of an unforeseen character but particularly it may... | 186 |
fomc | 1,979 | While we're all here, could I address a question to Bob Black? We have a Conference of Presidents meeting scheduled in December. | 25 |
fomc | 1,979 | We could reschedule that. | 6 |
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