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fomc | 1,980 | Well, that would be fine, Fred, if we were the sole source of the inflation. But it's like playing poker with the other players always pulling all the wild cards. We're playing with OPEC, and we really have no control over oil prices. To say that we're consistently going to reduce inflation in a situation where we don'... | 144 |
fomc | 1,980 | Mr. Baughman. | 6 |
fomc | 1,980 | Mr. Chairman, it seems to me that we're not going to have the privilege of avoiding making some fairly definite commitment as to what our policy posture will be beyond 1980. There's also a possibility of getting some positive mileage from taking a fairly specific posture as to our plans regarding the orientation of mon... | 287 |
fomc | 1,980 | You're saying you wouldn't give numbers. | 7 |
fomc | 1,980 | I would not give numbers unless in a final showdown we have to give numbers to avoid numbers being legislated. But I would go so far as to be rather unequivocal in terms of stating that we have every intention of having diminishing magnitudes of monetary growth rates and credit expansion in each of the succeeding 2 or ... | 345 |
fomc | 1,980 | You don't want to say anything about the level of the target? | 13 |
fomc | 1,980 | I had hoped we would take that up tomorrow. | 10 |
fomc | 1,980 | Not the annual. | 4 |
fomc | 1,980 | Well, my inclination would be something on the order of our experience in '79 with a downward tilt. In other words, if we [adopt] a range, I'd put the midpoint of the range below the experience in '79. If we pick a specific target, I'd say the highest it should be is the absolute increase in '79. | 70 |
fomc | 1,980 | Governor Coldwell. | 4 |
fomc | 1,980 | Mr. Chairman, I approach this from two interesting bases. Number one, membership of the FOMC will not be the same three to four years from now. In fact, if my count is correct, we're going to lose at least one-third of the members. I doubt very much if we're going to commit anybody out that long. I think it would be a ... | 610 |
fomc | 1,980 | Down? | 2 |
fomc | 1,980 | Down. | 2 |
fomc | 1,980 | Governor Wallich. | 4 |
fomc | 1,980 | Well, I start with the experience we've had of hitting our target on M1 and getting as a result a severe acceleration of inflation plus a much stronger economy. We've been waiting for this recession now for a year. It was predicted for the early part of '79. So, this leads me to think that there is something about our ... | 480 |
fomc | 1,980 | Mr. Chairman, Governor Wallich's comment reminded me of a fact that was inadvertently left out of the Bluebook. We showed the actual growth rate of M1 for 1979 of 5.5 percent and I meant to show also in parentheses, and did not, the growth of M1 as if there had been no ATS accounts. One would have had to add 1.3 percen... | 139 |
fomc | 1,980 | Well, that explains a little more why we were able to finance such a tremendous inflation, but the increase in velocity still remains very large. | 28 |
fomc | 1,980 | Other demand shifts may also be occurring. | 8 |
fomc | 1,980 | Do you consider the 6.3 percent consistent with the range of 3 to 6 percent, though? | 23 |
fomc | 1,980 | No. That would go with a range of 4-1/2 to 7-1/2 percent. | 24 |
fomc | 1,980 | I really don't want to prolong this, but you say 6.8 percent [without ATS] accounts. Is the implication that that's the part that came out of demand deposits? | 36 |
fomc | 1,980 | Yes. | 2 |
fomc | 1,980 | But you have M-lB, which is the number with all of the ATS and NOW accounts, at 7.3 percent. Are you saying that most of the NOW accounts came out of demand deposits last year? | 44 |
fomc | 1,980 | No, I was referring to M-1A; that would add 1.3 to M-1A. I don't have at hand at the moment any additional M1 data. | 38 |
fomc | 1,980 | Well, we'll explore that another time. Mr. Guffey. | 14 |
fomc | 1,980 | Thank you, Mr. Chairman. There are two or three points I would like to make. One, on the discussion of whether or not to retain ranges, I think there is comfort in ranges and that we must retain them for 1980. And I think a spread any narrower than the spread of 3 points that we have had in the past would be ill advise... | 346 |
fomc | 1,980 | Mr. Winn. | 4 |
fomc | 1,980 | Well, I would take a somewhat different tack. You talked about the complexity of reality as we view the Ms and reserves. I think the complexity of the economy with respect to the outlook is even greater. Second, I think we are boxed in because of the law saying we have to do this and do that. If I were doing it, I woul... | 189 |
fomc | 1,980 | What I don't quite understand, Willis, is that you say you would put your scenario out first, but then you say you don't know what the scenario is. | 32 |
fomc | 1,980 | Well, that's correct. But [I'd say: Given] this hypothesis, this would be true. For example, Paul, go back to October and look at what you would have projected on the international front versus what you feel now. That can change far more dramatically in a very short period of time. Let's assume we go to a military draf... | 270 |
fomc | 1,980 | You dismiss entirely the argument that the more firmly we set a range the more we might be influencing the reality? | 22 |
fomc | 1,980 | At this time, yes. | 6 |
fomc | 1,980 | Do you think we have the luxury to do that, Willis? It seems to me that we are charged with deeper responsbility than that. | 29 |
fomc | 1,980 | Well, the Board has to [indicate] what projection is consistent with the numbers it chooses [for the aggregates]; and that is the scenario. | 30 |
fomc | 1,980 | That's right; that's what I mean. | 8 |
fomc | 1,980 | And that could be wrong. | 6 |
fomc | 1,980 | It could be very wrong. I think the reality is that we have a much greater [chance] of being wrong this time than has been true in a long time. | 34 |
fomc | 1,980 | Where would you stick the number today, subject to change tomorrow? | 13 |
fomc | 1,980 | Around 5 or 5-1/2 percent as a midpoint, Paul. | 17 |
fomc | 1,980 | Mr. Kimbrel. | 6 |
fomc | 1,980 | Mr. Chairman, I guess for different reasons I would opt for not going to longer projections. Frankly, there are so many uncertainties that there are enough difficulties with 1980. And even there, I would hope that we could relate our longer-run look at 1980 to the actual targets that were in place for 1979 and not our ... | 220 |
fomc | 1,980 | Mr. Timlen. | 5 |
fomc | 1,980 | Mr. Chairman, I must say I am pleased that this is only a preliminary discussion of our long-range targets be they for 1980 or 1980 and 1981. I am not sure whether I am distracted or overwhelmed by major external political forces as well as external financial forces. I have no idea how or when they may be wound down; m... | 86 |
fomc | 1,980 | [Unintelligible] proposing making it for the last quarter. | 14 |
fomc | 1,980 | Why not? At any rate, I think these external developments all pose threats on the side of impeding our inflation fighting efforts, and they pose a risk to the strength of the dollar if there's a renewed reason for a flight from [other] currencies. Finally, I would agree with some of the people to my immediate right tha... | 286 |
fomc | 1,980 | Governor Partee. | 4 |
fomc | 1,980 | First, I would use the 3-point ranges that we have had. As a matter of fact, if I could, I might choose a 4-point range as Phil [suggested]. [But] given the fact that we have had ranges of 3 points, I just don't see us broadening them out. I would remind you that we fully used the ranges this past year. In fact, we mor... | 541 |
fomc | 1,980 | But when you say "hold to it," you mean consistent with your first comments about using the range if necessary. | 23 |
fomc | 1,980 | Yes, that's right. And, as I said, I'd drift a little low in [the range] in the beginning with the view that growth will be rising within it later on. | 37 |
fomc | 1,980 | Mr. Black. I don't know whether we will get through with everybody today, consistent with getting out at a reasonable time. But if it's agreeable, let's go on a little longer. | 37 |
fomc | 1,980 | Mr. Chairman, I come out very close to Ernie Baughman in feeling that we ought to stress our range in 1980 and not indicate specifically what the ranges will be for future years but indicate very clearly that we still hold our oft-stated intention to reduce these ranges gradually over time until we get them down to wha... | 452 |
fomc | 1,980 | Mr. Mayo. | 4 |
fomc | 1,980 | Mr. Chairman, I find myself philosophically interested in the idea of reducing the ranges, but I don't think this is the time to do it. I think we need all of the flexibility we can have here. I find myself at least at the moment utterly opposed to going above 6 percent on the upper end of our range for whatever we cal... | 519 |
fomc | 1,980 | Mr. Willes. | 5 |
fomc | 1,980 | My wife made me promise that I would be more agreeable in the new year, so I would like to say that I agree with everything that has been said. I'd like to say it, but the fact is that I don't agree. But since the hour is late I will be very brief in stating my disagreement. We all agree that the outlook is uncertain. ... | 435 |
fomc | 1,980 | You are not going to offer any numbers? | 9 |
fomc | 1,980 | Next month he will. | 5 |
fomc | 1,980 | Next month. | 3 |
fomc | 1,980 | Well, we'll stay in suspense. Mr. Balles. | 12 |
fomc | 1,980 | Since the hour is late, Mr. Chairman, and since I don't really have any convictions but only tentative leanings at the moment, I'm not sure I will give a number either. But I would like to refresh recollections by going back five years when we didn't have to have publicly announced ranges. Subsequently, when we did ann... | 421 |
fomc | 1,980 | A midpoint of 1 percent? | 7 |
fomc | 1,980 | I'm sorry. As you can see, I'm getting punchy; the hour is late. Please don't record that. I agree with your [suggestion of] a midpoint in the general area of 5 percent for either M-1A or M-1B. I think the important thing is to demonstrate within the context of how serious this recession may turn out to be that, while ... | 127 |
fomc | 1,980 | Well, I'm torn here between the hour and having only three more names left. I'd rather like to get through the three names if we can do it with great dispatch. Mr. Rice. | 38 |
fomc | 1,980 | Well, Mr. Chairman, I don't see how we can look much beyond 1980. As a matter of fact, I would prefer not to look beyond the next 3 months. | 38 |
fomc | 1,980 | You'll have that opportunity tomorrow. | 6 |
fomc | 1,980 | But since we have to look at 1980, I would favor some moderate reduction in the rate of monetary growth for 1980. Since the M1 range we would be reducing from is 4-1/2 to 7-1/2 percent, [whose midpoint is] roughly equivalent to the rate of growth in the target for 1979, 3-1/2 to 6-1/2 percent would be an acceptable ran... | 261 |
fomc | 1,980 | By "leaning on it," you mean down? | 11 |
fomc | 1,980 | Down. I think it can be done without much harm. It will be a period when unemployment is still relatively low. So, I would argue for more restraint, or a rate of growth toward the lower end of the range over the next 3 months with the understanding as the year unfolds that higher rates of growth would be tolerable. | 68 |
fomc | 1,980 | Mr. Morris, are you feeling brief? | 9 |
fomc | 1,980 | Very brief, sir. I think we ought to be able to show a substantial reduction in our guidelines for [this] year, simply because it is [likely to be] a year of recession. It's a year when the demand for money is going to be down. And it's only in recession years, in my judgment, that we are going to be able to reduce the... | 247 |
fomc | 1,980 | Mr. Roos. | 5 |
fomc | 1,980 | First of all, if I may, let me commend the staff. I think the form of this Bluebook is the best I have ever seen. Maybe we will only keep it within our own family, but it enables us to make these decisions in the context of economic implications instead of just looking ahead for 2 or 3 weeks as we sometimes have in the... | 385 |
fomc | 1,980 | Mr. Schultz has promised me he can pronounce an interim benediction in 30 seconds. | 19 |
fomc | 1,980 | It's an uncertain world so we need all the flexibility we can get. We need at least a 3 percentage point range, with a midpoint of 4-1/2 to 5 percent, which would argue for alternative 2 or a half point higher. Longer range I agree that we'd be absolutely foolish to set specifics. I do think it's necessary that we say ... | 118 |
fomc | 1,980 | I very much appreciate your staying here until 6:30 p.m. I didn't give you much choice, I guess, but nobody vocally objected anyway. I think it was very useful to hear these preliminary expressions and to get this part of our agenda out of the way. We will proceed with Mr. Kichline's economic outlook when we all return... | 76 |
fomc | 1,980 | I guess I, or we collectively, neglected to ratify the domestic operations. Is there a motion to ratify the domestic operations? SEVERAL. So moved. | 34 |
fomc | 1,980 | Without objection they are ratified. While we're in the process of ratifying, why don't we hear about foreign currency operations. | 25 |
fomc | 1,980 | [Statement--see Appendix.] | 6 |
fomc | 1,980 | Questions? Comments? | 4 |
fomc | 1,980 | What in your opinion is likely to be the effect of the announcement this morning that OPEC is seriously going to pursue a basket of currencies? | 28 |
fomc | 1,980 | They've been discussing that off and on. Who announced it? If it was the Saudis and there's a general agreement, then it could lead to selling of dollars. But if it was the Kuwaitis or some research economist in one of these areas or newspapermen, it's unlikely to be [more than] a momentary blip in the market. | 72 |
fomc | 1,980 | It was a story that came out yesterday afternoon, I think, when you were probably still on the plane, Scott. And the Desk reported at that time, although it was on the ticker in the morning yesterday, that there had been no effect on the market. The nature of the story, as I heard it, was that some Arabian official had... | 158 |
fomc | 1,980 | According to page 4 of The Wall Street Journal, it was a West German newspaper reporter quoting Saudi Arabia's oil minister as saying that the currency basket appeared inevitable. | 33 |
fomc | 1,980 | That's the story we got yesterday. We've heard that before. | 12 |
fomc | 1,980 | Scott, in your Desk operations and your wanderings abroad, what's your sense of the direction of currency management on the part of the multi-nationals? Are they making any significant shifts? | 38 |
fomc | 1,980 | No, in fact they have been rather out of the market. They were a major factor early in December as they transferred some of their profits and earnings home. During the late part of the month and early this month, in our conversations with them, they said they just don't know which way to go. They're very nervous [about... | 173 |
fomc | 1,980 | Would you like to ratify the transactions? | 9 |
fomc | 1,980 | I move to ratify. | 6 |
fomc | 1,980 | Without objection they will be ratified. Do you have any recommendations, Mr. Pardee? | 19 |
fomc | 1,980 | Well, we are now getting into the phase of second renewals of swap drawings and I do need authorization. Some of the drawings relate to our operations last summer, in July. We have eight swap drawings in the amount of $335 million that are up for second renewal between now and February 14. I would like to recommend tha... | 87 |
fomc | 1,980 | Any discussion? Do we have a motion to that effect? | 12 |
fomc | 1,980 | I'll move. | 3 |
fomc | 1,980 | Second. | 2 |
fomc | 1,980 | Without objection we will approve that proposal. We turn to Mr. Kichline who has the unenviable job amid all of this uncertainty of giving us a prudent, considered, forceful, accurate view of the economic outlook. | 46 |
fomc | 1,980 | How about unambiguous? [Laughter] | 10 |
fomc | 1,980 | [Statement--see Appendix.] | 6 |
fomc | 1,980 | Did I understand you correctly that you're projecting domestic energy prices up 60 percent? | 16 |
fomc | 1,980 | That's correct. That refers to crude oil prices--the wellhead prices--not the total energy component. | 21 |
fomc | 1,980 | What were they up in 1979? | 9 |
fomc | 1,980 | Well, substantially less. I think for the year it was about 45 percent. | 17 |
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