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fomc | 1,980 | No, we did not. The exercises that we did, using the model, are presented in broad form in the Bluebook. We did not for this meeting go into any other alternatives, of which there are an infinite number of possibilities. | 48 |
fomc | 1,980 | Could you say what, let us say, 4 percent across the board would be? | 18 |
fomc | 1,980 | Well, we took 4-1/2 percent and 7-1/2 percent. And the results for the year are shown in the Bluebook. We did not use alternative paths that would have something like slow money growth and then fast money growth within the years. | 56 |
fomc | 1,980 | Mr. Winn. | 4 |
fomc | 1,980 | I get lost in the fiscal forest. For a number of years we had budget results in which expenditures fell below appropriations. To what extent is this going to be reversed? Plus the fact is that there is no reason why one can't anticipate next year's appropriations; orders [and] expenditures come later. And I don't quite... | 106 |
fomc | 1,980 | Let me just add to Willis' question. What are you assuming about special government measures or Home Loan Bank measures or whatever? | 25 |
fomc | 1,980 | We have built into the forecast government subsidized [housing] units of 300,000, which is pretty much in line with what the Administration talked about. That's 50,000 more than in the last fiscal year. | 45 |
fomc | 1,980 | It doesn't mean, then, that they are cranking up the tandem plan? MR. KICHLINE(?). Well, that's part of it, but it's not a major cranking up of the tandem plan. As you know, the budgetary impact there is quite variable; it depends on when the government sells those mortgages. It's an interest [subsidy] that ultimately ... | 256 |
fomc | 1,980 | I'm somewhat amazed at the amount of money that's suddenly showing up in Cleveland. I don't know if that's the subject of charity coming home or what but the money seems to be coming out of the woodwork for that sort of thing. I'm gathering that this is really going to mean that this year we're not going to have any ap... | 70 |
fomc | 1,980 | That could [mean] a very big difference in the federal spending. | 14 |
fomc | 1,980 | One of the aspects of this that is important, too, is the extent to which there is excess capacity in the defense industry that could take up a significant increase in defense spending. We learned again in the Vietnam conflict that we couldn't spend as fast as was budgeted because the factory wasn't there; they had to ... | 90 |
fomc | 1,980 | Related to that is the fact that inventories are rather tight and [are being carefully] watched in most of these special sectors. If we get any change in that area, we're going to see explosive prices and people scrambling for the short supply. My final comment is that I'm struck by the number of people who tell me the... | 142 |
fomc | 1,980 | I'd like to correct the response I gave Governor Coldwell. We did not assume a flat 6 percent quarterly money path. It's 6 percent QIV 1979 to QIV 1980; but in fact we have built into our current forecast about 5-1/4 to 5-1/2 percent growth in Ml in the first half of '80 and about 6-1/2 percent or so in the second half... | 92 |
fomc | 1,980 | But you didn't do any alternative scenarios? | 8 |
fomc | 1,980 | No. | 2 |
fomc | 1,980 | Are there any further comments on the business situation? If not, we'll turn to the decision we have to make. Just by way of background, and summarizing yesterday's discussion, I thought there was a good deal of skepticism expressed around the table about the idea of seeming too precise much beyond 1980. I do have some... | 310 |
fomc | 1,980 | [Statement--see Appendix.] | 6 |
fomc | 1,980 | In turning to this matter, let me just mention a couple of things. As Mr. Roos said yesterday, given the new technique we are using and all the complications of an annual and a short-term horizon, the Bluebook was put together admirably in my view. It does take a quarter's time horizon for this particular decision. Tha... | 96 |
fomc | 1,980 | The Committee on the Directive tried valiantly to get that put in a year ago without success. So we're happy. | 23 |
fomc | 1,980 | Well, it could be longer or it could be shorter, but it seems to be a tentative compromise anyway. | 22 |
fomc | 1,980 | Is it going to roll forward? | 7 |
fomc | 1,980 | Yes, presumably. I don't know whether we thought this all through, but I guess the presumption would be that in February we will have the next three months, if we continue in this framework. Now, that's-- | 44 |
fomc | 1,980 | But it would be related to the path. You wouldn't lose sight of the longer-run path. | 19 |
fomc | 1,980 | It will always be related against the-- | 8 |
fomc | 1,980 | We would continue to present the growth rates for the whole year as we go on. | 17 |
fomc | 1,980 | We thought of doing it for six months, but it's an arbitrary decision. | 15 |
fomc | 1,980 | The three months is starting January 1st through March 31st? | 15 |
fomc | 1,980 | December. | 2 |
fomc | 1,980 | December to March is the way you calculate it. | 10 |
fomc | 1,980 | I presented December to March, and we have in the text the quarterly average growth rates that are roughly consistent with it. | 24 |
fomc | 1,980 | Does it include December or does it not? | 9 |
fomc | 1,980 | December is the base. It's essentially the growth rates in January and February and March averaged. | 18 |
fomc | 1,980 | What is the difference? I didn't pick up on that. All these numbers you were giving here are the December-to-March figures. If you have 5 percent growth December to March, what does that make the quarterly average? | 46 |
fomc | 1,980 | The quarterly average is 4-1/2 percent. They're running about-- | 16 |
fomc | 1,980 | Just a little lower. | 5 |
fomc | 1,980 | Just a little lower this time. | 7 |
fomc | 1,980 | In Steve's comments he raised the question repeatedly about whether the Committee, in effect, has any preference as to how interest rates evolve during this period. You can have different points of view on that: That you don't care or that it's a very important question. I would think comments on that point are relevan... | 140 |
fomc | 1,980 | Mr. Chairman, I am concerned about what you alluded to as a thread that ran throughout Steve's comments indicating a continued concern about interest rates because interest rate movements would affect output one way or another. It seems to me--and I don't say this critically in your direction, Steve--that we did adopt ... | 207 |
fomc | 1,980 | The staff believes, I think--and I can't talk for everyone--that decisionmaking in the economy is affected by the level of interest rates and credit availability. On the other hand, the staff believes, or at least I do, that it's difficult for the Committee to make a priori decisions about the proper level of interest ... | 279 |
fomc | 1,980 | Let me just ask this. There has been reference made to the possibility that interest rates would drop. I noted with interest and with admiration the fact that the Chairman in a recent speech said publicly to the world: Don't be concerned if interest rates drop because under our new practices interest rates could concei... | 153 |
fomc | 1,980 | But, President Roos, to be very brief, I was simply addressing myself to the question--raising it for the Committee --of whether you want low growth of M1 in the first half and high growth in the second half or [vice versa] because the Committee has to make that decision, and there are certain implications. That's what... | 75 |
fomc | 1,980 | If I may say in this connection, Mr. Roos, I think we've got a spectrum over which we can operate. We used to operate with very tiny changes in federal funds rates from time to time, or between meetings certainly, and not very large ones even at a meeting. There is no doubt that we have changed; in my opinion, the emph... | 287 |
fomc | 1,980 | You don't have to recant in the presence of-- | 11 |
fomc | 1,980 | If I may follow up on this. The purpose of a money supply target presumably is to force wider swings in interest rates. If we stick to the same rate of money growth through expansion and recession, we'll get very wide swings of rates, wider than we've been willing to impose by acting a priori, as Steve said, on the int... | 133 |
fomc | 1,980 | Perhaps we could combine comments on this conceptual and theoretical point with practical comments on where we should put the money supply target in the next month. Mr. Eastburn. | 33 |
fomc | 1,980 | Well, I would like to respond to Steve's comments about the path of money growth. I think where we go on this depends on how smart we are. | 32 |
fomc | 1,980 | You're not assuming too much on that? | 8 |
fomc | 1,980 | My conclusion from listening to the discussion before is that we're really not all that smart as to be able to do that. And that forces me into the position that if we have as a long-range strategy a gradual reduction of money growth, we ought to figure out where we want to start and pretty well stick to that. That put... | 159 |
fomc | 1,980 | Mr. Coldwell. | 5 |
fomc | 1,980 | Well, Mr. Chairman, it seems to me that the direction we're working on here is to lower the [growth in the] monetary aggregates. I would accept alternative C, for which you have growth of 4 percent. I'd be willing to accept a range around that, although I'm not sure how this is all working out with single points versus... | 316 |
fomc | 1,980 | We got 3 percent from September to December and 4.9 percent, I think, for the quarterly average. | 24 |
fomc | 1,980 | Yes. | 2 |
fomc | 1,980 | Just for purposes of clarification, Governor Coldwell, when you began talking about a range, is that merely a reflection of our frailties in achieving the number or do you have something in your mind about interest rates, let's say? | 47 |
fomc | 1,980 | Well, I was coming to that, Mr. Chairman. The range I put down was partly because of our frailties in achieving a number, and I'd give the Desk a little guidance rather than just leave it to the Manager to make some ad hoc decisions on it. But it also reflects some interest in the interest rate package. Contrary to Mr.... | 149 |
fomc | 1,980 | Mr. Black. | 4 |
fomc | 1,980 | As I indicated yesterday, Mr. Chairman, my preference on the long-run targets would be to go mainly with M-1B. It increased at a 7.3 percent rate last year and I think 6 percent is a reasonable rate for [this year]. If the relationships set forth over the next year between the old M1 and M-1B hold in the future, this w... | 493 |
fomc | 1,980 | Governor Partee. | 4 |
fomc | 1,980 | I'm pretty sympathetic with Dave Eastburn's comments. I think fine-tuning is difficult in practice, and I would point out that the main misses that we've had have been large misses. That is, it really isn't that we expect 5 percent and get 4 percent. We expect 5 percent in a month and get zero or a minus; or we expect ... | 193 |
fomc | 1,980 | Yes. | 2 |
fomc | 1,980 | We would specify it in current terms. I like the 5 percent of alternative B, partly because that would give us 4-1/2 percent for the quarter which, if we get it, will be on the moderate side from the standpoint of the ranges that we choose for the year. I would be willing to tolerate a little shortfall from that 5 perc... | 324 |
fomc | 1,980 | Mr. Kimbrel. | 6 |
fomc | 1,980 | Mr. Chairman, I continue to be concerned about the expectations and realities of our price level and about the possibility of the influence we can have on our exchange rate frailties at the moment. I'd be very anxious to reaffirm our posture, a posture that would indicate a continuing steady move to a general reduction... | 142 |
fomc | 1,980 | Mr. Mayo. | 4 |
fomc | 1,980 | Mr. Chairman, I want to make a couple of points. First of all, I want to agree with Dave Eastburn's philosophy of not monkeying around with fine-tuning among the quarters. This makes us think we are smarter than we are, among other things, to use his language. The purpose here is to set a long-term range and, unless we... | 908 |
fomc | 1,980 | Mr. Baughman. | 6 |
fomc | 1,980 | Mr. Chairman, it seems to me that the targets set out in alternative C have a good probability of coming pretty close to serving the needs of the environment as they unfold in the next couple of months or so. I've been rather impressed with the observation through time and in conversations here that we can't have much ... | 200 |
fomc | 1,980 | Mrs. Teeters. | 5 |
fomc | 1,980 | Well, I want to ask a question first. Your economic forecast is based on a 6 percent rate of [money] growth. If you take the rate of growth of money down another full percentage point, what does that do to real growth and to the unemployment rate? | 55 |
fomc | 1,980 | You did assume that the rate of growth in money would be slower in the first half of the year? | 21 |
fomc | 1,980 | Yes. The staff forecast is based upon the money path of alternative 1 on page 15 in the Bluebook, which is 6 percent for the year. It's slower in the first half--I think it's around 5-1/2 percent and then 6-1/2 percent in the second half--but the short-run path consistent with that is alternative B. | 77 |
fomc | 1,980 | What happens if you reduce that path by a full percentage point? | 13 |
fomc | 1,980 | Do you mean for the long-run target or the short-run target? In the short run, if you stuck to the 6 percent target mentioned and simply altered the money path for one quarter and then picked it up the next quarter, it really wouldn't have a significant impact on inflation or real GNP. | 61 |
fomc | 1,980 | Governor Teeters, there's a degree of fine-tuning in the numbers here that has to be taken with a grain of salt. But on page 25 in appendix C, if you reduce that 5 percent to 4 percent and still aim at something like 6 percent M1 growth, which is what Jim's assumption is--that's the third column under alternative C --y... | 165 |
fomc | 1,980 | I'm not sure I got a [complete] answer. My inclination is that if we cut [money growth] below the 6 percent that's in the forecast for the year, we'll have a more severe recession on our hands as we keep the interest rates up. I have a great deal of sympathy with Dave Eastburn's point of view that we should stick to a ... | 366 |
fomc | 1,980 | Mr. Timlen. | 5 |
fomc | 1,980 | My preference, Mr. Chairman, is for alternative C. I think it's consistent with efforts to reduce the growth in the aggregates over the year 1980 and also consistent with the [view] that the basic economy may be slowing in the first quarter. I think it would have an important impact on inflationary expectations and hel... | 181 |
fomc | 1,980 | Governor Wallich. | 4 |
fomc | 1,980 | Well, I continue to think that the economy moves on interest rates. If I rely on the money supply, it's because in [a period of] inflation I think that's a better way to get the right interest rates than to try to do it outright. But I don't regard the money supply as a black box where I have to accept everything that ... | 130 |
fomc | 1,980 | With able help. | 4 |
fomc | 1,980 | With able help from various-- | 6 |
fomc | 1,980 | We really brought the real rate of inflation from about 7 percent to 10 or 11 percent, Henry. | 23 |
fomc | 1,980 | Well, we can argue about the numbers, but [inflation] has gone up while the growth of the money supply as we define it has gone down. So I lean toward the tighter side for the long term, alternative II. And within that framework I lean toward alternative C in terms of the old definitions of money. I don't care whether ... | 184 |
fomc | 1,980 | Henry, did you say you would change the top of the funds range to 16 percent? | 19 |
fomc | 1,980 | To 16, yes. And the bottom to 12. | 13 |
fomc | 1,980 | Mr. Willes. | 5 |
fomc | 1,980 | Thank you, Mr. Chairman. It's amazing to me how I can have such a fundamentally different view about how the world works than Chuck Partee and yet find that he stated my policy position much more eloquently than I could ever state it. Whatever you wrote down for Dave Eastburn and Chuck Partee, write down for me and tha... | 117 |
fomc | 1,980 | I'm not arguing against that, but I think we should indicate a dominant preference. | 16 |
fomc | 1,980 | I don't think we have enough information. | 8 |
fomc | 1,980 | We will [indicate our preference] in the Policy Record, certainly. | 15 |
fomc | 1,980 | We are forced to do it. Let's be proud and carry the flag and not say we don't know but maybe this is the better of the two. I see us being too academically sound, if I can put it that way, rather than carrying leadership for a figure. And if we can't carry that leadership, nobody can. | 65 |
fomc | 1,980 | Mr. Morris. | 4 |
fomc | 1,980 | Mr. Chairman, I think alternative B looks good, even though I came out yesterday for a 4-1/2 percent midpoint. I feel that if we are going to bias the flow during the year, it ought to be the opposite of what most people have been saying. I think the rate of growth in the early part of the year ought to be greater and ... | 151 |
fomc | 1,980 | You hope to produce a more saucer-shaped than V-shaped one [and would] increase the money supply more rapidly in the first part of the year and less rapidly in the second part. | 38 |
fomc | 1,980 | Right. Traditionally, following our earlier policies, we have supplied very little monetary growth in the early part of a recession. We have encouraged a sharper decline in the economy thereby. We lagged in reducing interest rates and then when the unemployment rate got really high, we turned around and produced very r... | 91 |
fomc | 1,980 | May I interrupt, sir? Don't you think the shape or the depth of the recession is already determined now? | 22 |
fomc | 1,980 | It probably is, largely. I'm not suggesting that we can-- | 13 |
fomc | 1,980 | So what we do now-- | 6 |
fomc | 1,980 | It's just that to the extent we have to make a decision, it ought to be biased in this direction. But I'm not under any illusions that we can fine-tune this thing. | 37 |
fomc | 1,980 | I don't believe that anything we do today is going to make the recession more saucer-shaped or more V-shaped. | 23 |
fomc | 1,980 | Well, the second part of it could affect the character of the recovery. | 15 |
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