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fomc
1,980
Well, the figures are supposed to be the same. I don't know how to--
17
fomc
1,980
Yes, but M-1B has the most potential for fluctuation.
15
fomc
1,980
But M-1B has the most long-run potential. M-1A, if you read it as "MIA," is "missing in action."
32
fomc
1,980
M-1B is "misinformed bunch."
11
fomc
1,980
It seems to me that the logical thing, without getting into tiny fractions, is either to do the Balles approach or the reverse of the Balles approach, which is about as much of a compromise as one can get, retaining the wider ranges. Now, that avoids quarter percents on either the midpoints or the outside [limits of th...
87
fomc
1,980
In the interest of simplicity, I am prepared to shift my vote to alternative III.
17
fomc
1,980
The trouble with alternative III--frankly, I have no particular problem with it--is that it's going to make some people more unhappy than any of the other alternatives.
35
fomc
1,980
But only 1/2 of 1 percent were unhappy!
13
fomc
1,980
There's a multiplier here, Paul.
7
fomc
1,980
Let me put it this way: It makes me unhappy but in the spirit of unanimity I would change my vote and go with alternative III.
29
fomc
1,980
It's a full percentage point drop in the growth rates from last year. Doesn't it mean that we're going to have an increase of 2 percentage points in the unemployment rate and no change in interest rates?
40
fomc
1,980
That's probably right.
4
fomc
1,980
Where are interest rates in [that scenario]?
9
fomc
1,980
Well, I surely share [that concern] with you.
12
fomc
1,980
Even taking all the probabilities in the staff estimate, the likely rate of [GNP] growth is between .8 and -2.2 percent. That is just not a very good economy, gentlemen, to have 12 percent interest rates.
49
fomc
1,980
But, Nancy, on the other hand, we'd get a rise in the rate of inflation.
19
fomc
1,980
We're going to get that anyway, Henry, from OPEC over the first three months of this year.
21
fomc
1,980
If we're going to get it anyway, you better be down where I am.
16
fomc
1,980
Actually, alternative III, you have to remember, is much more lenient than where Governor Coldwell would like to be. So that--
28
fomc
1,980
Associate me with that, too.
7
fomc
1,980
Of course, he won't be here to--
9
fomc
1,980
No, I am going to be out in the ranks of the unemployed with fixed incomes to pay the price--
22
fomc
1,980
Well, I would recommend to you the Balles position. But if you're bound and determined to go to alternative III, we'll go to alternative III. Let's try Balles once more.
37
fomc
1,980
I'm not going to vote for it this time.
10
fomc
1,980
Things are coming my way!
6
fomc
1,980
How many did you get? What was the count?
11
fomc
1,980
Five. MR. PARTEE &
7
fomc
1,980
Five; we've lost one!
6
fomc
1,980
Well, I tried, Mr. Chairman.
9
fomc
1,980
That's the end of Balles, et al.
10
fomc
1,980
The "et als" are still around.
9
fomc
1,980
My next move would be to alternative III.
9
fomc
1,980
With great reluctance, I will try "III."
11
fomc
1,980
Nine, Mr. Chairman.
6
fomc
1,980
It is a mistake.
5
fomc
1,980
Why, Paul? What's your principal reservation about it?
11
fomc
1,980
My reservation is not the substance of it, but that I don't think it correctly gets to the midpoint of the range of opinion.
26
fomc
1,980
Well, go back and try the Schultz approach again. That looks to me as if it buys a good share of those of us who are concerned about--
31
fomc
1,980
By the Schultz approach you mean just reversing--
9
fomc
1,980
Reversing the Balles points.
8
fomc
1,980
Oh, I am perfectly happy to do that. Let's try that one.
15
fomc
1,980
Take M-1A and M-1B of "III" and M2 and M3 of "II."
24
fomc
1,980
Let's see whether that captures--
6
fomc
1,980
Seven.
2
fomc
1,980
Seven? Doesn't it make you two even a little happier?
12
fomc
1,980
A 4-1/2 percent rate of growth for Ml? No.
16
fomc
1,980
Well, if that's the case, we better stay with alternative III.
14
fomc
1,980
I think everyone is stuck on III; that's okay.
11
fomc
1,980
So, it's alternative III?
6
fomc
1,980
How would the chair vote?
6
fomc
1,980
Yes.
2
fomc
1,980
You would vote for it?
6
fomc
1,980
Well, I'll vote for alternative III if that's what everybody wants to vote for. I don't see the significance in the 1/2 percentage point difference that some other people apparently see.
37
fomc
1,980
Well, I don't either, but it takes me a whole point [lower].
16
fomc
1,980
Oh, I understand.
5
fomc
1,980
Mr. Chairman, is the staff to assume that in making its GNP projections, it should take the 4-1/2 percent rate of growth for M-1A as a center point? That is a lower rate of growth than we had.
52
fomc
1,980
I presume that in some sense that must be the implication.
12
fomc
1,980
You realize we're already in trouble in terms of being in conformity with the Administration's forecast. At least you have to do the testifying on Humphrey-Hawkins. We're already inconsistent; this is making it worse.
44
fomc
1,980
The President has given up on Humphrey-Hawkins for this coming year anyway. He moved out [the time period in which to reach the objectives].
31
fomc
1,980
He may have moved it out but the Administration's forecast is markedly different. And we will have to go up to the Hill and say we're going to keep money so tight that there is no way that the Administration's forecast can be realized. That's about what it comes down to.
56
fomc
1,980
I am really much more concerned about M2 and M3 than I am M-1A or M-1B because at these interest rates and these inflation rates I am very unsure of the connection between the two. And I think there is going to be a demand shift this year. The staff indicates that they can see no indication yet, but--
71
fomc
1,980
[It can] hardly be bigger than it was last year. We already had a great big demand shift in the recorded figures for last year. For M-1B, which I think a lot of people would support as the better redefined money, our midpoint will be 3 points below what we realized last year. Three points!
68
fomc
1,980
Well, that figure is a little artificial because we had the shift into ATS and NOW accounts.
19
fomc
1,980
This is a question of fact, Mr. Chairman. What impressions do you have as to whether the Congressional Committee considers the ranges as having a very strong implication that we'll move toward the midpoint? I haven't gathered that that was true in the past; we have ranges with the precise idea of being flexible. In-hou...
99
fomc
1,980
I can't answer that question. It probably implies a degree of sophistication on the part of Congress that is beyond any generalization.
25
fomc
1,980
There seems to be a feeling around the table here that if we adopt alternative III, we're struck with the midpoints. I don't think we are, frankly.
32
fomc
1,980
What else is the Desk going to aim for?
10
fomc
1,980
What's the purpose of having the range?
8
fomc
1,980
We'd certainly have a tendency right now to aim for the midpoint, not knowing anything else. That's pending further information.
24
fomc
1,980
That is true in the short run, Paul, but as the year moves on, we have that flexibility. We just finished using it the last time.
31
fomc
1,980
Yes, in the short run.
7
fomc
1,980
We sure did.
4
fomc
1,980
Mr. Chairman, I don't know if this will be helpful, but one possibility--in the spirit of what has been discussed --is to take the 3-point ranges for M-1A and M-1B of alternative II and to lower the top ends of M2 and M3 by 1/2 point.
66
fomc
1,980
Well, I was going to suggest the opposite. If there's more of a concern about M2 and M3, maybe we should take a 1/2 percentage point off the top of the M1 ranges.
43
fomc
1,980
Then you have more substitutability among the deposits?
11
fomc
1,980
And it leaves us a little more leeway on M2 and M3.
16
fomc
1,980
I'd go for that.
5
fomc
1,980
Presumably they are, theoretically, a little more volatile anyway.
13
fomc
1,980
2-1/2 to 5-1/2 percent on M-1A?
19
fomc
1,980
No.
2
fomc
1,980
[For M-1A] 3-1/2 to 6 percent--a compromise between alternatives II and III on both the Mls.
31
fomc
1,980
All right. I'd go for that.
8
fomc
1,980
And 4 to 6-1/2--
11
fomc
1,980
It's 4 to 6-1/2 percent on M-1B, which is probably going to have to be revised anyway.
28
fomc
1,980
I'd be happy.
4
fomc
1,980
And leave the 6 to 9 percent and 6-1/2 to 9-1/2 percent [for M2 and M3, respectively].
34
fomc
1,980
What was M-1A, please?
9
fomc
1,980
3-1/2 to 6 percent. And M-1B is 4 to 6-1/2.
26
fomc
1,980
What about M2 and M3?
8
fomc
1,980
They're the same as in alternative II.
8
fomc
1,980
There's something wrong.
4
fomc
1,980
There's a bit of logic in it, I think.
11
fomc
1,980
That's logical, and I like that.
8
fomc
1,980
Just a comment on that, Mr. Chairman: The reason I was turned off by alternative II for M2 and M3 is that if we went for the upper end of that range, which I presume we could, that would result in no decrease at all in the growth rates of those two magnitudes for 1980 from what we experienced in 1979.
74
fomc
1,980
If we go right to the top.
8
fomc
1,980
We also have to recognize that they're rather uncontrollable by us with money market funds and Eurodollars and Caribbean dollars and RPs in there.
29
fomc
1,980
We lose that visual effect, but it's getting argued that the economics are a little against us in terms of the uncertainty and it gives wider ranges. I think there's a certain sense in doing that. It has the disadvantage that--
45
fomc
1,980
So the midpoint on M-1A would be 4-3/4 percent?
18
fomc
1,980
That's right. [Unintelligible] mislead with that quarter percent.
16
fomc
1,980
That's just raising it, on average, because the lower ends don't really mean anything.
17