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fomc | 1,980 | What would happen though, Mr. Chairman, if you were asked in your testimony whether this was unanimous? How would you answer [if] we didn't take a vote? In other words, there is a difference of opinion, I'm sure, on this '81 situation. How do we resolve that in terms of reporting to Congress? | 66 |
fomc | 1,980 | We talk in terms of consensus. | 7 |
fomc | 1,980 | Why don't we see how close we can come to a consensus? If we can get a strong enough consensus, maybe we'll take a vote; if not, we-- | 33 |
fomc | 1,980 | There's no doubt that I have to be able to say it's a consensus. Now, I don't know if we have to take a formal vote to say it's a consensus. | 34 |
fomc | 1,980 | After all, the very fact that it's a fairly general statement and a very preliminary one makes it more logical that it was a consensus view rather than a vote. | 32 |
fomc | 1,980 | Well, [not having] a vote doesn't say it wasn't a consensus. [Whether or not] we're voting, that's what this is. | 28 |
fomc | 1,980 | Yes, but it's not as [unintelligible]. | 12 |
fomc | 1,980 | If we try to sharpen this pencil too much, we're going to be voting on what words you use in the testimony. I think this is getting ridiculous. | 31 |
fomc | 1,980 | That's right. I'd like to stop short of that, frankly. | 13 |
fomc | 1,980 | Yes, I think this is putting the Chairman in a very peculiar position. | 15 |
fomc | 1,980 | I really thought we had enough agreement in substance to leave the drafting of the words to you and the staff, Mr. Chairman. | 26 |
fomc | 1,980 | I'm happy to accept that view without even introducing the complications that can be quibbled about. If it is the consensus that it can be left to the staff and myself and the understanding is that it's-- | 41 |
fomc | 1,980 | As long as you don't commit us to lowering the ranges. | 12 |
fomc | 1,980 | On that we want a vote. | 7 |
fomc | 1,980 | Do you accept that we will try to lower the ranges but that the announced-- | 16 |
fomc | 1,980 | No, I don't, Henry. I'm really not committed to that. | 14 |
fomc | 1,980 | It's not "committed." [The Chairman] will use that earlier language that we talked about. | 20 |
fomc | 1,980 | I'm not sure I even want to try to lower them. | 12 |
fomc | 1,980 | Obviously there are some, Nancy, who are committed to a consistent lowering [of the ranges]. So how do we-- | 24 |
fomc | 1,980 | No, we are not committed to a consistent lowering. | 11 |
fomc | 1,980 | He said some of us are. | 7 |
fomc | 1,980 | I said there are some. | 6 |
fomc | 1,980 | Some of you are, but I'm not, frankly. | 11 |
fomc | 1,980 | And how is that difference--the fact that it isn't unanimous one way or the other--described in the record? | 24 |
fomc | 1,980 | It seems to me that we could say we will work toward lowering the ranges. Whether this will be possible and to what extent can only be determined in the light of the circumstances that we meet then. That wouldn't be a commitment as far as you're concerned. | 51 |
fomc | 1,980 | That's further than I want to go, Henry. | 10 |
fomc | 1,980 | Couldn't we put out a statement which said that it's the consensus of this Committee that policy in 1981 is going to aim toward contributing further to a reduction in inflation. With that in mind, the Federal Reserve will adopt its specific targets for the aggregates at the beginning of next year, but the objective wil... | 112 |
fomc | 1,980 | Yes, but that's saying almost nothing. | 8 |
fomc | 1,980 | I agree, but I think maybe we can get away with that. | 14 |
fomc | 1,980 | Inflation would probably rise next year. | 8 |
fomc | 1,980 | He will be asked the question of whether that means lower numbers. | 13 |
fomc | 1,980 | Well, then he can talk about the technicalities of M-1A and M-1B and so on during periods of-- | 27 |
fomc | 1,980 | Do we have to reflect unanimity on this? | 10 |
fomc | 1,980 | No, I don't think so. We'd like to have it all the time but if there's a real difference of opinion, I think we're stuck and we just don't reflect unanimity. | 36 |
fomc | 1,980 | Well, I'm afraid there is [a difference of opinion]. | 12 |
fomc | 1,980 | I [suspect so], too. I don't think this [draft language] quite does it, Steve. It talks a lot about the technological complications, which I think should be in the statement someplace, but it doesn't seem to me to reflect adequately the views of all the members of the Committee in that there is a real uncertainty invol... | 79 |
fomc | 1,980 | I was a little afraid that would argue strongly against lowering [the ranges]. It makes it very clear. | 21 |
fomc | 1,980 | Couldn't we adopt Governor Schultz's earlier suggestion? Could we agree on that--that we all want aggregate targets for 1981 at or below the 1980 ranges? | 34 |
fomc | 1,980 | Well, I would hope that that's a minimum we could agree upon. The real [problem] is that I am not sure that's right. I'm not sure that goes far enough for some people. I admit the difference isn't very large but I suspect it's real. And the only way I can see going further--just to try again out loud--is to say it is t... | 145 |
fomc | 1,980 | Doesn't this get us to the nub of the whole philosophical issue of whether we put a greater priority on reducing inflation and enduring a certain amount of pain or bitter medicine--which are words we've all used regarding that process--or whether we will opt, if push comes to shove, for bringing relief to the economy a... | 78 |
fomc | 1,980 | Well, that is part of it. The other part is how much one is persuaded about monetarist doctrine in general. I think those two considerations are entering in here, which makes it difficult. | 40 |
fomc | 1,980 | I don't know if you hear this, Mr. Chairman, or if it is just a product of where I live and work. But we hear constantly the overpowering, almost pleading, request from the groups we bring in, including labor leaders: "For heaven sakes, do what is necessary to bring down inflation, even if it means high unemployment fo... | 94 |
fomc | 1,980 | Well, it's easy to be influenced by the short run, and I recognize the trap that we can conceivably get into next year. But I feel uncomfortable right at this stage. It seems to me that it's perfectly illustrated by this [Proxmire] resolution, which presumably I have to support, however lukewarmly. If we come out with ... | 112 |
fomc | 1,980 | Can't we put it in terms of not really knowing what is going to happen in the next six months? | 21 |
fomc | 1,980 | Well, I'm willing to go so far [and make] the kind of statement I just made: That while this is our general intention, specifically how far or whether we can do it in 1981 remains to be seen. Nevertheless, our bias is in that direction. | 55 |
fomc | 1,980 | Can't we even say that the Committee is committed to bringing the money supply growth down to non-inflationary levels over time and that for 1981 we will have the monetary aggregates generally at or somewhat below the figures for 1980 depending upon conditions in the economy? | 55 |
fomc | 1,980 | But you're getting yourself into a box, Fred. We've been bringing the rate of the money supply growth down for the past four years and inflation has been going up. What is a non-inflationary rate of growth in the money supply? | 49 |
fomc | 1,980 | There's a lag though, Nancy, isn't there? | 10 |
fomc | 1,980 | We don't know; we will keep bringing it down until we find out. | 15 |
fomc | 1,980 | We don't know. | 4 |
fomc | 1,980 | It must be lower than what we've had. | 9 |
fomc | 1,980 | Or we have to do it longer. | 8 |
fomc | 1,980 | Mr. Chairman, if we don't at least hit that lower part of the ranges--and in fact if we begin to report month by month what the market is apt to perceive as pretty rapid [money growth] rates--I think we will have an extremely severe credibility problem. | 55 |
fomc | 1,980 | Say that again. | 4 |
fomc | 1,980 | I'm saying that during the next few months, if [money] growth comes anywhere near what we're projecting, as we approach the midpoint of the target range we're apt to have a problem if we don't explain very carefully that we're just trying to get growth back up within the target range. If we do that and then when Paul t... | 113 |
fomc | 1,980 | Just to get to the substance, whatever the exact words are, my own feeling is pretty strong that we have to say something about a bias toward lowering the ranges next year. I'm willing to put in an escape hatch that says in the end it may not be possible. But there has to be some minimal expression of a bias in that di... | 160 |
fomc | 1,980 | Yes, but even with a 4-1/2 percent rate of growth in the money supply we'd have a very anemic recovery. | 28 |
fomc | 1,980 | I know, but it's still all a projection too, and-- | 13 |
fomc | 1,980 | I find it ironic that we've reached agreement fairly quickly on 1980 and the next quarter and we're having so much trouble on the longer term with very general language. We basically have had three points of view expressed. There are those who would like to say simply that we'll be reducing the aggregate targets next y... | 147 |
fomc | 1,980 | I'm inclined to think that we're probably going to have to--or maybe should--end up with a vote. What I would propose is that we put together what you describe as the middle ground, indicating a bias but with a caveat. I can circulate the language and get a reaction to the precise language. If you don't want to bias it... | 161 |
fomc | 1,980 | Mr. Chairman, if we expressed the intention to reduce the aggregates next year and conditions in February were such that it was just unreasonable, couldn't we take our action at that time instead of expressing the caveat and reluctance now? After all, this is purely a projection. If conditions deteriorated to where we ... | 95 |
fomc | 1,980 | Sure. We can do anything in February we want to do in the end. This obviously biases what we do in February. I'd just like to get a showing of hands on this and maybe [consider] some kind of voting procedure. We don't want to take a formal action, or a final action anyway, right now. I will circulate some language in a... | 175 |
fomc | 1,980 | You can try another caveat in that we really don't know what fiscal policy is going to be; that's still a wide-open area. | 27 |
fomc | 1,980 | Sure, that can be implied, too. | 9 |
fomc | 1,980 | Paul, there's another phrase you might want to use and that is: "It's the present intent of the Committee..." | 23 |
fomc | 1,980 | Well, let me worry about the precise language. It will be circulated. Do I capture a sufficiently wide area of Committee opinion to make this the likely candidate to be worked on, subject to fiddling around with the language? | 45 |
fomc | 1,980 | So long as it's not assumed that this is our expectation. | 12 |
fomc | 1,980 | Well, you'll have to judge that in itself in the end. Some people may want to [express] a different opinion. I'm trying to say something here, though not very much. I'm trying to express a bias without locking us into it. That's the intention. | 53 |
fomc | 1,980 | Yes. I don't want to be faced in February with having it said that in July I promised to do this. | 23 |
fomc | 1,980 | I think it's clear that nobody is going to be faced with something like "I promised to do it." But I still want to maintain the bias. I sense that that's likely to capture the biggest number and come as near to a consensus as we can get. It may be a complete consensus. Is that right? Is that near a consensus? | 69 |
fomc | 1,980 | I can go with that. | 6 |
fomc | 1,980 | That seems to be the case, so let's operate [on that assumption]. We'll get some language out before the end of the week and have some form of assent or vote or something so that I can say that it's a consensus of the Committee. Okay. Does that complete the meeting? | 57 |
fomc | 1,980 | There's just one minor technical presentational point, which I think is worth calling to your attention. The way the operational paragraph has been drafted, by putting M2 for the first time down at the bottom of the paragraph instead of saying M-1A, M-1B, and M2, it will give the markets the impression that we're downg... | 94 |
fomc | 1,980 | It's not the first time. This is a reversion to what was the regular practice until the last meeting. | 22 |
fomc | 1,980 | It was not intended to downgrade M2, I take it? | 13 |
fomc | 1,980 | No. | 2 |
fomc | 1,980 | Up until the last meeting it was done that way? | 11 |
fomc | 1,980 | It was changed at the last meeting because there were no numbers in the directive at the last meeting. We simply have reverted to what has been the practice. | 31 |
fomc | 1,980 | I had the same question Tony did when I glanced at it. But if it was just a reversion to what was done in all the meetings up until the last one, I don't think it's a-- | 41 |
fomc | 1,980 | If in fact we're going to give M2 some weight in the decisionmaking process, then I think Tony's suggestion ought to be considered. Maybe we ought to put it in the body of the operational paragraph instead of hanging it on the end. | 49 |
fomc | 1,980 | We're going to give it some weight, yes. I can do it either way. I don't think it's important that we've always done it the other way. I would go along with that; it's probably slightly better. This is just a question of whether we list M2 along with the M1s. Is that agreeable? Okay, the only other item on the agenda i... | 85 |
fomc | 1,980 | What about the forecasts? | 5 |
fomc | 1,980 | Oh yes, thank you--the forecasts. Do you want to hand those [tables] out? I don't know that we have to spend a lot of time on this but we'll see. | 38 |
fomc | 1,980 | You're just trying to get the range, right? | 10 |
fomc | 1,980 | I'll show you. Do you all have copies? | 10 |
fomc | 1,980 | No, they're down at that end of the table. | 11 |
fomc | 1,980 | What we've done, as you will see, is to take the numbers that you submitted and that the Board members talked about. The Chairman exerted his prerogative of not putting down precise numbers. But we've divided it up to give a little sense of [the views of] the Board members, the voting Presidents, and the non-voting Pre... | 444 |
fomc | 1,980 | Are you likely to be asked the question-- | 9 |
fomc | 1,980 | Excuse me, Nancy, but while I think of it, the most important question presentationally seems to me whether we present these forecasts with no tax cut, with a tax cut, or both. I am afraid, frankly, of just presenting a projection which says "with a tax cut" because I don't know how to avoid the implication that the Fe... | 140 |
fomc | 1,980 | Also, if we do it both ways, one can subtract and see what the effect of a tax cut is. | 23 |
fomc | 1,980 | If we do it both ways [the questions is] why not have the tax cut. It's as if all these projections surely show: Mirabile dictu! If we have a tax cut, we get more growth and no more inflation, and anybody except a damn fool would have a tax cut. In fact, instead of a $30 billion tax cut, why not make it $60 billion bec... | 88 |
fomc | 1,980 | Yes, why not make it twice as big? | 10 |
fomc | 1,980 | Paul, I would suggest that we present projections assuming no tax cut and then go on to say that if there is a tax cut of, let's say, $25 to $30 billion, then the picture would change. How it would change depends upon the composition and the timing of implementation because that makes an enormous difference as to how m... | 106 |
fomc | 1,980 | Well, I would prefer to approach it the way you are approaching it. But how does one handle this question? It sticks out even more sharply than it otherwise sticks out that our projection is for an extremely sour business picture and a very high unemployment picture for another 18 months, so why aren't we using policy-... | 64 |
fomc | 1,980 | The question you're going to get on this, regardless of how we present it, is how much of this is due to the difference in our fiscal policy assumption and how much is still due to the difference in our monetary policy assumption, because the CEA has a much easier monetary policy assumption than we have. That could be ... | 79 |
fomc | 1,980 | Is the CEA assuming an easier monetary policy or do they have a different assumption as to that wonderful demand shift that's-- | 24 |
fomc | 1,980 | Oh, they have lower interest rates. | 8 |
fomc | 1,980 | 6 percent. | 3 |
fomc | 1,980 | They have lower interest rates. How do they get them? | 12 |
fomc | 1,980 | The public projection that goes up to Congress has an interest rate forecast now that's purely fictitious. That is, they are using a rule of thumb which says that for interest rate projections we will adopt the rule that real interest rates are unchanged. That [procedure] was adopted two years ago when they had to disc... | 120 |
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