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fomc | 1,977 | All right, thank you. Mr. Mayo. | 10 |
fomc | 1,977 | Well, I was on the same track as Frank--I think this is an absurdity in the [sense that] it causes people to suggest, when they hear the explanation, that we are all nuts down here. It isn't even clear--even if we say it's washed out, well, we are saying it really isn't washed out because it makes a difference in the w... | 165 |
fomc | 1,977 | You're quite correct. I meant that the level of the money stock is not higher after mid-July, but on average you are talking about-- | 29 |
fomc | 1,977 | But on average it is, and so that enters in--to put this absurdly, perhaps--this enters in to maybe 1/10 or 2/10 of 1 percent higher money supply growth for the entire year , or an annual rate of 2-1/2 for the month of July. And so we should theoretically set our long-term target ranges one-tenth or two-tenths higher f... | 117 |
fomc | 1,977 | I don't think it makes the average figure for the year higher, because the rate of change in August would be lower because of this. | 27 |
fomc | 1,977 | Not necessarily. If you are a Social Security recipient and you have that money two days earlier, you have an average balance of cash for the month of July that's higher than it would otherwise be, right? It hasn't anything to do with August, September, or any other month. But it's an absurd economic practice. | 63 |
fomc | 1,977 | A billion and a half dollars for two days can't affect the annual average by even 1/10 of 1 percent. | 25 |
fomc | 1,977 | It affects the monthly average by 2-1/2 percent, Paul. Now, what I'm concerned about is the expectation in the marketplace that, by God, the money supply is exploding on us again. | 42 |
fomc | 1,977 | Let's be careful; we are not talking about the explosion, we are talking about-- | 17 |
fomc | 1,977 | We are talking about very big increases in the first week of July, Mr. Chairman--about $3 billion. | 23 |
fomc | 1,977 | We are talking about a difference between 5.8 and 8.2, and that is well within the normal margin of error of the seasonal calculation. | 32 |
fomc | 1,977 | That's for the month. I think Frank's talking about the first week. | 15 |
fomc | 1,977 | Well, that's true, for the first week it will be very much bigger. | 16 |
fomc | 1,977 | Well, I think Paul's got the right idea; you just emphasize it in the statement. If you start to adjust your statistics ad hoc, there is a question of credibility: "Why are you doing that? Because you didn't want to show a large increase?" | 52 |
fomc | 1,977 | We do this for the industrial production index when we have a special factor. | 15 |
fomc | 1,977 | Well, I know, but I have always been a little nervous about that. | 16 |
fomc | 1,977 | The difference there is that it's been done for years, and therefore it's a respectable procedure by now. | 20 |
fomc | 1,977 | Well, the other special factors from time to time--when we have to do the same for each of them, in the end, then we find that the money supply throughout the year grows at 5.5 percent. | 45 |
fomc | 1,977 | Seems to me [that] protestations about people who have watched our money supply figures and immediately translate them into market actions are contradictory in the sense of the subject we are now discussing. If we are really going to tell the world to stop worrying about weekly fluctuations, we ought to think a long ti... | 96 |
fomc | 1,977 | All I'm suggesting, Steve, is that we have a good seasonal adjustment instead of a lousy one. | 20 |
fomc | 1,977 | Well, I would suggest that we might discontinue the seasonally adjusted weekly figure as of the first week of July and give this as a reason. There are so many odd things affecting that seasonal pattern, that we are going to stop seasonal adjustment. | 49 |
fomc | 1,977 | I think we have to be very careful about that. A campaign is being waged against the Federal Reserve now by some economic and statistical quacks. And for us to discontinue the seasonal calculations would, I think, be a concession on our part, which I am not ready to make at all--that the quacks who make a living out of... | 252 |
fomc | 1,977 | You have my vote, if you are going to vote today. | 13 |
fomc | 1,977 | I'll second it. | 4 |
fomc | 1,977 | This is discontinuance permanently. I thought you were suggesting for the one week. | 16 |
fomc | 1,977 | No, for permanently, of the seasonally adjusted weekly figures. | 13 |
fomc | 1,977 | Well, no, I would-- | 7 |
fomc | 1,977 | You can't discontinue the unadjusted figures. Freedom of information requires-- | 14 |
fomc | 1,977 | I don't see why you can't. After all, we don't publish daily figures, thank God. We could do it, we've got them. | 28 |
fomc | 1,977 | You'd get a court case. | 7 |
fomc | 1,977 | Look, whether we win or lose a court test, you do the right thing in this shop. But let's not debate that issue today. Mr. Balles, you had a question on the Bluebook. | 42 |
fomc | 1,977 | I wanted to ask Mr. Kichline a question, not on Bluebook per se, but on related matters in financial markets. Just a comment. In the first place, I find it rather strange, this dichotomy in the trend of business loans since the first of the year--New York versus the rest of the country, among the big banks. Total busin... | 199 |
fomc | 1,977 | With regard to New York, the only information that we have that seems quite consistent--we've checked reasonably thoroughly on this--deals with the performance of the commercial paper market. Many of the prime customers apparently were in the paper market. We tracked down the names of some of those issuers who were lar... | 210 |
fomc | 1,977 | In that connection, John, I happen to have been at the New York board meeting, and I don't think Paul was; Alan was, some others. But there was some indication that this was not an unusual phenomenon, that typically loan demand growth in New York lagged the rest of the country in a business cycle, and that this was not... | 77 |
fomc | 1,977 | Well, it is true that New York normally lags, but this has been an exceptionally long and pronounced lag. And I think the normal, usual explanation for it in the Treasury market is that the biggest companies in the country are relatively liquid, and most of the loan demands must be coming from smaller ones, which is re... | 206 |
fomc | 1,977 | All right, thank you. Mr. Willes, please. | 13 |
fomc | 1,977 | I have just one question, Mr. Chairman, following along essentially the same line that Governor Coldwell was on earlier. I assume, given the robustness of the economy, that if your forecast for M1 turns out to be in error, and you are surprised by the number that you see, [would you] expect to be surprised with higher,... | 73 |
fomc | 1,977 | I wouldn't be surprised to see anything, frankly, on a monthly basis, but I think one of the factors tending to hold down July growth in our view is still some continuing lag impact of the higher interest rates--that we ought to be having some marginal trending down of what would otherwise be the underlying rate of gro... | 118 |
fomc | 1,977 | All right, we will hear from Mr. Jackson and then break for coffee. | 16 |
fomc | 1,977 | I have already said what I was going to say. | 11 |
fomc | 1,977 | Very good. We'll take a break now, a brief break. | 13 |
fomc | 1,977 | Gentlemen, we have to resume our deliberations, and we want to turn now to the policy directive, and let me just say a word about that--give my own views. We embarked on some tightening; what we sought to achieve, I think we have achieved. There has been a marked slowing down in the monetary aggregates. Also, while sho... | 580 |
fomc | 1,977 | Would you use the money market directive, Mr. Chairman, or the aggregates directive? | 17 |
fomc | 1,977 | Well, logic is a stern master, and if one respected it, really, one would have to use a money market directive--but I have found it desirable at times to throw logic to the winds, and I see some advantage in the monetary aggregates directive because, basically, that is what we ought to be doing. Who would like to speak... | 78 |
fomc | 1,977 | I have the same feeling about the federal funds rate range that you do. I think, basically, we are talking about B. I am, anyway, and you are. I think I feel a little more cautious about the business outlook than the staff does at this point. But also the aggregates are going up higher, and I think that this is a littl... | 219 |
fomc | 1,977 | All right, thank you, Mr. Volcker. Mr. Roos now, please. | 19 |
fomc | 1,977 | Mr. Chairman, I would like to speak in behalf of the alternative C pattern, for a couple of reasons. It is obvious that our aggregates are at the upper portion, the upper limits, even beyond the upper limits, [of the] long-term ranges. If we are going to get these down, we are going to have to, somewhere along the line... | 307 |
fomc | 1,977 | Let me make this observation. It's not that I want to be argumentative. I'm trying to be factual. If the economy should turn down, you can rest assured that the monetary aggregates will come in at a very subdued rate no matter what our target's going to be. And therefore, the monetary aggregates will slow down even if ... | 98 |
fomc | 1,977 | Mr. Chairman, I feel quite strongly that the federal funds rate range should remain exactly where it is. I feel also, though, that I would rather adopt the monetary aggregates specs of C, because I am concerned--I don't want to see us move as much as the fed funds range would indicate if, indeed, we only get a 2 percen... | 157 |
fomc | 1,977 | Mr. Black now, please. | 7 |
fomc | 1,977 | Mr. Chairman, I feel that M1 in the second quarter is still going to be moving a little faster than we'd like to see it. In view of the likelihood that the economy will continue on upward, the demand for transactions balances is likely to lead to some rise in the demand for money. But fortunately, it looks like M2, whi... | 208 |
fomc | 1,977 | Okay, Mr. Black. Mr. Coldwell, please. | 13 |
fomc | 1,977 | Mr. Chairman, I'd be perfectly satisfied with the steady policy directive this time, but that, to me, implies use of the money market directive rather than the monetary aggregates directive. I would prefer that we use the full specs of alternative B, 5 to 5-3/4 on the funds rate range. If things turned out to the point... | 180 |
fomc | 1,977 | Thank you, Mr. Coldwell. Mr. Balles, please. | 15 |
fomc | 1,977 | Mr. Chairman, in spite of some jawboning that we have gotten from certain quarters, I feel personally pretty good about what we did in calming down the monetary aggregates. I think that has worked quite well. We have reassured markets, as you've mentioned and as Frank Morris alluded to earlier. In terms of the decline ... | 252 |
fomc | 1,977 | Thank you, Mr. Balles. Mr. Eastburn now. | 14 |
fomc | 1,977 | Mr. Chairman, I like your suggestion of alternative B. I think, also, that it is consistent with the uncertainty that I was talking about earlier. And one of the things we also hear when we talk of businessmen is that they do look to the Fed for some source of stability. And in that connection, I was interested to read... | 204 |
fomc | 1,977 | Thank you, Mr. Eastburn. Mr. Willes, please. | 15 |
fomc | 1,977 | Thank you, Mr. Chairman. We've talked a lot today about uncertainty, about businessmen's feelings, and so on. It seems to me that one element of consistency between what businessmen tell us and what we've heard around the table today is an increasing concern for inflation. And I guess, in the comments that you made ear... | 223 |
fomc | 1,977 | Thank you, Mr. Willes. Mr. Partee now, please. | 16 |
fomc | 1,977 | Well, I am in agreement with your proposal, Mr. Chairman. I think it would be a good time to stand still because it isn't altogether clear to me which way we are going to be going from this point. There are a few signals in the economy that are a bit bothersome. On the other hand, it seems to me the bulk of the evidenc... | 322 |
fomc | 1,977 | Thank you, Mr. Partee. Mr. Morris now, please. | 15 |
fomc | 1,977 | Well, Mr. Chairman, I think we are very fortunate that the staff projections for May and June turned out to be pretty close to reality and that we didn't need the insurance on the funds rate that I feared we might need a month ago. I like alternative B. I would hope that we could stay, as Dave Eastburn suggested, at 5-... | 113 |
fomc | 1,977 | Who would like to speak next? Yes, Mr. Jackson. | 13 |
fomc | 1,977 | I prefer alternative B, but I would prefer a money market directive. If you look at the calendar and the distortion to take place July 1, and we meet on the 19th, and the projections are that it'll take two weeks for this to be worked out, we will really hardly know what's going on for July or most of the period ahead ... | 85 |
fomc | 1,977 | Thank you, Mr. Jackson. Mr. Wallich, please. | 14 |
fomc | 1,977 | Well, we've worked off most of the bulge of April and the two following months, but not all of it is for M1. So to be going again at 8 percent in July is something of a concern. However, this is a special situation, and so I would not take issue with the alternative B range of 3 to 7 [for M1]. As far as the funds rate ... | 147 |
fomc | 1,977 | Thank you, Mr. Wallich. Who'd like to speak next? Yes, Mr. Guffey. | 23 |
fomc | 1,977 | I'd like to join those--I guess Paul Volcker, Bob Mayo, and others--that have suggested that we adopt the aggregate ranges of C but rather the federal funds that you have suggested, 5-1/4 to 5-3/4, and staying at the 5-3/8 as long as possible. That seems to me and our staff a little more consistent with staying where w... | 178 |
fomc | 1,977 | All right, thank you, Mr. Guffey. Now, Mr. Baughman. | 20 |
fomc | 1,977 | I get the feeling that we are once again gradually building a procyclical record of monetary policy. Granting the great uncertainty of the numbers--as we attempt to peer a few weeks ahead, it seems this moves me into the direction of those who have suggested a little firming, or at least posturing for some possible fir... | 187 |
fomc | 1,977 | All right, thank you, Mr. Baughman. Mr. Winn, please. | 18 |
fomc | 1,977 | Mr. Chairman, these are mighty small difference we are talking about. I think [if] our posture could be steady as you go, we probably are in the best position. I think I would prefer the B, money market directive. | 48 |
fomc | 1,977 | Thank you, Mr. Winn. Who would like to speak now? We have a few silent members of the Committee still. Mr. Gardner, please. | 31 |
fomc | 1,977 | My experience with this recovery--the only one I've had the opportunity to live with in the introspective halls of the Federal Reserve System--is that we are never quite sure of it. It is certainly protracted, it certainly has not spawned an enormous number of pressures. It has not been traditional. I can understand al... | 302 |
fomc | 1,977 | I'd like to second that, that's my view. Thank you, Mr. Gardner. Mr. Lilly now, please. | 24 |
fomc | 1,977 | Well, we are talking about such a small difference between B and C that I find it difficult to have an opinion. But I must make a bow toward the longer range, and this is what we have to do over the coming years. It would seem to me that any slight tightening possible should be undertaken, so I would be in favor of C o... | 107 |
fomc | 1,977 | All right, thank you. Anyone else would like to speak? | 13 |
fomc | 1,977 | Mr. Chairman, we would support the alternative B. One possibility that occurs to us is that [for] the M1, which has been excessive in the second quarter, the alternative C ranges might be more appropriate. M2 has been performing much better, and perhaps the 6 to 10 range is more appropriate there. | 66 |
fomc | 1,977 | Thank you, Mr. Fossum. Mr. Winn, are you in a mood to speak? Oh, yes, of course you did. Are you in the mood to speak again? | 38 |
fomc | 1,977 | No. | 2 |
fomc | 1,977 | I think we have heard now from every member of the Committee. As far as the language of the directive goes--I haven't kept a record--I am a little uncertain what the rest of the Committee's thinking is. I have the impression that as many are in favor of the monetary aggregates directive as the money market directive. L... | 86 |
fomc | 1,977 | Four, Mr. Chairman. | 6 |
fomc | 1,977 | Now we'll just check that--those who favor a money market directive. | 14 |
fomc | 1,977 | I was going to vote for the majority. | 9 |
fomc | 1,977 | Six, Mr. Chairman. | 6 |
fomc | 1,977 | All right, I will vote with the money market directive. Let me just take a--well, my Secretary has given me somewhat incomplete information, I am sorry to say, and I don't trust my memory. There is, as I read the record, a majority in favor of 3 to 7 for M1; there is a majority in favor of a federal funds rate of 5-1/4... | 140 |
fomc | 1,977 | Ten, Mr. Chairman | 5 |
fomc | 1,977 | Well, gentlemen, any further indication of the Committee's thinking? | 13 |
fomc | 1,977 | I think there is some logic, as Mr. Fossum suggested, in just reducing the M1 a little bit. It is M1 that's above our ranges, not M2--one way to compromise it for me. | 45 |
fomc | 1,977 | Yes, I thought it was a reasonable suggestion. | 10 |
fomc | 1,977 | I see no difficulty in having the range 2-1/2 to 6-1/2. Let's have a show of hands on preference. We're going to be comparing 3 to 7 for M1 over against 2-1/2 to 6-1/2. Those who prefer 3 to 7 will raise their hands. | 73 |
fomc | 1,977 | Two, Mr. Chairman. | 6 |
fomc | 1,977 | All right, those who prefer 2-1/2 to 6-1/2 will raise their hands. Very well, that's helpful. Any other comment? Well, I hear none; therefore, I think we ought to vote now on a money market directive and an M1 range of 2-1/2 to 6-1/2 percent, an M2 range of 6 to 10--I don't want to push logic--and a federal funds rate ... | 134 |
fomc | 1,977 | I think I'd be constrained on that last one, Mr. Chairman. I think we need more room on the bottom side. | 25 |
fomc | 1,977 | Well, I respect that. There is a very clear majority favoring the lower limit of 5-1/4. I don't think the difference is really very large. If and when we get to 5-1/4, depending on how events in the economy, and the money market, and the financial markets more broadly are developing, we can take another look at it, if ... | 109 |
fomc | 1,977 | Chairman Burns Yes Vice Chairman Volcker Yes Governor Coldwell No Governor Gardner Yes President Guffey Yes Governor Jackson Yes Governor Lilly Yes President Mayo Yes President Morris Yes Governor Partee Yes President Roos Yes Governor Wallich Yes Eleven to one, Mr. Chairman | 52 |
fomc | 1,977 | All right, thank you. Now, we concluded what I wanted to conclude a little sooner than I thought, I am glad to say, but if the Committee consents to my doing so, I'd like to leave now and turn the meeting over to Mr. Volcker. The subjects to consider are, first, the foreign currency activities that we have been engaged... | 165 |
fomc | 1,977 | I do, and in my judgment you are not [subject to Sunshine Act limitations at that session], Mr. Chairman. And with your permission, if, in the course of that discussion, it appears to be otherwise, I will hasten to remind you. | 52 |
fomc | 1,977 | Well, you'll be there as our moral as well as our legal conscience. | 15 |
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