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fomc | 1,977 | The demand for money in relation to income in your case. | 12 |
fomc | 1,977 | Yes. | 2 |
fomc | 1,977 | We had not assumed that we're back on that, Governor Wallich. We have not assumed that the demand curve-- | 23 |
fomc | 1,977 | Well, neither has Mr. Wallich, if I understood him correctly. It was an "if" proposition. | 23 |
fomc | 1,977 | I meant to say we're on the same slope, not on the same path, because the path is down $40 billion from where we expected to be. | 31 |
fomc | 1,977 | And you put even that in "if" terms. | 11 |
fomc | 1,977 | Even that is an "if." | 7 |
fomc | 1,977 | Well, let's be clear. The staff has not assumed the same slope. I presume that you have a much higher interest rate in the early part of next year. | 33 |
fomc | 1,977 | Now we're getting into technical things of slopes and demand curves. One way of putting it is, I don't know whether the slope has ever changed, but you relate money to GNP as a curve, given interest rates. I assume that curve isn't shifting down. I'm assuming that the shift from money to other liquid assets is not occu... | 125 |
fomc | 1,977 | But not back to the previous relationship, I think. Henry was making the point that it would be back to the previous relationship. That is, your model, let's say, would be right on the increments from now on out. If the model were right, to get that objective of monetary growth that you have, you would have to get cons... | 72 |
fomc | 1,977 | I think the clearest answer I could give is that you're right. | 14 |
fomc | 1,977 | We talk about money, we talk about monetary growth, and implicit in all of this is acceptance of M1, whereas this Committee decided some time ago to attach equal weight to M1 and M2, which means we've moved away from M1. And there is some thinking in this Committee, which I share, that we may perhaps want to move furth... | 101 |
fomc | 1,977 | And let's pursue further, Mr. Chairman, the development you reported on last time, of the development of M1.5 or whatever we care to see. | 32 |
fomc | 1,977 | What was it in August, Mr. Chairman? | 10 |
fomc | 1,977 | Mr. Black? | 4 |
fomc | 1,977 | What figure do you have on that new one for August? | 12 |
fomc | 1,977 | Well, I've got that here, and I'll look it up. In the meantime, let's have Governor Jackson's comments. | 24 |
fomc | 1,977 | My question pertained to that subject, Mr. Chairman. Mr. Axilrod, to what extent do we better understand the ramifications of the Regulation Q ceiling interest rate on the growth rate of M2 and M3, and how much they may have impacted on the high side in earlier periods, and to what extent they may impact on the lower s... | 79 |
fomc | 1,977 | Well, we are projecting somewhat higher growth rates in the time and saving deposit components of M2 and M3, beyond the next month or two, than we would have had at current interest rate levels. We're projecting a somewhat higher interest rate than now, and one of the reasons is that because of the inflation that we cu... | 332 |
fomc | 1,977 | Do you think that the implication of the Regulation Q ceiling will make the use of M2 as an operational target more imperfect, or will it be sufficiently distortive to make it worthy of reconsideration of the use of M2? | 46 |
fomc | 1,977 | All of the aggregates have problems as targets. And when you adjust the ceiling rate, or even when market rates get near the ceiling rate whether you adjust it not--both [circumstances] create the need, I believe, for special and careful interpretations of M2 and M3. That is, if you raise the ceiling rate, you have to ... | 166 |
fomc | 1,977 | But you don't think you would destroy the operational effectiveness of it. | 13 |
fomc | 1,977 | It makes them more uncertain around those times because we can't be very certain as to what extent the public is or isn't going to shift deposits. We'd have to rely on historical relationships, and they're very imperfect, as you know. | 45 |
fomc | 1,977 | Mr. Black raised the question about the rate of growth of a modified M1, the one that I referred to at the last meeting, for the month of August. Now the modified M1 concept is as follows: You start with our conventional M1 magnitude, then you add to it deposits of state and local government, and then you add to it bus... | 314 |
fomc | 1,977 | A realistic 2:15, really. | 9 |
fomc | 1,977 | Let's say at two o'clock, and we'll start promptly at 2:15. [Lunch recess] | 21 |
fomc | 1,977 | Gentlemen, no matter what that clock might say, it's 2:15, and now we're ready to start our monetary policy discussion. Let me say a few words by way of getting our discussion going. The Federal Reserve is passing through a difficult time in regard to policy, and I think the country is passing through a difficult time.... | 630 |
fomc | 1,977 | I think philosophically I would agree with you that, particularly where the ramifications of our operations are so uncertain, particularly as to the mechanistic definitions of what constitutes money, and particularly as we may be entering a phase where there's a new relationship between supply and the real economy, whi... | 502 |
fomc | 1,977 | Then it puts it over the top range. | 9 |
fomc | 1,977 | It puts it over the top of the range, which then I think would justify a stronger move in the federal funds rate-- | 25 |
fomc | 1,977 | You don't need to specify that [higher federal funds rate range] because the directions would be inconsistent and there would have to be new directions issued. | 29 |
fomc | 1,977 | That's an operational question that I'm not sure I agree with, based on my understanding of the way we operate. But at any rate, I would prefer to see the 6-3/4 percent top limit so that if the Desk saw significant increases beyond the 3 to 8 percent that I'm suggesting, that we would go as high as 6-3/4. | 76 |
fomc | 1,977 | All right. I'm a little troubled, not by your prescription, but by the route that you get there. That is, I'm a little troubled by your reasoning. Let's say that the rate of growth--let's just look at M1--is 7 percent, which was my suggested upper limit. Then presumably Alan and Peter at that time would be 6-3/8, 6-1/2... | 88 |
fomc | 1,977 | Excuse me, I overlooked the fact that I would propose the 6-1/4 estimate for the midpoint. It was a 6 to 6-3/4 percent range. | 39 |
fomc | 1,977 | Well, 6-1/4, they'd have to move on the federal funds rate immediately, which my suggestion would not involve, and that goes contrary to your own reasoning. You don't want to disturb the federal funds rate too much. | 48 |
fomc | 1,977 | In my own viewpoint, I wouldn't view an eighth of one percent as being a significant change. | 19 |
fomc | 1,977 | Well, I don't think any of us would quarrel with that. Mr. Partee. | 19 |
fomc | 1,977 | Well, I agree with a good deal of what Governor Jackson had to say, but when he finally got to the prescription, why, it wasn't then the same prescription I would have suggested. I think he's right that it biases the outcome too much to take a range as low as 3 to 7 [on M1] if I understood you; 4 to 8--I didn't underst... | 87 |
fomc | 1,977 | 4 to 8. | 5 |
fomc | 1,977 | 4 to 8. Now given the fact that September looks as if it's developing to be rather significant, and the possibility of October--well, October could be double digit on M1, given the previous performance. And so I would rather also see a range that encompasses a somewhat higher number--I would propose 3 to 8 [and] 5 to 9... | 152 |
fomc | 1,977 | Yes, I had that in mind. | 8 |
fomc | 1,977 | Now if we do get an October that is quite strong, we will undoubtedly go over the 7 percent, the 8 percent top on M1. And when we go over the top, I would assume that the Manager would report to you that the instructions were inconsistent, and then the question would be changing the instructions, considering whether to... | 211 |
fomc | 1,977 | I'm not sure I understood what you both are talking about on the funds range. You were talking about 6-1/8 and then-- | 29 |
fomc | 1,977 | 6-1/8 is the midpoint of the 6 to 6-1/2 | 19 |
fomc | 1,977 | Asymmetrical. | 4 |
fomc | 1,977 | All right, thank you. And Mr. Mayo now, please. | 14 |
fomc | 1,977 | Mr. Chairman, I want to subscribe to your preamble. I must say, though, that I also come out with a slightly higher M1 upper end and M2 upper end, as Phil Jackson did. Otherwise, I find that we may be pushing ourselves up a little too soon if, indeed, we have a late September as well as an early October that gets us a ... | 289 |
fomc | 1,977 | All right, thank you, Mr. Mayo. Mr. Coldwell, please. | 17 |
fomc | 1,977 | Well, Mr. Chairman, I guess I am going to round out these various alternatives, using the same figures, but come out just slightly different from Mr. Mayo. I would be perfectly willing to accept your prescriptions in M1 and M2, putting the cap of 7 and 8 percent on the two respectively. I think there's room for a littl... | 449 |
fomc | 1,977 | Thank you, Mr. Coldwell. Mr. Kimbrel now, please. | 17 |
fomc | 1,977 | Mr. Chairman, my reasoning is almost identical with Mr. Coldwell's. Just expressed the numbers exactly. I'm not sure [whether], on the federal funds, we would even want to enunciate the asymmetrical note, but I think I'd be much more inclined to let the market forces take the funds rate up as soon as practicable. I hav... | 230 |
fomc | 1,977 | Thank you, Mr. Kimbrel. Mr. Eastburn next, please. | 17 |
fomc | 1,977 | Thank you, Mr. Chairman. I certainly agree with you that the increase in M1 is disconcerting and that the increases in the other Ms are higher than we would like to see them. I think these indicate that it's a matter of judgment, and my own judgment [is] that these are more than random shock developments and we need to... | 316 |
fomc | 1,977 | I would accept the last comment. Thank you, Mr. Eastburn. Mr. Volcker now, please. | 23 |
fomc | 1,977 | Well, I was going to start with the comment that Mr. Eastburn ended up with. I think it's easier to figure out what we want to do on the low side of all these things than perhaps the upside. Although the general intention is clear enough all around, I guess, to make the end as low as you can stomach for presentation pu... | 404 |
fomc | 1,977 | Well, that is something that I don't think we ought to try to do at this time. I have great sympathy with that suggestion. But I think that's something that your [sub]committee, Mr. Partee, should bring a recommendation on very, very soon. | 54 |
fomc | 1,977 | What, the [Sub]committee on the Directive? | 11 |
fomc | 1,977 | Yes. Aren't you chairman of it? | 9 |
fomc | 1,977 | Yes, yes. But that was the subject that we had proposed to study, and we were told not to study it. | 25 |
fomc | 1,977 | Well, as the Chairman of the Committee--in view of my responsibilities, prerogatives--I speak in behalf of the entire Committee when I counsel you to get busy on that promptly. | 38 |
fomc | 1,977 | I will try to have some preliminary work done for the Committee next time. | 15 |
fomc | 1,977 | My problem is, Mr. Chairman, I am not sure I would take the same view in the long run. My comment is directed for the particular short-run situation. | 34 |
fomc | 1,977 | Well, I don't think we can afford to change our procedure. We can change our goals from meeting to meeting, [but] I think we need some stability with regard to procedure. We'd be lost if we don't. As to the outcome, I'm leaning increasingly in the direction of giving more weight to M2. But I want that to be weighed by ... | 130 |
fomc | 1,977 | No. I think that is essentially it. | 9 |
fomc | 1,977 | Thank you very much. Mr. Morris next, please. | 12 |
fomc | 1,977 | Well, Mr. Chairman, I have been doing a lot of soul searching for this meeting. Particularly because I feel that, near term, the economy is not going to be as strong as the staff has projected. On the other hand we've got the fact that we've had two quarters of back-to-back growth rates substantially in excess of what ... | 411 |
fomc | 1,977 | To maintain our credibility, what does that mean? First, we want the market and the country at large to take seriously our protestation, since we believe in it seriously, as we are determined to do what we can to help unwind the inflation. All right, that's essential to maintain credibility. [It] is equally essential t... | 217 |
fomc | 1,977 | Mr. Chairman, I've got an eclectic approach, I guess, and I wish I could give proper footnotes, but so many things have been said by so many people, I'm not sure I can. I certainly agree with the feeling of most people that M2 has been projecting a different posture of policy than M1 has been. And I think the majority ... | 228 |
fomc | 1,977 | I would like to say something about the Chairman's role in advising the Committee between meetings. Let's make the assumption that I will continue to think the way I feel now. And if we were at 2 or 3 [percent on M1], and let's say that the federal funds rate at that time was 6 [percent]. I would certainly advise the C... | 96 |
fomc | 1,977 | I certainly concur with that. | 6 |
fomc | 1,977 | And therefore, what I think is important is the point Mr. Volcker made and one other member of the Committee--presentation [of a zero value], I think, would be unwise, since our decision on ranges are all public. To have a figure of zero or minus--we can take care of that. | 64 |
fomc | 1,977 | If we stop on the 6, there can be hardly any backup? | 15 |
fomc | 1,977 | We can take care of that through the communications between meetings if it so happens we're at that point. I hope we are at that point. | 28 |
fomc | 1,977 | And I wasn't going to suggest that we publish that, either; I want to make that clear. We've been playing around with the estimates on this thing and we're probably dead wrong. I pointed out once that we didn't have the experience, but neither did we have the long record of misses that some of the others [did]--we now ... | 362 |
fomc | 1,977 | Thank you, Mr. Black. Mr. Balles next, please. | 15 |
fomc | 1,977 | Well, Mr. Chairman, as I listen to this discussion, it seems to me that one of the obligations that I guess we have as a Committee is to make some judgments about the business outlook. It's true that the headlines quite recently have featured a number of pieces of bad news. But it also occurred to me--as I listen to th... | 810 |
fomc | 1,977 | Thank you, Mr. Balles. We will hear next from Mr. Wallich. | 18 |
fomc | 1,977 | Well, I tried earlier to analyze our situation in terms of where the instability in situations came from--from the monetary side or from the real side. The predominant impression seems to be that it comes from the monetary side, whether it's just a stochastic shock, or whether we're back on the old slope of the demand ... | 620 |
fomc | 1,977 | Thank you, Mr. Wallich. Mr. Lilly next, please. | 15 |
fomc | 1,977 | Well, as I mentioned earlier, I share with Henry the view that the economy is not very strong, and the recovery is fragile, in my opinion. And I think that we are attacking a structural problem [with] a monetary shotgun, if I may create a phrase. The targets that I find at the high end, if not at the limit of my restri... | 138 |
fomc | 1,977 | Thank you, Mr. Lilly. Mr. Roos next, please. | 15 |
fomc | 1,977 | Mr. Chairman, I would like to make several observations about what I've heard. First of all, it seems to me that there has not been any significant deterioration of economic conditions since a month ago, when we met here and adopted an M1 range of 0 to 5 percent. I'm at a loss [as] to [how to] accept the logic of that ... | 895 |
fomc | 1,977 | Thank you, Mr. Roos. We will hear from Mr. Gardner now, please. | 19 |
fomc | 1,977 | I guess you could have taken from my earlier remark today that I'm a little apprehensive about the projections we have for the demand for total credit in the economy. And clearly we have been experiencing higher growth rates than we have expected at each of these meetings. I am prepared to be quite conservative today. ... | 396 |
fomc | 1,977 | Thank you, Mr. Gardner. Mr. Winn now, please. | 14 |
fomc | 1,977 | Mr. Chairman, thank you. To try to resolve the conflicting forces that we are dealing with, and at the same time as a historian looking at our records, I had trouble getting away from last month's actions, with the economy not being that much different in outlook from what we had. And so I would recommend an M1 range o... | 153 |
fomc | 1,977 | Thank you, Mr. Winn. Mr. Willes now, please. | 15 |
fomc | 1,977 | Thank you, Mr. Chairman. Just one quick comment. Almost everybody seems to agree that we need to continue to move. There may be some differences in timing, and in that regard I'd like to echo the comment that Dave Eastburn made, and that is, I am fairly persuaded by the staff report that says, in effect, if you move in... | 150 |
fomc | 1,977 | Thank you, Mr. Willes. Mr. Guffey now, please. | 17 |
fomc | 1,977 | Thank you, Mr. Chairman. I guess my concern is shared by perhaps everybody around the table in terms of the aggregates growth. But let me say, first, that in our view the economy is healthy. It isn't as fragile as has been described today. And as a result, we perhaps should be taking some advantage of that to move our ... | 318 |
fomc | 1,977 | Thank you, Mr. Guffey. | 9 |
fomc | 1,977 | Mr. Chairman--I'm sorry-- | 7 |
fomc | 1,977 | You started this meeting, and now you are in a unique position also of ending it, or ending the formal go-round, and now we are ready for your benediction. | 36 |
fomc | 1,977 | It'll be very brief. It's in a sense belaboring the obvious to remind us all that the record we are building continues to look more and more procyclical, and also I guess to remind us that historically this has tended to move us into a position which resulted in a development which has come to be labeled a crunch. And ... | 322 |
fomc | 1,977 | Thank you, Mr. Baughman. Well, gentlemen, we've expressed a range of views, but the differences among us, with one or two exceptions, are quite small. The range of 2 to 7 or 3 to 7 for M1 would be acceptable, I think, to the majority of the Committee, and a range of 4 to 8 [for M2] would be accepted as well by most of ... | 269 |
fomc | 1,977 | Eight. | 2 |
fomc | 1,977 | Now there was no clear indication as to preference by members of the Committee with regard to the language of the directive. Mr. Wallich commented on that, and he made an unusual announcement. Mr. Wallich generally is in favor of monetary aggregates directives, but he seemed to favor a money market directive this time.... | 136 |
fomc | 1,977 | Six, Mr. Chairman. | 6 |
fomc | 1,977 | Now how many would prefer a money market directive? | 10 |
fomc | 1,977 | Four. | 2 |
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