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fomc | 1,977 | Usually, in a taxpaying month you go negative in Boston, as I recall. | 18 |
fomc | 1,977 | That's right. | 3 |
fomc | 1,977 | Frank, does your survey show where the funds are coming in? Are they coming in the long areas, where you wouldn't have incentive for disintermediation that you would have in some of the shorter areas? | 42 |
fomc | 1,977 | Well, we didn't make it a very extensive survey--just trying to find out if they were beginning to get alarmed yet or not. I thought it was a little surprising. | 36 |
fomc | 1,977 | You were beginning to ask a question. | 8 |
fomc | 1,977 | How much room do we have? | 7 |
fomc | 1,977 | I was interested in the answer to the question. | 10 |
fomc | 1,977 | I think he was going to give him another month to get it. | 14 |
fomc | 1,977 | Well, let me indicate what we have in our forecasts. We have an annual rate of growth for S&Ls and mutual savings banks in the second half of 1978 that averages a 7-1/2 percent annual rate. At the same time, we have a bill rate there that's 7-3/4 percent. Now there, a couple of cautionary notes that I'd like to throw i... | 300 |
fomc | 1,977 | Mr. Chairman, I wonder if I could break in here and pursue the same point that Frank has been talking about, because it's a question I wanted to raise myself. Last week, I happened to be up in Seattle on business; I asked all the banks that I visited whether they'd seen any signs as yet of savings flows decreasing, and... | 716 |
fomc | 1,977 | I think that's fair; probably in most cases they are assuming lower interest rates and getting somewhat lower housing starts. | 22 |
fomc | 1,977 | Gentlemen, I think the time has come to state what views we have with respect to the outlook for the overall economy. And I think it's particularly important that members of the Committee indicate whether they agree substantially with the broad projections made by the staff, putting details aside, or whether there are ... | 88 |
fomc | 1,977 | Mr. Chairman, we agree with the optimism of the Board staff, even though it is somewhat more optimistic than many others that we read. And even though we had the snow in October, in fact we're slightly more optimistic than the Board's staff. We think that there's a little tendency on the part of many observers, as they... | 84 |
fomc | 1,977 | I think we'd like to hear you argue the case for greater optimism. | 14 |
fomc | 1,977 | Well, we find, for example, that in each of the areas that we have been talking about so far today, consumer spending, housing starts, and so on--while a particular number may be low for a month or two, the feedback we keep hearing from our retailers, from our businessmen who are making their plans for capital spending... | 109 |
fomc | 1,977 | Yes, but are you commenting on the economy of your own region or on the national economy? | 19 |
fomc | 1,977 | No, we're getting this feedback from around the country. And precisely because of our geographic peculiarities, we have asked our own staff as well as our directors to reach out elsewhere to make sure we weren't being overly influenced by the things in our District. I do have one question that we find a little difficul... | 129 |
fomc | 1,977 | My guess would be, or my judgment--we will not have any significant protectionist measures in this country over the next year. Do you have a different view, Mr. Truman? | 37 |
fomc | 1,977 | No, I, it's only a guess. Yours may be a judgment, mine's a guess. I'll agree that you're not going to see much-- | 30 |
fomc | 1,977 | Well, I'd like to pursue your comment. Mr. Willes has indicated that he feels that, if anything, the staff forecast understates prospects of the economy. Are there others within the Committee who take a similar view--who feel more optimistic than the staff apparently does? Mr. Roos, first, and then Mr. Winn. | 68 |
fomc | 1,977 | Whether I feel more optimistic or equally optimistic, we have met with businessmen in our District, some of whom have national and international operations, in the last couple of weeks. And literally none of them cite any weaknesses or any significant weaknesses. By and large, most of them are optimistic, most of them ... | 111 |
fomc | 1,977 | All right, thank you. Mr. Winn and then Mr. Kimbrel. | 17 |
fomc | 1,977 | Mr. Chairman, I think my optimism is in part based on the hope that some of the psychological malaise may be lifted. It's a kind of a commentary on our times when last week a New York Stock Exchange seat sold for $35,000, and a taxi medallion in New York sold for $52,000. So our out-of-work brokers can't even buy a cab... | 175 |
fomc | 1,977 | Okay. Mr. Kimbrel. | 8 |
fomc | 1,977 | Mr. Chairman, I guess I should [say that] the negative features that relate to us are entirely, at this moment, apparently strike related. Lockheed, of course, yesterday voted to strike in the Atlanta area, which is a significant employer. On the other side, the New Orleans dock workers apparently have voted reluctantl... | 240 |
fomc | 1,977 | All right, in the interest of orderly discussion, before I call on other members of the Committee, I would like to have a show of hands on the part of those members of our family who believe that the outlook for the general economy is less favorable than our staff has suggested. | 56 |
fomc | 1,977 | Over the full projection period? | 6 |
fomc | 1,977 | Well, define that as you may. All right, then, we'll hear from some members of that-- | 21 |
fomc | 1,977 | [Unintelligible] count five, Mr. Chairman. | 13 |
fomc | 1,977 | Well, no, I wasn't ready to count. I wanted the individuals rather than a count of the numbers. Mr. Partee, let's hear from you now. | 33 |
fomc | 1,977 | Well, Mr. Chairman, I guess I would veer in the direction, I think, in the probabilities of a somewhat lower increase than the staff has. And I do this with some temerity because I think it's awfully hard to know what's likely to occur. And I do it also with a clear understanding that I don't anticipate an actual reces... | 877 |
fomc | 1,977 | Thank you, Mr. Partee. Mr. Volcker now, please. | 16 |
fomc | 1,977 | Well, Mr. Partee has pretty much made my speech at this point. Let me say that I think the staff forecast doesn't seem at all unreasonable to me. But it is higher than what my people have been forecasting in New York by about 1 percent[age point] for calendar year 1978. And while I think it could reach the staff's proj... | 631 |
fomc | 1,977 | Mr. Balles now, please. | 8 |
fomc | 1,977 | Well, our staff forecast is very close to that of the Board in broad terms up through about the middle of next year. We're considerably less optimistic for the second half of the year. And largely because of the reason I alluded to earlier, we expect a downturn in housing to occur, principally in the single family--[un... | 163 |
fomc | 1,977 | Thank you Mr. [Balles]. Mr. Wallich, please. | 15 |
fomc | 1,977 | Well, this is of course a contingent forecast based on there being no further action on the policies that are in the pipeline so far. I would also say that it is not a very high forecast--4.3 percent in the fourth quarter is not very much, and final sales of 3.8 in the fourth quarter is really quite modest. Also, I'm m... | 348 |
fomc | 1,977 | And assumes great wisdom. | 5 |
fomc | 1,977 | --assumes great wisdom--I was going to say this raises other risks. It raises risks of acceleration of inflation; it reduces, I think, the chances of a downturn. So all that I wanted to say is that, in the absence of new action, I think that the staff is more on the high side than I would be. | 69 |
fomc | 1,977 | Gentlemen, I scheduled this meeting for a two-hour period, and the two-hour period is at an end. I wish we could carry on; I hate to interrupt the flow of thought. But I've got to go to another meeting, and I believe the Bank Presidents have scheduled a meeting to start at 5:00. So we will resume our discussion of the ... | 116 |
fomc | 1,977 | Is this the meeting of the Sunshine [law] now? | 12 |
fomc | 1,977 | Yes, this is Government in the Sunshine. October 18, 1977 | 16 |
fomc | 1,977 | We had, I think, a reasonably thorough discussion of the economy, the way in which we do it, individually, but several members of the Board did not express their views. And we decided at the end of yesterday's meeting to continue our economic discussion--at least for a little while. We'll start with Mr. Coldwell, and t... | 99 |
fomc | 1,977 | Thank you, Mr. Chairman. We were talking yesterday, as you may recall, about any questions of difference on the projection period. And I don't find myself, on balance, over the period to mid-'78 on a net basis a whole lot different than the Board staff, although I think they're a bit optimistic. But my pattern of proje... | 281 |
fomc | 1,977 | All right, thank you. Mr. Lilly now, please. | 13 |
fomc | 1,977 | Well, last month, as you remember, I was nervous about the economy, and I'm a little more nervous this month. I think the growth of the economy is dependent on consumer expenditures, housing markets, and an increasing rate of capital expenditure, and I haven't seen any of those factors improve somewhat. In fact, I thin... | 179 |
fomc | 1,977 | All right, thank you, Mr. Lilly. Mr. Jackson now, please. | 17 |
fomc | 1,977 | I think the staff's projection is a very rational, thoughtful, and appropriate effort about the expectations for the economy. Unfortunately, though, at this stage of the economic recovery of the United States, at least, I think we are entering an area where it's not what is or what is expected to be but the reaction to... | 462 |
fomc | 1,977 | All right, thank you, Mr. Jackson. Anyone else? | 13 |
fomc | 1,977 | May I inquire, Mr. Chairman? | 8 |
fomc | 1,977 | Yes. | 2 |
fomc | 1,977 | Are we relating our projections, our opinions as to future economic activity on the premise that was used in the staff projections of 5-1/4 percent M1 growth from the third quarter of 1977? My question is, it would seem to me that monetary policy decisions should have some effect on any economic projection, and are we ... | 120 |
fomc | 1,977 | Well, the staff projection is based on that assumption of the 5-1/4 percent rate of growth. I think it would be fair to say that many economists who have arrived at similar projections of the economy have done so without taking that restrictive or that explicit monetary assumption. In other words, while the staff belie... | 124 |
fomc | 1,977 | I think so. | 4 |
fomc | 1,977 | He said with a little sigh. Any further comments? Well, if not, let me say just a few words about the condition of the economy as I see it, and I'm not going to take much time because we want to move on, and I will have more than a little to say about monetary policy later on. I think the staff projection is reasonable... | 117 |
fomc | 1,977 | Very much so. | 4 |
fomc | 1,977 | As I see it, we have a depression in some major branches of our national agriculture. We have a significant recession in the metal-producing industries. On the other hand, we have considerable strength--we had a long discussion of that yesterday, and I diverged a little from the thinking that was expressed around the t... | 526 |
fomc | 1,977 | We're about where we closed last night, but the dollar was lower earlier today and other central banks [unintelligible]. [Secretary's note: This statement was not found in Committee records.] | 39 |
fomc | 1,977 | [Interrupting] Did Secretary Blumenthal make the latter statement? | 14 |
fomc | 1,977 | It was taken out of context. This was a press conference on other matters, and someone asked him [paraphrasing], "Well, what do you think about the rise in the Japanese yen lately?" And he said, "Well, there hasn't been much rise, has there?" And they said, "Oh yes, it's gone up such and such," and got into a discussio... | 125 |
fomc | 1,977 | Did he say the latter? Are you sure? | 10 |
fomc | 1,977 | Yes. It was in an "if" clause, however, rather than a-- | 17 |
fomc | 1,977 | I didn't see that. | 5 |
fomc | 1,977 | He didn't say he wanted a large appreciation-- | 9 |
fomc | 1,977 | He said "if." | 5 |
fomc | 1,977 | --but that's the way it was interpreted. | 9 |
fomc | 1,977 | That's right, but it's the way it was interpreted, and it was yanked right out of context. It's like any-- | 25 |
fomc | 1,977 | He says if you want a large effect you need a large change. | 14 |
fomc | 1,977 | He was making an analytic point and got interpreted as a policy position. | 14 |
fomc | 1,977 | That's right. | 3 |
fomc | 1,977 | And on the basis of what little I knew, I thought it was misinterpreted. | 18 |
fomc | 1,977 | Well, he was making an analytic point, that, if you're going to have an effect on the trade account, you're going to need an awfully large change in the exchange rate under the current circumstances. But he wasn't advocating that, it's just the point he was making. But the Reuters people, who weren't there at the time,... | 137 |
fomc | 1,977 | [Interrupting] Would you tell us about the good news that has been ignored by the market? | 20 |
fomc | 1,977 | I have a brief bit later on. The economy is not performing that badly; we have growth here. Other countries don't have much growth. Our rate of inflation is lower than in most other countries. We've had currencies that are rising--their rates of inflation are 10, 12, 15 percent. The market has lost perspective on many ... | 95 |
fomc | 1,977 | Rise in interest rates-- | 5 |
fomc | 1,977 | And interest rates have risen. [Secretary's note: This statement was not found in Committee records.] | 20 |
fomc | 1,977 | Thank you. Mr. Black. | 7 |
fomc | 1,977 | Scott, I gather from what you said about the market's tendency to ignore any good news, that your assessment of the positive effects of, say, an increase in the discount rate or moving the federal funds rate up still further would not make much difference. | 51 |
fomc | 1,977 | At the moment, the market is not focusing too much on interest rates. At the moment. But if some of these other fears were calm, then they would be focusing on interest rates. The general feeling, perhaps, is that there might be further firming of interest rates here, but I don't think people expect much further rise. | 67 |
fomc | 1,977 | Any other comments? Mr. Wallich, please. | 11 |
fomc | 1,977 | And what's been the response to our recent interventions? Do central banks abroad feel that we've done our share of the job, or do you still get pressure to do more? | 34 |
fomc | 1,977 | Well, at the Desk we haven't had any pressures to do more. We've been working very closely, of course, with the Bundesbank, the Swiss National Bank, but there have been some rumblings from the Swiss, particularly, that the U.S. ought to do more. But that's again in the context that the Bundesbank had done $900 million ... | 195 |
fomc | 1,977 | Can you tell from their reactions whether this enormous amount of intervention, I think on the order of $20 billion supporting the dollar, whether they're disappointed in that it hasn't had more of a stabilizing effect? | 41 |
fomc | 1,977 | Oh, yes, disappointed. | 6 |
fomc | 1,977 | Shouldn't you say they spent $20 billion on holding down their own currencies? | 16 |
fomc | 1,977 | Well, I just want to bring out the fact that $20 billion was spent and was not enough to hold the dollar. | 25 |
fomc | 1,977 | No, I'm just referring to the phrase "supporting the dollar." I don't think that was their motive. Their motive was to hold down their own currency. | 32 |
fomc | 1,977 | Oh, yes, I think that is probably so. But if you thought of it--suppose we had done this, nobody else supported the dollar; we had, let us say, very large reserves of some sort and had to spend $20 billion in support of our currency, it would not have been sufficient to prevent this decline. And that impresses me very ... | 100 |
fomc | 1,977 | There is some indication that stable rates really aren't a viable permanent system. | 14 |
fomc | 1,977 | Under present inflationary conditions I would say, not otherwise. | 12 |
fomc | 1,977 | Well, when you have intervention on such a scale, that means to me that a number of countries in the world are conducting their affairs in a way suggesting that they believe they are or should be in the fixed-rate system. And of course, they're doing it in the interest of protecting their foreign trade, and that's why ... | 118 |
fomc | 1,977 | At base, this is one of the elements, but I think as central bankers, we're all more concerned with the financial flows and the relative stability of our market. To have these vast amounts of money moving across the market is a problem for any central banker. I think, though, in response to Governor Wallich's point, th... | 151 |
fomc | 1,977 | You're saying that effect of intervention depends to some extent on who does it? | 15 |
fomc | 1,977 | Right. The British, if they buy another dollar today, it'll just go right into their reserves and into our bond market. If we were to buy another dollar today it would have more effect on market psychology. This is what we're facing--psychological markets. | 52 |
fomc | 1,977 | Is there any change in the psychological attitude of foreign official institutions that are a major holder of the dollar reserves, other than these major trading people? | 29 |
fomc | 1,977 | Well, it's hard to measure. At the request of the Chairman a few months ago, we have been watching very carefully for any concrete indications of shifts of funds by the OPEC central banks, in particular, and it's very hard to trace this because they are very sophisticated in the manner in which they carry out their tra... | 161 |
fomc | 1,977 | Well, had you asked the central banks and the leading OPEC countries what they may be doing? | 20 |
fomc | 1,977 | Yes, and we don't get very concrete answers either. But they do point out that they are concerned about the dollar and point out the scenario that, if the dollar continues to decline, then they have no other choice but to continue to diversify to Swiss francs, marks, and other currencies, yen, in order to maintain the ... | 71 |
fomc | 1,977 | You say continue to diversify. How far has this moved? | 12 |
fomc | 1,977 | It varies with the country. | 6 |
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