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fomc | 1,977 | You mean to refer to both, domestic and international. | 11 |
fomc | 1,977 | Yes, domestic and international. | 6 |
fomc | 1,977 | I would strongly support that. The specific suggestion by Mr. Volcker is on lines 78 to 80, to be revised as follows: "In the conduct of day-to-day operations, account shall be taken of emerging financial market conditions, including the unsettled conditions in foreign exchange markets." And I think the added phrase is... | 83 |
fomc | 1,977 | Well, that would be within the [federal funds rate] range that we would select--your 6-1/4 to 6-3/4 percent? | 35 |
fomc | 1,977 | Now, there is another change that has been suggested--it's purely factual, and that is on line 18, where "a decline of about 2-1/2 percent in the value of the dollar against major foreign currencies," that should read "a decline of more than 3 percent"; that's simply a correction. The dollar has been moving; as a matte... | 92 |
fomc | 1,977 | Right, Mr. Chairman. As of this morning, since the last Committee meeting, the change on our weighted average is 3-1/2 percent. I think "more than 3 percent" captures it. It might be more than that now. | 52 |
fomc | 1,977 | "More than 3 percent" will capture it. This is just a single day's quote, you see. No dissent from that I take it? All right, thank you, Mr. Volcker. And now, Mr. Black, please. | 50 |
fomc | 1,977 | Mr. Chairman, you opened your statement by mentioning that the aggregates had quieted down, and I share this feeling. I would simply like to add one amplification to that, and that is, if you look at the behavior of M2 in the last couple of months and subtract out the large time component on that, instead of an apparen... | 189 |
fomc | 1,977 | Very reassuring. | 3 |
fomc | 1,977 | I'm sure it is. Turning to the federal funds rate, I think the specifications of B are about right. I have a lot of sympathy for what Dave Eastburn was saying. [For M1], I would not even worry about bringing the floor down below the 2-1/2 percent that he specified, and I would prefer a 7 percent or so ceiling on the ot... | 181 |
fomc | 1,977 | Thank you, Mr. Black. Mr. Coldwell now, please. | 15 |
fomc | 1,977 | Mr. Chairman, the suggestion you've raised bothers me only a little bit, the 2-1/2 to 8-1/2 percent [range for M1], because if I read these estimates for December and January, the average is 6.8 percent, which leaves you a margin of only 1-1/2 percent if the staff estimate, on an averaging basis, is anywhere near corre... | 314 |
fomc | 1,977 | Thank you, Mr. Coldwell. Mr. Roos, please. | 15 |
fomc | 1,977 | Mr. Chairman, I'm troubled by the upper limit of the M1 range. As I calculate it, in the Bluebook projection, they project first-quarter money growth at about a 5-1/2, 5.6 percent annual rate. If we permit M1 to grow at anything like 8, 8-1/2 to 9 percent, and if it should get to the top of the range, which certainly h... | 525 |
fomc | 1,977 | Would this be a correct interpretation of your position, that you prefer a monetary aggregates directive? | 18 |
fomc | 1,977 | Yes, certainly. | 4 |
fomc | 1,977 | Which would mean an earlier response by the Desk. | 10 |
fomc | 1,977 | Could the response--coming to the extent that we can anticipate what might happen--does that response have to be delayed until it's within 1 percentage point? I don't-- | 34 |
fomc | 1,977 | I don't think we ought to change the rules under which we operate. That is something that we ought to do only after due deliberation. | 28 |
fomc | 1,977 | The trouble with that is, if they come in low you are forced to move it lower and we don't want to-- | 24 |
fomc | 1,977 | By changing the habitual range for the aggregates and for the funds rate, we have really made every directive we give into a money market directive, because it used to be that the ratio was 2 to 1 between the spread in the aggregates and the spread in the funds rate. Now, it is on the order of 12 to 1, so it takes much... | 99 |
fomc | 1,977 | Well, I don't want to debate the past about whether we did or did not change the rules. If the Committee wants to change the rules, the Committee obviously is free to do so. I merely caution against doing it without due consideration, but that's up to the Committee. | 55 |
fomc | 1,977 | Well, Mr. Chairman, if I may, if we do view potential inflation late next year or early in '79 as a serious problem, if business is concerned about inflation--which certainly everything we hear in our District implies that it is--if we feel that the economy is fairly strong, and with the growth of money that has occurr... | 177 |
fomc | 1,977 | I don't disagree with you. What troubles me is that, you see, the monetary aggregates evolve and they evolve on the basis partly of hard data, partly on the basis of soft data, partly on the basis of no data. And therefore, the distinctions that you're making with such precision are fuzzy in my own mind in view of the ... | 78 |
fomc | 1,977 | Well, Mr. Chairman, if there is this fuzziness and this uncertainty, then why don't we retreat from spending the time and effort that we do on the aggregates, and why don't we just tell the world--I don't mean this in a disrespectful way--but why don't we go the fed funds route instead of trying to imply--I think the w... | 149 |
fomc | 1,977 | I think my statement--I didn't make my position clear. I didn't mean to say that M1 and M2 over a period of time are fuzzy. I meant to say that the Desk is responding to estimates. And therefore, the distinctions that you are making, I felt in view of the way in which the Desk operates--and it can't operate in a very d... | 86 |
fomc | 1,977 | Is there not a problem--and I would agree on the short run--is there not a problem of the accumulative effect of a lot of short run-- | 32 |
fomc | 1,977 | There, there I am entirely with you. Well, I think you've made your position clear, and I think to accomplish your objective, what that requires is not so much--first of all, a monetary aggregates directive, and second, probably a lower upper limit of the M1 range, rather than some change in our procedure and special i... | 72 |
fomc | 1,977 | Mr. Chairman, couldn't you also go with a money market directive and still lower upper limits? | 19 |
fomc | 1,977 | Yes, yes, that's another way of doing it. | 11 |
fomc | 1,977 | That would be my preference. I don't think we are so far apart on our objectives, but in view of uncertainties, I'd prefer that route. | 29 |
fomc | 1,977 | Well, I think we understand one another reasonably well, now. Mr. Partee, please. | 20 |
fomc | 1,977 | Well, I'm somewhat sympathetic with Phil Coldwell's point. I think that the 2-1/2 to 8-1/2 percent range will bias the result in terms of a higher funds rate when the period is over because the midpoint of the staff estimate is in the upper part of that 2-1/2 to 8-1/2 range. And I must say that, without knowing anythin... | 307 |
fomc | 1,977 | Thank you, Mr. Partee. Mr. Wallich now, please. | 16 |
fomc | 1,977 | I have no problem with the specifications of the funds rate in [alternative] B. I would prefer an aggregates directive. But let me explain why I said I think all our directives now are money market directives; [it is] because the range for the funds rate is very narrow and the range for the aggregates is going wide, so... | 195 |
fomc | 1,977 | Thank you, Mr. Wallich. Mr. Jackson now, please. | 15 |
fomc | 1,977 | I share the concern that was expressed by Governor Wallich about our spread. However, I'm afraid our reasons have been produced by different circumstances, and that is, our recent experience with the inaccuracy of the projections with which we're dealing. If I thought for a moment that our projections, which were the b... | 391 |
fomc | 1,977 | Thank you, Mr. Jackson. Mr. Baughman now, please. | 16 |
fomc | 1,977 | Mr. Chairman, your suggested modification of alternative B is acceptable to me. I would like to see the Committee move to give the aggregates a little more weight in policy than they've had for awhile now. And it seems to me that, at the present time, it might be all right to do that by going with an aggregates directi... | 107 |
fomc | 1,977 | Thank you, Mr. Baughman. Mr. Gardner next, please. | 16 |
fomc | 1,977 | Mr. Chairman, I can agree with your specifications, and if we can negotiate a slightly lower top, I won't have any trouble with that. But in any event, I believe that I came into this discussion with the hopes that we would continue on as much of our present course as possible, and I would favor the money market formul... | 82 |
fomc | 1,977 | Thank you, Mr. Gardner. Mr. Balles, please. | 14 |
fomc | 1,977 | Mr. Chairman, for reasons you've set forth and which others have repeated, I think your specifications are good. If anything, I would lean a little more toward the view that Mr. Eastburn expressed, but I could accept either one. It seems to me that this is a pretty good time for us to be holding steady, and because of ... | 90 |
fomc | 1,977 | Thank you, Mr. Balles. Mr. Winn now, please. | 15 |
fomc | 1,977 | Mr. Chairman, I'd associate myself with John's comments, that I would be happier if we could lower the range of the aggregates a little bit; but I find your suggestions acceptable. I'd like to make one point, however, that we're placing an awful lot of emphasis on the aggregates numbers. And I must confess, I get nervo... | 108 |
fomc | 1,977 | You are worried about the accuracy of our statistics? | 10 |
fomc | 1,977 | Yes, that's correct. I mean, when you see this expanding loan volume and expanding business activity, and here we are getting a negative number, which makes me-- | 33 |
fomc | 1,977 | Probably very temporary. | 4 |
fomc | 1,977 | I know, but it still makes me nervous. | 10 |
fomc | 1,977 | A little earlier, when the economy was-- | 9 |
fomc | 1,977 | I know; it happened in reverse. That makes me nervous about those numbers, too. | 18 |
fomc | 1,977 | You're just nervous. | 4 |
fomc | 1,977 | Maybe we are dealing with lag time, then. | 10 |
fomc | 1,977 | I don't know. | 4 |
fomc | 1,977 | Well, I think we ought to be dealing with averaging time on the aggregates. | 16 |
fomc | 1,977 | Yes, that's right. | 5 |
fomc | 1,977 | Several members of the Committee have not yet spoken. Mr. Mayo, please. | 16 |
fomc | 1,977 | Mr. Chairman, unlike Henry, who says that all of the recent directives have looked like money market directives to him, even if they are stated in the other words, I think a good case can be made that all of our directives over the last year have been aggregates directives because we do, I think, tend to pay too much a... | 205 |
fomc | 1,977 | Where is that? | 4 |
fomc | 1,977 | Well, it's page 5, the very last page, I guess it is, of the directive formulation that was circulated to us yesterday. Lines--well, it's specifically line 80. | 38 |
fomc | 1,977 | You'd have that read "at about the current level"? | 12 |
fomc | 1,977 | Yes, I'd keep it there. That was what this Committee agreed to last time, and I see no reason to change it. Roger reminds me that we had in mind that this may get published, and I think the same reasons-- | 47 |
fomc | 1,977 | I don't know why that happened. I don't know why. | 12 |
fomc | 1,977 | Well, I'd like to suggest that it be put back in, the "current level." | 18 |
fomc | 1,977 | In the money market formulation, it would have been. | 11 |
fomc | 1,977 | We normally take out the specifications shown last time with the strike-throughs on page 5, | 19 |
fomc | 1,977 | On page 5, it's crossed out. | 9 |
fomc | 1,977 | Last time the specification [unintelligible]. And the specifications last time at that point were in the form of the words in the current level. So following our standard procedure, we struck it, but the Committee can, of course write them back in. | 52 |
fomc | 1,977 | Any difficulty in writing that in? Well, I hear none. | 13 |
fomc | 1,977 | It's pretty clear what it is. | 7 |
fomc | 1,977 | It's very clear this time. | 6 |
fomc | 1,977 | I'm glad you caught that, Mr. Mayo. | 10 |
fomc | 1,977 | To continue, I find alternative B quite congenial--2-1/2 to 8-1/2 is all right, and I don't worry as much as some of my associates about that 8-1/2 despite my remarks on statistics. I think we are quite capable and will be alert and the Chairman can call us in session if indeed there seems to be a quarterly aberration,... | 228 |
fomc | 1,977 | May I respond, just briefly on--that was one reason for supporting [the] lower range for M1 that a wider range for M2 would give you. | 33 |
fomc | 1,977 | It does, but I would just go you one notch further, Phil. | 15 |
fomc | 1,977 | Thank you, Mr. Mayo. Mr. Morris now, please. | 14 |
fomc | 1,977 | Well, Mr. Chairman, things are going our way for a change, and I think your specifications are quite acceptable. I would have a slight preference for Paul Volcker's 2 to 8, but apart from that-- | 46 |
fomc | 1,977 | Thank you, Mr. Morris. | 7 |
fomc | 1,977 | I'm fine with your specifications. | 6 |
fomc | 1,977 | Thank you, Mr. Lilly. Anyone else who hasn't spoken and who would like to speak, or anyone who has already spoken would like to speak again? | 31 |
fomc | 1,977 | A question, Mr. Chairman. | 7 |
fomc | 1,977 | Please. | 2 |
fomc | 1,977 | Am I correct in assuming that if we adopt a money market directive, that there is a greater delay in action by the Desk? In other words, that we have a greater possibility [with a money market directive] of reaching the upper level of whatever ranges we adopt [unintelligible] than if we have an aggregates directive? | 67 |
fomc | 1,977 | That is how I would understand the final decision. | 10 |
fomc | 1,977 | Is it possible, Mr. Chairman, is it procedurally correct, that we take the vote on the directive prior to the range? | 28 |
fomc | 1,977 | Yes. Yes, in view of the fact that not all members of the Committee have indicated what they feel, the directive language ought to be--we'll do that. But let me just take a few seconds to see where we are. | 48 |
fomc | 1,977 | Mr. Chairman, while you are doing that, may I suggest something here. I'd like to have the staff look into the possibilities of using two-month retro and one-month forward instead of our present two-month aggregates figure. So that for today-- | 49 |
fomc | 1,977 | That is something for Mr. Partee's committee to look into. | 14 |
fomc | 1,977 | One thing we're studying. | 5 |
fomc | 1,977 | You are studying it now? | 6 |
fomc | 1,977 | Yes. | 2 |
fomc | 1,977 | Good. | 2 |
fomc | 1,977 | That is, using this as the midpoint of a quarter. | 12 |
fomc | 1,977 | Right. | 2 |
fomc | 1,977 | That has a great deal of merit, and I hope that you will pursue that signal. | 18 |
fomc | 1,977 | That's been studied to some degree, but let's study it more intensely. | 14 |
fomc | 1,977 | Well, it reduces the amount of forecasting influence. | 10 |
fomc | 1,977 | That isn't the midpoint Phil. [Unintelligible.] | 12 |
fomc | 1,977 | Well, I'm talking about for today, in December, using November, December, and January. | 19 |
fomc | 1,977 | Gentlemen, let me indicate where we are. I think there is a pretty clear consensus within the Committee with regard to the several ranges. A range of 2-1/2 to 8-1/2 percent for M1, a range of 6 to 10 for M2, a range of 6-1/4 to 6-3/4 [for the federal funds rate]. And now let us have a show of hands on the language of t... | 119 |
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