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fomc
1,978
Mr. Chairman, I think I come out in exactly the same position as Governor Partee.
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1,978
But I think the time has come to say that there are no cowards in this room, period. I don=t want to hear remarks like that.
31
fomc
1,978
We=re all realists.
6
fomc
1,978
I only feel cowardly on M3, I think.
12
fomc
1,978
I don=t feel cowardly; I just want to exercise prudence.
15
fomc
1,978
Prudence came from New England, didn=t she?
12
fomc
1,978
How do you know the difference?
7
fomc
1,978
If he did it, it would be prudence; if you did it, it would be cowardice!
22
fomc
1,978
So I would accept your specifications with the Partee/Jackson proviso of only cutting the range for M3 by 1/2 percentage point.
30
fomc
1,978
Thank you, Mr. Morris. Mr. Eastburn now, please.
15
fomc
1,978
Well, I join the ranks of prudent men, too. The only question I have is that M2 ceiling. Really, this turns into a factual question more than anything else. In the short-term ranges, it=s expected for the next two months that the large denomination time deposits will grow enough to offset the slow growth in time deposi...
145
fomc
1,978
Thank you, Mr. Eastburn. Mr. Volcker now, please.
16
fomc
1,978
Well, it seems to me that the most important number here, in operative terms, is probably the upper limit on M1. And in terms of the mind of the market, and I suspect my own mind, as to whether we really mean it and whether we will attain it, I don=t think we can afford to lower that at this point against our past reco...
338
fomc
1,978
Thank you, Mr. Volcker. Mr. Black now, please.
15
fomc
1,978
Mr. Chairman, in your statement a while ago [you said that] if we don=t fight inflation, who will, [and that] I think provides a pretty good backdrop for this. I share what I think [are the views of] everyone else here on GNP and inflation and inflationary expectations and that the accompanying low level of confidence ...
241
fomc
1,978
Thank you, Mr. Black. Mr. Willes, please.
14
fomc
1,978
Thank you, Mr. Chairman. I won=t make any comments on the numbers. I=d just like to indicate that there seem to be two points of view expressed. One is that we don=t need to do anything about M1 because it=s nowhere near where we are anyway, so it=s kind of irrelevant. The other point of view is, I think, the one you e...
192
fomc
1,978
Thank you, Mr. Willes. Mr. Balles now, please.
16
fomc
1,978
Well, I share the view expressed by some others already that the announcement effects of these ranges are very, very considerable. And with inflationary concerns in the air both at home and abroad, not to reduce the ranges--I think we all agree--would have some very adverse effect on inflation expectations. Now, having...
299
fomc
1,978
It=s a new ballgame.
7
fomc
1,978
We=ll have to address that at the time? Is that your point?
16
fomc
1,978
Yes, it=s a new ballgame, and I think the consequences for the monetary growth rates should be taken into account beforehand by the Board. It should be considered very carefully by the Board before making a final decision on that regulation, which--
49
fomc
1,978
It wouldn=t be for a long time anyhow.
10
fomc
1,978
Well, I just assumed that at that point we might have to readjust our view of what=s feasible in terms of the ranges.
27
fomc
1,978
Oh, if that regulation is adopted by the Board, it=s a new ballgame and it would be a most confusing ballgame for quite a while. I think the Board will have to think very carefully before reaching its decision. And if its decision is to go ahead, then I think that our work in this Committee will be cut out for us.
71
fomc
1,978
What is a normal time frame for the Board=s consideration of an issue like this one?
18
fomc
1,978
Well, I think that a significant period needs to be allowed, first for study of the proposal. And second, if the Board decides to go ahead with the proposal, I think we need to give the Congress reasonable time to legislate against us if that should be the inclination of the Congress. I think it would be unwise for us ...
184
fomc
1,978
Yes, Mr. Chairman. I would join what appears to be a consensus with respect to retaining the M1 range. I=d like to specifically align myself, however, with Governor Partee=s and Governor Wallich=s comments with regard to probably hitting the upper [area] of that [4] to 6-1/2 percent, given the velocity projections by t...
127
fomc
1,978
My recommendation was neutral with regard to a half or a full point.
14
fomc
1,978
We would prefer cutting 1/2 point off M3, recognizing that we quite likely could come in toward the lower end of that range. But I would also suggest to you that you might take some comfort from the fact that we have missed the M3 targets since, I believe, the fourth quarter of 1975--always on the high side. So [if] we...
104
fomc
1,978
Thank you, Mr. Guffey. Mr. Baughman.
15
fomc
1,978
Mr. Chairman, it seems to me that the staff estimate that alternative B is consistent with the general economic forecast might well be given substantial weight at this particular juncture. It does give us no change with respect to M1 and M2. It gives us some significant change with respect to M3, but the conversation a...
147
fomc
1,978
Thank you, Mr. Baughman. Mr. Winn, would you be good enough to advise us?
22
fomc
1,978
I vote for prudence under the circumstances. And I really haven=t any quarrel with this [recommendation]. I think we ought to recognize just a little bit that our shifting base problem is happening to us in all this, however.
48
fomc
1,978
All right, thank you, Mr. Winn. The Committee is unanimous on retaining the present range for M1, except for Mr. Roos who also agrees with the Committee on the midpoint of that range. As for M2, the majority of the Committee is inclined to leave the range where it is presently. And as for M3, the majority is inclined t...
110
fomc
1,978
Mr. Chairman, do we have to consider the aggregate versus the [money market] directive, or is that--
23
fomc
1,978
No, that comes later in connection with the short-run ranges. We=ll vote on growth ranges from the fourth quarter of '77 to the fourth quarter of '78 of 4 to 6-1/2 percent for M1, 6-1/2 to 9 percent for M2, and 7-1/2 to 10 percent for M3. And if the Committee will bear with me, we shall leave it to the staff to adopt a...
123
fomc
1,978
I=m not sure why we adopt that number.
10
fomc
1,978
There are very good reasons in dealing with the Congress, and also in our own thinking, to pay some attention to the credit side and not only to the money side.
34
fomc
1,978
May I make only a comment with [regard to] setting bank credit? I think it=s not such a very good strategy to be raising the bank credit range at the same time we cut the M3 range.
44
fomc
1,978
Let us so advise the staff unambiguously.
10
fomc
1,978
Just so they find it compatible.
7
fomc
1,978
That=s a very useful reminder. Well, we=re ready for the vote, unless members of the Committee would like further deliberation. Would you be good enough to call the roll?
37
fomc
1,978
Chairman Burns Yes Vice Chairman Volcker Yes Governor Coldwell Yes President Guffey Yes Governor Jackson Yes President Mayo Yes President Morris Yes Governor Partee Yes President Roos Yes Governor Wallich Yes
39
fomc
1,978
[Statement--see Appendix.]
6
fomc
1,978
Thank you, Mr. Sternlight. Are there any questions or comments?
15
fomc
1,978
One question, Mr. Chairman.
7
fomc
1,978
Yes, Mr. Jackson.
6
fomc
1,978
This weather has produced such a substantial volume of float that our capacity for issuing currency has been potentially impaired. Has any thought been given to substituting agency securities for Treasuries so that we would still have additional leeway for the issuance of currency?
50
fomc
1,978
It=s not legal.
5
fomc
1,978
You could have a change in the law.
9
fomc
1,978
Excuse me, did I say the wrong thing? I meant where we=d sell our agencies and buy the Treasuries. Did I say the wrong thing? I apologize.
36
fomc
1,978
I think it would be difficult for the market to absorb big sales of agency issues on short notice.
20
fomc
1,978
Has some consideration been given to some careful but nonetheless deliberate shift in policy because of these restraints?
19
fomc
1,978
I=m not aware of such consideration.
8
fomc
1,978
The Desk is allergic to any such activities. Isn=t that true?
14
fomc
1,978
I think it would be hard for the market to absorb sales.
13
fomc
1,978
Hard for the market to absorb even sales of insignificant volume?
12
fomc
1,978
Small sales? We have allowed some runoff to occur in agency issues as these reach maturity. That=s just a runoff.
24
fomc
1,978
That does seem a very relevant question to me, Mr. Chairman. At the very least, it seems to be an indication that if the law isn=t changed, policy somehow isn=t changed in another respect. I think it does take a change in law; we have at the very least a very big yellow light on purchases of agencies--the net increase ...
88
fomc
1,978
I think it would be a good idea for the Desk to become--I=ll use the word "courageous" today--or to become prudent or more prudent and to exercise its greater prudence by one of these days making a sale of an insignificant volume of agency issues.
57
fomc
1,978
In light of our earlier conversation, I=d say they have been prudent. And now you think they ought to be courageous?
25
fomc
1,978
I think the Committee really ought to reach a decision on this--perhaps it=s too late--and instruct the Desk to be somewhat flexible in that direction.
31
fomc
1,978
We never sell agencies?
5
fomc
1,978
And while we=re on that, there is an age-old practice that I would like to see changed, but I don=t want to spend more than ten seconds on the point. And that is when we formally vote, we vote to approve, ratify, and confirm the transactions [of the Desk]. I think it would be more accurate, and really more proper, simp...
138
fomc
1,978
Mr. O=Connell isn=t here to defend himself.
12
fomc
1,978
Well, he=d have to defend all his predecessors, too.
13
fomc
1,978
It=s going to cause quite a stir in the market when we first start selling agencies. It seems to me that it=s incumbent upon us at that time to explain to the market why we are doing it because the stir on the first occasion is going to be pretty substantial, I would think.
59
fomc
1,978
You=re going to have to do more explaining to Congress probably, in spite of its wisdom.
19
fomc
1,978
Peter, could we sell to the Federal Financing Bank?
11
fomc
1,978
I think the explaining we will have to do, if any, is why we haven=t done it in the past--not why we are doing it now.
32
fomc
1,978
I don=t see why we can=t do it as part of a general sale when we=re selling other things rather than doing it alone.
28
fomc
1,978
We did undertake in the past, on two occasions, sales of relatively short maturities of agencies. On one occasion it went quite smoothly; on another occasion, it was rather upsetting.
37
fomc
1,978
Upsetting? [Selling] small amounts was upsetting?
11
fomc
1,978
On the order of one or two hundred million, is my recollection.
15
fomc
1,978
One or two hundred million? Well, I would not call that insignificant but, you know, I haven=t kept up with this two trillion economy of ours.
32
fomc
1,978
I think it is a policy question that the Committee would be wise to address in a definitive way.
20
fomc
1,978
I think the Committee should address this question. And it should be on the agenda for another meeting. Mr. Axilrod, you have a genius for brevity and this is the time to demonstrate it once again.
44
fomc
1,978
Thank you, Mr. Chairman. [Statement--see Appendix.]
13
fomc
1,978
Any question? If not, I=d like to go back, if you will permit me, to the question that was raised about the inclusion of a figure for bank credit in our longer-range projections. I quickly gave a reason for doing it. And yet, the fact that we as a Committee do not deal with it is troublesome. I would like to make a sug...
191
fomc
1,978
We can do that, Mr. Chairman--or perhaps [consider] institutional credit, which is quite [unintelligible] to M3.
30
fomc
1,978
Maybe. I wish you=d think about that pretty carefully and then at a later time make a recommendation. Perhaps in the future, with a wiser or more defensible measure of credit, the Committee would want to ponder it or to take it into account. Well, I=m glad you=ll undertake that study to find out. I think we=re ready no...
199
fomc
1,978
We=ve just talked about a little modification of alternative B, which I think is basically on the right track. I think there is a technical reason, as we discussed a few meetings ago, for keeping a range of 6 percentage points for M1 if M2 has a range of 4 points. I think statistically that just reflects the relative v...
563
fomc
1,978
I just object to that. That violates every canon of the English language, really, to have a range of 1/4 of one percent and talk about a monetary aggregates directive.
37
fomc
1,978
The question is what [triggers a] move within that 1/4 of one percent.
20
fomc
1,978
We have gotten to a point of fine-tuning that is far beyond our knowledge or understanding or even our good sense. I=ve made myself clear, I hope.
34
fomc
1,978
I don=t think your logic is inconsistent, but the nature of the directive is not a major preoccupation of mine. The limits on the range--
30
fomc
1,978
All right. Thank you, Mr. Volcker. Mr. Coldwell now, please.
19
fomc
1,978
Mr. Chairman, I=d take alternative B. I have some doubts about the figures the staff is [projecting for] the rates of [monetary] growth in February and March. I have a suspicion that the March figure is going to be sharply higher than what [they're] showing. But there is some leeway in this averaging business, and as l...
249
fomc
1,978
Thank you, Mr. Coldwell. Mr. Black, please.
14
fomc
1,978
Steve Axilrod has reminded us all that we are approaching a pretty difficult period if we=re trying to project the aggregates. And this year the [tax] refunds are expected to be larger and a larger percentage is expected to be paid in March, so I would share Governor Coldwell=s idea about the prognostication for the Ma...
353
fomc
1,978
Thank you, Mr. Black. Mr. Wallich, please.
14
fomc
1,978
I=m concerned about the wide M1 range. If you take February as given, that means the March M1 growth can move up or down 5 percentage points from where it is without triggering the funds rate if we=re on the money market directive; it means a swing of 10 percentage points that we are allowing ourselves. What are we gai...
128
fomc
1,978
It depends on how much volatility there is.
9
fomc
1,978
We can have [by] the next meeting a strong move in the aggregates one way or the other, and we are going to be confronted with that situation of moving the funds rate whether we like it or not, and we are going to have lost half a month or so. So I think we are better off doing the following: Setting a narrower range a...
218
fomc
1,978
May I point out one thing? The next meeting will be held three weeks from today. We will have figures on monetary aggregates that will be worth paying some attention to only by Thursday of next week, which is approximately a week and half from now. If there ever was a time to try to stand still, both because of the bre...
119
fomc
1,978
Mr. Chairman, these numbers associated with alternative B are rather attractive to me. If I had a personal preference, and absent your very last comment that maybe the time does argue for no change, I guess it would be easing down M1 1/2 percentage point [on the top and bottom] to 1/2 to 5-1/2 percent, M2 as suggested ...
189
fomc
1,978
Thank you, Mr. Kimbrell. Mr. Partee, please.
16
fomc
1,978
When we [discuss] the difficulty with the aggregates, everyone is assuming that March may be a very strong month. What if the coal strike goes on? March could be a very low month. I think there are so many uncertainties in the picture that we can=t really, within a range of 10 points, say what M1 is likely to do in the...
263
fomc
1,978
Taking no aggregates--without any ranges?
8