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fomc
1,994
I call on Ted Truman.
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Well, let me deal with the historical issue first. The reason why Secretary Simon proposed this arrangement in 1977 was to establish a mechanism that would allow the United States to participate in the arrangement As I remember, the arrangement was in effect for a period of a year or two. It was a joint operation that ...
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Any further issues or discussion relative to the three items I mentioned? If not, let's take a single vote on all. Would somebody like to move their approval?
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So move.
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Is there a second?
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Second.
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All in favor say "Aye." SEVERAL. Aye.
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Opposed?
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No.
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Okay, the "Ayes" have it. The next item on the agenda is updating the Managers' titles in the Committee's Rules of Organization and other documents. A memorandum from Mr. Gillum was distributed a week or so ago. Any questions?
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Mr. Chairman?
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Yes.
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I'm sorry, there was a resounding silence on the last vote. I think that may reflect the fact--frankly, I didn't understand the issue and that's why I didn't say anything. I think we had two "Yeses" and one "No." While I agree it passed, could we at least have some kind of document laying out the pros and cons?
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Was that sent?
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Not the pros and cons. A document summarizing the history was circulated earlier.
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Well, I suppose what I really want to hear is--I'm asking Jerry Jordan--you said we had a letter outlining what Secretary Simon said. At some point, perhaps next year, I'd--
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Sure, certainly. Ted, why don't you arrange to distribute some information on this? Actually, we've been over this a number of times over the years, and it's an open dispute; there has not been unanimity in this Committee on this. Jerry Jordan has raised these issues before. Perhaps it would be useful to get a set of d...
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Well, we can recirculate the documents. The documentation was circulated to the Committee in 1990; not all of you were here then.
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I was not here in 1990.
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We'd be glad to recirculate that document to the Committee, and we will remind you of it next year when the topic comes up.
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Thank you.
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Okay? On updating the managers' titles, is there any question on that? Is there any objection to it? If not, I will assume it's passed. We now move to our regular pre Humphrey-Hawkins meeting and I will ask somebody to move the approval of the minutes of the Federal Open Market Committee meeting of December 21.
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So move.
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Without objection. We'll now move to Peter Fisher on foreign currency operations.
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[Statement--see Appendix.]
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Do we have to authorize the oral intervention? [Laughter]
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Questions for Peter? If not, let's move on to Joan Lovett and the Domestic Desk.
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Thank you, Mr. Chairman. [Statement--see Appendix.]
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Questions? President Forrestal.
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Joan, do you have an "add need" tomorrow as well?
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For the entire period that begins today--which is the first day of the maintenance period--both the New York and Board staffs estimate a need to add something under $1 billion for the full period. The distribution of those reserves in the first couple days of the period is such that today is sort of straddling "flat" i...
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Mr. Syron.
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Joan, just on that point. This apparently will be germane to the discussion that appropriately we will be having later about how we announce one way or the other. What does the market think we are going to do tomorrow? Is there any perception of the need to stay flat? What would they think we would do if we were stayin...
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In the market it will depend on where the federal funds rate is. I guess people will assume that if the funds rate were firm we would signal something through inaction--by not providing reserves. However, I think most of them feel that our preference would be to signal something through an assertive action and therefor...
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Would we conclude correctly, Joan, that as far as you can see today, if the Committee decided that action should be taken tomorrow, the technical condition of the market is such that it would not create a problem for us?
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I think that's correct as far as the technical condition of the money market in terms of getting the right constellation of rates. Yes, I think that's correct.
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Other questions? If not, would somebody like to move to ratify the actions taken by the Domestic Desk?
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So move.
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Is there a second?
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Second.
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Without objection. I think we can now move on to the Chart Show and Messrs. Prell and Hooper.
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Thank you, Mr. Chairman. Peter and I will be referring to the chart package that's been placed in front of you. [Statement--see Appendix.]
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[Statement--see Appendix.]
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I want to note that revisions, if any, on the forecasts that everyone submitted should be sent to Mike Prell by the close of business next Friday, February 11. Questions?
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I have two questions. The first has to do with personal income numbers. Do you have a breakdown for personal income, a forecast by source of income?
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Yes. I wouldn't want to put too fine a point on any of the numbers, but we do go through a reasonably detailed exercise.
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Could I get a copy of that breakdown?
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You're trying to get inside the factory here. I certainly will share with you our major numbers.
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Horrors! [Laughter]
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This is known as the statistical sausage factory!
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I think one has to recognize that, when we get down to these levels of detail, there are potentially a whole lot of offsetting factors and we don't necessarily have strong convictions.
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I realize that you need more details to develop forecasts. I'm not going to hold you ex post to the forecast, believe me, but I do want to have some sense particularly about whether the functional distribution of income is going to change from 1993 in your forecast. And that's why I'd appreciate more details.
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Interest and dividends versus wages and salaries?
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Yes, and small business income.
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I can share with the entire Committee in broad terms our expectations in this regard. In personal income growth, we have a substantial step-up in regular salary disbursements. Nonfarm proprietors' income is expected to rise somewhat more than in 1993, but it's not a dramatic change. Wage and salary disbursements are mu...
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What you've told me is that everything is going up. I believe that is true. I would just appreciate seeing the data expressed as relative increases at some point. My other question was on housing. I had a consumer group allege that a third of all new single-family housing starts are manufactured homes.
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Beats me. I just don't know.
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Are trailers part of that?
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That's not in manufactured homes.
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It's not mobile homes; this is housing that is prefabricated at the factory.
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Prefabricated?
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Yes, a lot of that type of construction goes on; I don't know what the number is.
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They may be including prefabs plus mobile homes, in which case--
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No, I think usually when they talk about manufactured homes they talk about the fact that they build the various structures in a factory and bring them on site for assembly. The trouble with the concept is that it varies in so many different instances as to what degree of prefabrication goes on.
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This prefabrication total has to be awfully high. You see these structures coming in on the trucks--
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If it's a third, it has to be far more--
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That seems high.
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Well, if they were including mobile homes, then that might be a quite plausible number. Mobile homes run a quarter of a million a year, so if you tacked on 100,000 or 200,000 houses as prefabs or whatever, that third would be easily attainable. I just don't know.
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You are quite right. It is attainable if they include mobile homes.
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I'll try to get more precise data.
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The other question I had was on the homeowner-ship rate. If you take out seniors, the homeownership rate declines more precipitously than it does here. But suppose you also took out two-adult households? You mentioned the role of demographics in here. Knowing the home maintenance that's involved, I couldn't imagine doi...
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Well, I've never seen figures broken out that way. I've seen it by age groups. Are you suggesting that there is a financial impediment to--
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It's more a time impediment or a hassle impediment.
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No, I don't have any real insight.
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Do you know if data exist?
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I've not seen them, but there are lots of data in this area; perhaps they have them at the Bureau of the Census.
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I call the phrase "two-adult" households as opposed to "single-adult" households--homeownership by two-adult households.
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There may be information in the housing census on those owning their homes.
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In the housing census, okay.
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Well, I suspect that somehow there's a cell buried in the data that could address--
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There is a cell in the sample.
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Okay.
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What estimate are you using internally for the January CPI change?
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I think we have about .3 percent for January.
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And the core?
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It's .4 percent for the total CPI.
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And .3 percent for the core.
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It's .4 for the total and .3 for the core?
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Yes. Again, there's some uncertainty relating to the seasonal adjustment factors. The latest word we received just a day or two ago is rather encouraging on how aggressive they may be in solving this problem.
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That seemed to be the case about 10 days ago.
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Well, we thought they were going to go a long way. They may go even further, so that the seasonal adjustment problem will be largely eradicated.
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President Parry.
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You were talking about the influence of the length of the workweek on the growth in employment. I have a recollection that when I read Part II of the Greenbook, it said that the workweek in manufacturing had reached a post-World-War-II high of 41.7 hours. Is it conceivable that the length of the workweek may actually f...
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We thought that a couple of tenths ago! The tendency has been remarkable here. I guess the conventional wisdom might be that at some point workers get tired of putting in that much overtime on a persisting basis. They like it for a while because their paychecks are padded, which makes up for the lean times.
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It's rather impressive when the length of the workweek is at a postwar peak.
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The incentives at this point look very strong for an employer. The additional worker means a batch of fixed-cost fringe benefits plus the perceived costs of hiring and possibly firing, including legal expenses. Then on top of that they fear that some medical insurance costs might be imposed that they don't face now. Ou...
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President Syron.
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Mike, just two technical questions. On this elusive business of potential, there's obviously no clear answer, but do you have any feel for where the likelihood of an error is on the potential? We are getting to really fine points here, but if you were going to guess, is the risk that your point estimate on potential is...
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I don't see a very obvious asymmetry in the risks. I might note that the CBO, using different techniques to some degree, arrived at the same numerical conclusion as our point estimate--2.4 percent. I think in the Bluebook there was, as I recall, some reference to possible risks that one could perceive. One possibility ...
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I know you said that when one tries to explain price performance, one can do it with the traditional model pretty much without taking the external sector into account in a different way than it has traditionally been done through the import and export channels. So, you don't think there's very much to this issue of whe...
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