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fomc | 2,001 | Thank you, Mr. Chairman. I've long thought that a variety of unforecastable internal and external shocks do happen and that there's nothing much we can do about that but try to interpret them and respond appropriately. And we can hope that we don't get a succession of shocks going in the same direction that builds into... | 370 |
fomc | 2,001 | President Hoenig. | 4 |
fomc | 2,001 | Mr. Chairman, I will take your lead on this. But I also want to express a differing view in the sense that while our economy obviously had a terrible shock, we have taken very aggressive and I think appropriate action and monetary policy is now in an accommodative position. Some time has to pass before we will see an u... | 230 |
fomc | 2,001 | President Minehan. | 4 |
fomc | 2,001 | I, like President Hoenig, would be much more comfortable with a move of 25 basis points or even no change versus your recommendation of 50 basis points. I want to go through some of my thinking on this. I think it's right to ease further. I had the same kind of battle with myself over the weekend that a couple of other... | 610 |
fomc | 2,001 | President Moskow. | 4 |
fomc | 2,001 | Thank you, Mr. Chairman. I started out my comments earlier by saying that this is an uncertain and unprecedented time. That clearly was evident as we went around the room and heard the comments during the go-around, which I too found very depressing. I expected it coming into the meeting because all the data and all th... | 263 |
fomc | 2,001 | President McTeer. | 5 |
fomc | 2,001 | Mr. Chairman, first I'd like to correct the record regarding Al and I swapping hats. The point of my remembering the Alamo was that even though the defenders lost the battle it was not because they were keeping their powder dry. So basically, he came around to my point of view! [Laughter] I agree with your recommendati... | 68 |
fomc | 2,001 | President Guynn. | 4 |
fomc | 2,001 | Mr. Chairman, this is the most fascinating meeting in my six years at the table. People have often asked me if I ever change my mind during the course of a meeting and I always say "yes," but I'm not sure that I often do. Today is probably the exception. I not only went into the weekend but I came out of the weekend th... | 218 |
fomc | 2,001 | Will you read the appropriate wording? | 7 |
fomc | 2,001 | This is from page 13 in the Bluebook: "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee in the immediate future seeks conditions in reserve markets consistent with reduci... | 124 |
fomc | 2,001 | Would you call the roll? | 6 |
fomc | 2,001 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Ferguson Yes President Hoenig Yes Governor Kelley Yes Governor Meyer Yes President Minehan Yes President Moskow Yes President Poole Yes | 36 |
fomc | 2,001 | You missed Governor Gramlich. | 6 |
fomc | 2,001 | May I vote also? [Laughter] I believe I'm entitled to. | 15 |
fomc | 2,001 | All right, Governor Gramlich. I have you voting "yes." [Laughter] | 18 |
fomc | 2,001 | I didn't think I was that transparent! I vote "yes." | 13 |
fomc | 2,001 | The preliminary statement that has been drafted is very close to the previous one. It's very short and it will be circulated to you. In the meantime I request that the Board of Governors retire to the room next door so that we can act on a discount rate request. So, this meeting is in recess and we will return shortly.... | 70 |
fomc | 2,001 | Do you need a vote on this statement? | 9 |
fomc | 2,001 | No. | 2 |
fomc | 2,001 | I just want to ask whether it's really necessary to make what could be interpreted as derogatory references to enhancing security. It's clear that the diversion of resources to security enhancement will have a negative effect on productivity, but do we really need to say that in this statement? After all, the whole wor... | 107 |
fomc | 2,001 | I think that's a valid criticism. Would somebody else like to comment on it? | 16 |
fomc | 2,001 | Well, if we don't say something about the reduction in productivity over the short run, for whatever reason, the statement will suggest that we think productivity is going to bounce back as soon as this economic slowdown abates. That sounds too much like whistling in the wind. I'm not sure we need to blame it on protec... | 90 |
fomc | 2,001 | No, I agree with that. I think the question is whether or not we phrase it in the way it is phrased here. | 27 |
fomc | 2,001 | Can we just say that because of the economic slowdown or the cyclical impact or something like that productivity growth will slow? | 24 |
fomc | 2,001 | No, there is a heightened risk premium that has occurred as a consequence of this. What we're talking about, in the extreme form, is the elimination of just-in time inventories. | 36 |
fomc | 2,001 | Yes, I know what you mean. But I don't think this is the time to be sounding quite so negative about security. | 25 |
fomc | 2,001 | Well, could we say the "appropriate" or the "necessary" diversion of resources to enhance security or something along those lines to suggest that it is well understood that resources will be used in this way? | 41 |
fomc | 2,001 | I think the word "necessary" is good. | 10 |
fomc | 2,001 | Yes, why don't we say the "necessary diversion of resources"? | 13 |
fomc | 2,001 | Yes, that does it. | 6 |
fomc | 2,001 | Or how about just the "reallocation of resources"? | 11 |
fomc | 2,001 | No, "necessary" addresses the issue that Cathy is raising. | 13 |
fomc | 2,001 | That turns it positive. | 5 |
fomc | 2,001 | Is that adequate? | 4 |
fomc | 2,001 | Well, let me first comment on the broader point and I'll also talk about the words used. Continuing with Bill McDonough's whistling in the wind argument, I think we also have to show that we recognize this phenomenon, whether we call it a reallocation or a diversion of resources. So I think we actually have to tie that... | 156 |
fomc | 2,001 | Would you feel better if we said: "The necessary diversion of resources to enhance security is likely to detract from advances in productivity for a time"? | 30 |
fomc | 2,001 | How about "necessary reallocation of resources"? I think that was somebody's suggestion. That sounds a little better. | 23 |
fomc | 2,001 | Okay. | 2 |
fomc | 2,001 | That's better. | 3 |
fomc | 2,001 | But the economic slowdown all by itself produces a reduction in productivity. | 13 |
fomc | 2,001 | No, the reference here is to structural productivity. I might note that the estimate for productivity in the third quarter is going to be coming out tomorrow. I don't know what the precise number is going to be, but it's going to show strong productivity in the quarter. If we subtracted out the September 11th problem, ... | 88 |
fomc | 2,001 | Yes. | 2 |
fomc | 2,001 | So it's not cyclical productivity we're talking about. | 10 |
fomc | 2,001 | No, I realize that. | 6 |
fomc | 2,001 | Mr. Chairman, could I offer a slightly different perspective? It may be consistent with what is bothering Cathy. The last clause is a clear statement that productivity growth is good. I might think that and everybody around this table might think that. But hypothetically, suppose 20 years ago we had substituted for the... | 130 |
fomc | 2,001 | That's my point exactly. You stated it so much better than I did. | 15 |
fomc | 2,001 | I agree with that. That's why the words "necessary reallocation"-- | 14 |
fomc | 2,001 | I don't think that takes away the negative tenor. | 10 |
fomc | 2,001 | Pardon me, but it's a measurement issue, isn't it? The GDP doesn't measure increased security; it doesn't give better security a positive weight. Is there a way to get the word "measurement" in here? | 43 |
fomc | 2,001 | Measured productivity. | 3 |
fomc | 2,001 | Yes, that may do it. | 7 |
fomc | 2,001 | We're trying to get across a very sophisticated concept here. | 11 |
fomc | 2,001 | Yes, measured productivity. I think the key question as far as the statement goes is: Do we want to leave in "and protect against production disruptions"? | 31 |
fomc | 2,001 | Yes, right. | 4 |
fomc | 2,001 | I don't think we need that. | 7 |
fomc | 2,001 | The sentence is very long. Let me read it and see whether or not we need that phrase. "Although the necessary..." Do we want to say "reallocation" or "diversion"? SEVERAL. "Reallocation." | 47 |
fomc | 2,001 | "Reallocation" is more positive. | 8 |
fomc | 2,001 | "Although the necessary reallocation of resources to enhance security is likely to detract from measured advances in productivity for a time, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate." | 51 |
fomc | 2,001 | Did you keep in "advances in productivity" or did you say "measured productivity"? | 19 |
fomc | 2,001 | The first reference is to measured productivity. The second one is to true productivity growth so I would leave the word "measured" out. | 28 |
fomc | 2,001 | Yes. | 2 |
fomc | 2,001 | But one could argue, along the lines that President Jordan did, that the actual productivity of the U.S. economy is better because of what might have been looked at as overhead expenditures on clean air and clean water. This reallocation of resources may turn out not to be a terrible development. | 58 |
fomc | 2,001 | Let me tell you what the problem is. If we're going to get into this, we've got a serious problem, which is whether in fact we're measuring efficiency or improvements in the quality of our standard of living. | 42 |
fomc | 2,001 | Right. | 2 |
fomc | 2,001 | Environmental and other types of controls do not increase efficiency. They improve the quality of life. Measured productivity is efficiency. | 24 |
fomc | 2,001 | The improved quality of life could make the overall labor force more efficient. | 14 |
fomc | 2,001 | It's conceivable, but that's not what is being measured. One way of looking at it is that a lot of activities basically don't benefit us because they are in some sense protective. A big chunk of medical expenditures falls into that category; it depends on whether the expense is for preventive or curative purposes. What... | 77 |
fomc | 2,001 | I know. | 3 |
fomc | 2,001 | We don't want to get into that. | 8 |
fomc | 2,001 | No, we don't. But I also don't think we want to come out with a statement that could be interpreted negatively. Granted, there are a zillion different sophisticated arguments one can make about why this statement is true. I still think the public interpretation of it will be negative with regard to security. | 60 |
fomc | 2,001 | Can we say "the appropriate reallocation of resources"? I made the statement in testimony to Congress in very much this way. I got very positive responses. | 31 |
fomc | 2,001 | Absolutely. I dispute the major premise here, which is that it's negative. I don't find it negative for the Federal Reserve to say that investment in security is a good thing, which is in my view what we're saying. I absolutely fail to see how that's negative. | 53 |
fomc | 2,001 | Well, maybe it's just an interpretation. I think investment in security is a good thing right now. That's what we need. | 25 |
fomc | 2,001 | Mr. Chairman, if you wanted to appear more neutral, the verb "detracts" may also seem negative. | 24 |
fomc | 2,001 | Yes. | 2 |
fomc | 2,001 | So if instead it said "is likely to slow the advance in measured productivity" I think that would pretty much go in the direction of neutrality. | 29 |
fomc | 2,001 | I think that's very good. I'd suggest the language "may restrain advances in productivity," which is shorter and less awkward. | 25 |
fomc | 2,001 | How about "may restrain advances in near-term measurements of productivity." | 14 |
fomc | 2,001 | You're on a roll, Al! [Laughter] | 11 |
fomc | 2,001 | Let's do it. | 4 |
fomc | 2,001 | "May restrain advances?" | 6 |
fomc | 2,001 | Yes, in that context we don't really need measured. Let me reread it. "Although the"--do you want to say necessary or appropriate? | 30 |
fomc | 2,001 | "Appropriate." | 4 |
fomc | 2,001 | "Although the appropriate reallocation of resources to enhance security may restrain advances in productivity for a time, the long-term prospects" etc. | 28 |
fomc | 2,001 | Great. | 2 |
fomc | 2,001 | That's shorter. | 3 |
fomc | 2,001 | I think that does it. | 6 |
fomc | 2,001 | All right! | 3 |
fomc | 2,001 | President Moskow. | 4 |
fomc | 2,001 | May I just ask a question? In the second paragraph, third line, is the phrase "for the foreseeable future" new in this statement? | 29 |
fomc | 2,001 | No, it's part of the boilerplate. | 9 |
fomc | 2,001 | We had it in previous statements? | 7 |
fomc | 2,001 | Oh yes, it's part of the boilerplate. | 10 |
fomc | 2,001 | We've had that in our statements since the Ferguson Committee came up with it. | 15 |
fomc | 2,001 | It's in a slightly different location in this statement, but we always use it. | 16 |
fomc | 2,001 | Okay? | 2 |
fomc | 2,001 | Fine. | 2 |
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