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fomc | 2,002 | Isn't a lot of the debt denominated in dollars? | 12 |
fomc | 2,002 | Oh, it used to be. It isn't any more. By a stroke of the pen, they have "pesofied" virtually everything. They cannot do that to the debt they owe to foreigners because foreigners basically will just say "no." | 49 |
fomc | 2,002 | Right. | 2 |
fomc | 2,002 | But anything that is circulating internally has been pesofied. | 12 |
fomc | 2,002 | Vice Chair. | 3 |
fomc | 2,002 | If I could make a comment, Mr. Chairman? Roger Ferguson and I attended a meeting of leading private-sector bankers and central bankers in Basel a couple of weeks ago. When the subject turned to Argentina, it was the most fascinating experience I've ever had in that there was absolute agreement between the public-sector... | 335 |
fomc | 2,002 | Jerry. | 2 |
fomc | 2,002 | I attended a meeting a couple of weeks ago at which Anne Krueger was present as was Ricardo Lopez-Murphy, who was the Argentine Defense Minister and then for a couple of weeks the Minister of the Economy. On the inflation question, Sebastian Edwards made some back-of-the-envelope calculations. These numbers to me just ... | 175 |
fomc | 2,002 | Sad stuff. | 3 |
fomc | 2,002 | It's not very encouraging. Incidentally, on the currency issue, when we subtract out the estimated change in dollars held by foreign holders, what have the domestic currency trends looked like in the last two or three months? | 43 |
fomc | 2,002 | Actually, Mr. Chairman, it's a pretty easy calculation because foreign and domestic holdings seem to be growing at just about the same rate. | 27 |
fomc | 2,002 | That doesn't make it an easy calculation. It may just be wrong! [Laughter] | 18 |
fomc | 2,002 | As we estimated it, the growth rates were similar. Looking at currency shipments in January, overseas and domestic holdings were both growing at 12 percent. In February it was about 81/2 percent for overseas and 13 percent for domestic. | 49 |
fomc | 2,002 | I assume $100 bills would move in pretty much the same way? | 14 |
fomc | 2,002 | That's in part how we get the numbers. It's one way of estimating this number; we look at that and the data we get from currency shippers. | 31 |
fomc | 2,002 | Okay. Any further questions? If not-- | 9 |
fomc | 2,002 | I move approval of the domestic operations. | 8 |
fomc | 2,002 | Second. | 2 |
fomc | 2,002 | Thank you. Without objection, they are approved. Dino you're still on. You're going to talk about GNMAs (Ginnie Maes), right? | 31 |
fomc | 2,002 | Yes. Don and I will make some brief opening comments on that topic. At this point the staff has done a fair amount of background work on how we might go about acquiring for the System Open Market Account a portfolio of GNMAs and also on structuring a portfolio of RPs (repurchase agreements) against foreign sovereign se... | 296 |
fomc | 2,002 | Yes, I just want to bring the Committee up to date on other work under way. We have a study being done on the auction credit facility (ACF), which would be a discount window facility. Rick Lang from the Philadelphia Fed is heading that up and is following up on the various issues Committee members raised when this subj... | 387 |
fomc | 2,002 | It strikes me that, if you're pressing on staff resources, the most difficult option in terms of the bridge necessary to get political and public acceptability is the use of foreign debt obligations. Unless someone has a differing view, it seems to me that we can certainly proceed with the Ginnie Maes before we can go ... | 82 |
fomc | 2,002 | I agree fully. And New York wouId have the staff do them both after we have finished the contingency work. | 23 |
fomc | 2,002 | Yes. President Broaddus. | 7 |
fomc | 2,002 | Mr. Chairman, if I could just make a couple of comments here. I certainly think these studies are useful and worthwhile. If we get to the point that we don't have enough Treasury securities out there to do our job, it's going to be helpful to have done these studies and given some thought to these alternatives in advan... | 628 |
fomc | 2,002 | Well, I think we all have problems with them. They are not options we have chosen to implement over the years, and the reasons are largely the issues that you've raised. These are fallback positions "in the event that." And the "that" may not emerge, judging from the most recent fiscal policy stances. So it may be a mo... | 109 |
fomc | 2,002 | All I'm asking is that this one other option be put on the plate and given some time and consideration. | 21 |
fomc | 2,002 | Can we have comments on that? I'm just curious to hear, say, Dino and Don's comments on that issue. | 24 |
fomc | 2,002 | I think there are a couple of issues involved, if I can dredge them up from my memory of our previous discussion. Part of the question was what the Treasury would do with the other part of its balance sheet. In effect, we'd be pushing the problem on to them. That may be where it belongs, but I think it would require a ... | 170 |
fomc | 2,002 | Well, I'm sure there are challenges and issues and mechanical questions to deal with. But that is the case with all of these other options. All I'm saying is that I hate to see this possibility get dismissed pretty much out of hand. | 47 |
fomc | 2,002 | Suppose they invested the cash in common stock, would you be appreciative of that? | 17 |
fomc | 2,002 | Well, that's their business, I guess. | 9 |
fomc | 2,002 | Mr. Chairman, working with Al and his people, we can certainly produce a short paper on this topic. Marvin Goodfriend and I had a debate about it at the Cleveland Fed last fall. We can convert our debate to a paper to bring to the Committee in a couple of months if that would be helpful. | 63 |
fomc | 2,002 | Okay. President Poole. | 6 |
fomc | 2,002 | I have a question, and it's purely a question. Given that there has been some discussion about the condition of FNMA (Fannie Mae) and FMAC (Freddie Mac), would a visible program to make possible investment in GNMA securities raise issues about why we are not investing in those of Fannie and Freddie? Would there be a po... | 131 |
fomc | 2,002 | We take Fannies and Freddies in RPs. This option would involve outright purchases of GNMAs, so we would be treating them differently. I think we would explain the difference as a full faith and credit issue. Part of the idea for moving to GNMA was that the Committee seemed not to want to increase its reliance on Fannie... | 309 |
fomc | 2,002 | President Stern. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. My issue was similar to Bill Poole's. I'm concerned about getting involved with GNMAs because of what that may lead to with regard to the pressure to make outright purchases of Fannies and Freddies, which I think would be a huge mistake. So despite all the imperfections, if I had to vote, I wou... | 85 |
fomc | 2,002 | President Jordan. | 3 |
fomc | 2,002 | Thank you. First, Al's comment about his last speech on this subject reminds me of a story from twenty-odd years ago in the banking industry. The question from one banker would be, "Have you seen Sandy Rose's last article on duration?" And the response would be, "I hope so!" [Laughter] This story does relate to GNMAs b... | 280 |
fomc | 2,002 | Governor Gramlich. | 4 |
fomc | 2,002 | I think we're all going on memory here. First, I would say that I don't have a particular preference for foreign RPs versus Ginnie Maes; I could go either way. But on the Ginnie versus Fannie/Freddie issue, I believe the distinction is that at one point Fannie and Freddie were explicitly privatized. They were supposedl... | 304 |
fomc | 2,002 | Well, they don't just have to buy assets. They can always reduce taxes. This doesn't constrain fiscal policy. | 22 |
fomc | 2,002 | But that means a deficit. That's the deficit option. Whatever you think about deficits, I believe that ought to be part of an overall fiscal strategy. And I don't want to have the Treasury changing that strategy just so we can do something that's a second-order improvement in monetary policy. I just don't think it's wo... | 64 |
fomc | 2,002 | I guess we ought to buy the Washington Senators! | 10 |
fomc | 2,002 | Or the Treasury could buy them and issue us a security. [Laughter] That I might go along with! | 23 |
fomc | 2,002 | President Santomero. | 5 |
fomc | 2,002 | I believe there's no easy answer to the question that is being raised by the Desk. If we look at the data on outstandings, that should be obvious. Once one moves away from Treasuries, what's left are corporates, agencies, mortgage-based paper of various kinds, and foreign securities--or at least foreign sovereign debt ... | 658 |
fomc | 2,002 | Vice Chair. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. I associate myself very substantially with what President Santomero has just said. I think the GNMAs are preferable to the repos with foreign sovereign debt collateral for the reasons that he cited. I also would like to remind us of the resource constraint. The limited number of people who can ... | 434 |
fomc | 2,002 | President Minehan. | 4 |
fomc | 2,002 | Well, if you wait long enough to speak, somebody says all the good stuff! I must associate myself with the views of President Santomero and Vice Chairman McDonough on this. I would also encourage us to get the work done on the contingency plans sooner rather than later. It's too easy as time goes by to let things slide... | 132 |
fomc | 2,002 | Governor Ferguson. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. I'll be the fourth in a row, so I'll be even briefer than President Minehan and say that I agree with what Tony Santomero, Bill McDonough, and Cathy Minehan have just said. Particularly since my name is somewhat associated with this contingency planning, I don't want anything to stand in the wa... | 137 |
fomc | 2,002 | President Hoenig. | 4 |
fomc | 2,002 | Mr. Chairman, if my memory serves me right, I think the last time we talked about this I favored as a "least worst" choice going with the Ginnies before going with the foreign sovereign debt. But I have a lot of sympathy for what Al said regarding the downside of the Ginnies. Nevertheless, I still would go in that dire... | 257 |
fomc | 2,002 | President Parry. | 4 |
fomc | 2,002 | Mr. Chairman, in spite of their shortcomings as well as their advantages, I think that both alternatives, as well as the ACF, are probably going to have to be arrows in the quiver for SOMA at some point. So at some time in the future, certainly after the contingency studies are completed, I think we ought to proceed. I... | 157 |
fomc | 2,002 | Governor Bies. | 4 |
fomc | 2,002 | I agree with what President Santomero said. I am very concerned, and my biggest concern is creating liquidity in a foreign market instrument. From a public policy perspective, when there are liquidity issues in U.S. markets, I think we'd have a real problem answering the question of why we chose to build liquidity in a... | 142 |
fomc | 2,002 | President Moskow. | 4 |
fomc | 2,002 | Mr. Chairman, I agree with what seems to be an emerging consensus that we do the contingency planning first and also with what Tony Santomero, Bill McDonough, and others have said. I just want to reiterate the point that Bill McDonough made. If the Congress designates certain securities as having the full faith and cre... | 225 |
fomc | 2,002 | I think it's important to point out that most of the credit allocation effect occurs with the issuance of the full faith and credit securities, not with their purchase. It's not a question of whether the Fed or somebody else holds them; that is probably worth a couple of basis points at most. The major issue is clearly... | 214 |
fomc | 2,002 | Mr. Chairman, just to complete the go-around, let me associate myself with those who have a preference for the GNMAs as opposed to the foreign debt alternative. My staff tells me that we'd be smart in the short run to concentrate on repos, even with Ginnies. Apparently there are some rather difficult accounting issues ... | 94 |
fomc | 2,002 | We already do repos in Ginnies. | 8 |
fomc | 2,002 | I assume that we could do more, as the first cut--do more repos before we do outright purchases. | 22 |
fomc | 2,002 | President McTeer. | 5 |
fomc | 2,002 | I would associate myself with Presidents Santomero, McDonough, and others in wanting to complete the contingency work first and preferring GNMAs over foreign debt. I doubt that we're ever going to need to do this, but maybe we could also buy time by lowering reserve requirements at some point so that the amount of secu... | 73 |
fomc | 2,002 | That would get somebody's attention, I'm sure. Does anybody else want to comment on this? | 19 |
fomc | 2,002 | Just two brief points. On the question of other assets that have the full faith and credit designation, there is the credit issue and then there's the liquidity issue. So, as we look at potential assets, the Desk might decide that a particular security meets our credit screen but it might not meet our liquidity screen ... | 184 |
fomc | 2,002 | Let me request that Don Kohn review the transcript of the discussion we've just had. I think it's fairly evident that the contingency planning has first and immediate priority and that there is a mixture of views beyond that. Also, I want to emphasize that this is not an issue on which those who are voting members of t... | 200 |
fomc | 2,002 | Thank you. I noted with some considerable relief the Chairman's remarks at Larry Meyer's going-away dinner in January in which he equated the making of mistakes with the learning experience. While I don't think I would classify the revisions we have made to our forecast as correcting mistakes, I can safely report to th... | 2,323 |
fomc | 2,002 | This morning the trade data for January have just been released. These data show a deficit of $28.5 billion, somewhat wider than in December and than we had incorporated in the Greenbook baseline. Compared with the revised December data, exports of goods and services were about flat. Imports rose somewhat, just about r... | 1,374 |
fomc | 2,002 | First, I was just curious, David, in your hypothesis that the sharp rise in productivity is a function of companies being blindsided to an unexpected rise in output or sales, have you taken a look at data for individual industries? I ask because this hypothesis is somewhat testable in the sense that one would expect th... | 124 |
fomc | 2,002 | We don't, Mr. Chairman. You're right that one natural place to look because we actually get timely information on industry data would be in industrial production. But since a significant chunk of that index takes labor input and makes an assumption about labor productivity, that wouldn't be a very fruitful way of going... | 186 |
fomc | 2,002 | Does the fact that initial claims seem, at least temporarily, to have stagnated at a weekly level around 400,000 suggest that the type of rises in payroll employment and in hours that are required to bring the growth in output per hour down may not be happening? | 54 |
fomc | 2,002 | I think it would be too early to say because so far the initial claims have been running more in the 385,000 area than the 400,000 area. | 34 |
fomc | 2,002 | Well, I thought our data had them a little higher, but maybe you're right. | 17 |
fomc | 2,002 | I think the mid to high 380s was where our seasonals were suggesting that claims were lined up reasonably well with the payroll employment growth. For our forecast of payroll employment, which shows a gradual acceleration to about 200,000 a month by midyear, we have a decline in initial claims to around 350,000 within ... | 72 |
fomc | 2,002 | Incidentally, what is the staff's estimate of the March industrial production index? | 16 |
fomc | 2,002 | We have a positive .3 for total IP. For manufacturing it's .1, and that is being held down by a falloff in assemblies. | 29 |
fomc | 2,002 | President Parry. | 4 |
fomc | 2,002 | Thank you. Karen, in Japan one hears a great deal about the amount and speed with which manufacturing is being moved to other parts of Asia where costs are significantly lower, particularly in the high-tech sector. Does that suggest that this outsourcing of manufacturing in Japan will lead to a different response on th... | 97 |
fomc | 2,002 | It's certainly true that outsourcing has become a much-discussed phenomenon in Japan. And many of the foreign direct investment flows into Asia arise in Japan because Japan is still running a sizable current account surplus. It has funds that need to be invested, and that goes hand-in-hand with Japan's strategy to do m... | 269 |
fomc | 2,002 | It may be that the currency would have to move more to accomplish the same amount of stimulus. | 19 |
fomc | 2,002 | True. It's certainly possible. But for example, the components that we've written down behind the scene so to speak--which give us a forecast of very low growth in 2003 rather than the contraction that we've projected for 2002--have to do with a combination of inventories plus exports working in that direction to get t... | 71 |
fomc | 2,002 | Thank you. | 3 |
fomc | 2,002 | President Moskow. | 4 |
fomc | 2,002 | I have a question for David on the longer-term outlook for inflation, beyond the actual forecast period. I'm looking at the baseline scenario and thinking about where the economy will be at the end of 2003. We will have had a year of 4 percent real GDP growth; the economy would be growing beyond potential. The output g... | 163 |
fomc | 2,002 | Actually, this is an issue that Vincent will be covering shortly in his remarks. But looking out beyond the Greenbook forecast interval--again, I caution you to take these figures with an enormous grain of salt and maybe an entire salt mine--we would expect close to another 100 basis points of tightening to be necessar... | 188 |
fomc | 2,002 | President Minehan. | 4 |
fomc | 2,002 | I had a question similar to Michael's, and maybe I should just wait for Vince to talk. Basically I want to ask you what you think the markets are telling us about inflation expectations, which we seem to think will continue to be low at the end of 2003. They fit my definition of low, let me put it that way. Any inflati... | 318 |
fomc | 2,002 | Well, so far--really up until the current quarter--our consumption functions that include both disposable income and wealth in them were tracking reasonably well. One of the points I was making in my remarks was that we actually have been assuming that there would be some shortfall in consumption behavior relative to t... | 409 |
fomc | 2,002 | President Hoenig. | 4 |
fomc | 2,002 | President Moskow asked my questions. Thank you. | 10 |
fomc | 2,002 | President Santomero. | 5 |
fomc | 2,002 | I'd be interested in some comments about what is going on in the German and French economies at this point. | 21 |
fomc | 2,002 | Germany is in the awkward position of being the weak link in the euro area, which certainly changes the nature of the debate within Europe from that prevailing in the final stages of the pre-EMU period. Both of those economies are in the throes of an election cycle, which is certainly complicating events this year. The... | 330 |
fomc | 2,002 | Anybody else? If not, who would like to start the roundtable? President Jordan. | 18 |
fomc | 2,002 | Thank you, Mr. Chairman. On the region, first I must say that even our most reliably gloomy directors and other business contacts are finding it harder to sustain their pessimism, but they work at it. [Laughter] Broadly interpreted, even those who only grudgingly admit that the situation is not as bad now as it was a f... | 1,177 |
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