WEBVTT
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Welcome once again as MIT professor Paul Samuelson
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discusses the current economic scene.
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This series is produced by
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Instructional Dynamics Incorporated.
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This recording was made February 26.
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We haven't looked for a little while
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at what the different authorities think about
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the developments of the American economy.
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This is a very relevant question because there is a
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tremendous amount of inflation concern throughout the land
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and in addition, there is a tremendous amount
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of recession concern throughout the land.
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As an example, when in Grand Rapids, Michigan,
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there was a turnover in a rather safe Republican district.
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Vice President Ford's former congregational seat,
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a seat which had gone Republican in every election
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since 1910, including the 1932 debacle
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during the Great Depression, when a Democrat
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ousted the man picked by Ford to succeed him.
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The explanation which most people gave
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was that this was a mandate or a plebiscite on Watergate
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but Vice President Ford called to our attention the fact
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that there's a great deal of unemployment in that area,
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it's related to the automobile industry,
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and that that, in his opinion,
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was a swing factor in the election.
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Well, where do we stand?
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What do the different authorities think is in store for us
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throughout the rest of this year now that they've
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had a chance to take a second look at the picture?
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Well in broad outlines as I look at
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half a dozen different forecasts,
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you still have pretty fair agreement
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that during the first part of the year,
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there will be real growth weakness in the economy.
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Negative growth in the first quarter, I think,
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in everybody's forecast.
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And that in the last quarter of the year,
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you will be on the comeback trail with positive real growth.
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There is general agreement that unemployment is gonna rise
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through most of the year, if not all of the year.
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There is general agreement that prices
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which are horrendous now, will not be as bad
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in the fourth quarter of the year
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as they are in the first quarter of the year.
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Now I know you'll say you've heard that story before
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but let's tell the story first and then
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let's analyze it to see what we think are
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the prospects for actual events working out
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in accordance with the authorities.
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What I've done is to jot down before me,
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four different forecasts.
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Thereby four different forecasters
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with pretty good track records over the years.
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These forecasters in my observation,
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have done better than any amateur's models
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and there is no exception that I can think of
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to that statement.
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They have done better than any
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automatic computer model on the average.
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Whether it be a monitores model like that of
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the Federal Reserve Bank of Saint Louis
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or whether it be a more complicated,
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if not more sophisticated model like that of
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Professor Ray Fair of Princeton University.
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So their testimony is worth paying attention to.
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What I've jotted down for these forecasters is
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where they think we're going to be in the fourth quarter
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of this year to see how much agreement there is
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and also to see whether it's a sad picture
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or whether it's a pretty picture.
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Time doesn't permit going down the whole vector of elements
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which a forecaster would want to forecast.
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Typically there are 30-40 key variables
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that you would be interested in.
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So I've just jotted down the few most important ones.
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Namely the rate of growth of real output,
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how that'll be in the fourth quarter of the year.
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The rate of growth of the general price level
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as measured by the GNP deflator which is not quite
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the same thing as the consumers price index.
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If time permits, I'll try to look into some of these
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forecasts to see what difference that would make.
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I think it's a small, significant difference
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but still a small difference.
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Then I've jotted down what the unemployment rate
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is expected to be in the fourth quarter.
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And finally for somebody who might just have interest
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in that sort of thing, what the rate of corporate profits
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after taxes will be in the fourth quarter of the year.
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Well, who is in the lineup?
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In no particular order, I've listed
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Data Resources Incorporated of my part of the world.
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The head of this is Professor Otto Eckstein
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of Harvard University.
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A distinguished student of public finance,
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a scholar, an expert in macro economics who has a PhD
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from Harvard and had undergraduate training at Princeton.
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He also has had rather extensive governmental experience
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having been on President Johnson's
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Council of Economic Advisors.
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He's the chap who, as a very young man,
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prepared the tremendous study in 1959
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for the joint economic committee.
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His credentials are in very good order
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and I would not dream of letting a quarter go by
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without trying to learn what the RI
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thinks is in the picture.
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Then we have the Wharton School model.
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I think very few words are required from me on this subject
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because I've quoted it extensively.
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The Wharton School model is of course
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not associated formally with the Wharton School as such
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but it is associated with a project there; computer project
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under the direction of Professor Lawrence Klein
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who you might say is the United State's tinbergen in being
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the dean of those who make macro economic models.
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He was a moving spirit behind the University of Michigan
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model years ago when he was at the University of Michigan
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and he's carried forward this activity.
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The third one I thought just for variety,
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I would pick a private model not for public circulation.
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This is for an investment banking firm.
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The economist who prepares the model is a friend of mine
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and he gave me this model in confidence.
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There's nothing secret about it but it's not something
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that's to be associated with his firms name.
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The reason that I think it's appropriate for me
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to bring it into the picture is that you might think
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that there are two levels of knowledge.
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There's inside knowledge and there's outside knowledge
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and there's two levels of communication.
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What people really think and what
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they think for the public record.
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I think you'll find that there is no such distinction
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were you to make a round up of internal forecasts
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and external forecasts.
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You would find that their median in the different components
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came to pretty much the same thing.
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The same distribution of fools and wise men
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and candid people and non candid people in both universe's.
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Finally, you've heard me many times
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quote from the Townsend Greenspan forecast and that
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which is the brainchild of Alan Greenspan
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has a very good track record indeed
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and I would certainly not let any quarter go by
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without finding out what the Townsend Greenspan organization
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sees ahead if that information was available to me.
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Now I could have quoted still others.
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I don't think the picture would have been
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substantially different and my leaving out any name
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represents no invidious distinction.
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It's just what I happen to have conveniently in hand
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for the preparation of this recording.
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Well now let's see what's going to happen
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to the rate of real growth in the last quarter of the year.
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Is it going to be negative?
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Not a single one of these four forecasters
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envisages a negative number.
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Indeed, two of them envisaged that we'll be above
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the normal growth rate for the American economy.
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DRI says plus 5.9% provided I have not misread
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and no I see I have not misread.
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That's a whopping six percent increase in real output
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by the last quarter of the year.
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And the Townsend Greenspan is five and a half percent
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annual rate of real growth of output.
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So if these gentlemen are right,
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the recession will be a memory at that time.
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We can go on to see what goodies they have in store for 1975
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and a data resources computer actually just keeps running on
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until the end of 1976.
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In case you wanna know, there's not going to be a recession
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between now and beyond the time
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when the U.S. celebrates it's 200th anniversary
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according to the DRI model of the very end of January,
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the very beginning of this month in which I'm recording.
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Well, what about the other two?
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The other two, the Wharton model has a two and a sixth
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percent rate of increase in the fourth quarter
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and the private unnamed forecaster has
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a plus three and a third percent.
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Both of those are a bit below the growth rate
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but they average out to more than we've seen
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for a good long time now while we've been
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in a growth recession.
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And I have no doubt that if I were to continue
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letting my eye pass down their columns to later quarters,
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that they would effectively have us out of the
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mini recession by
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early 1975
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at the latest.
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Is this good or is it bad?
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Well I think that is very encouraging for somebody
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who wants real output not to stagnate and not to decline.
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Just for comparison, let me say what the estimates are
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for real output in this current first quarter of the year.
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Data Resources thinks that we'll be at almost
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a 4% annual rate of decline, actually minus 3.9%.
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And Townsend Greenspan thinks that we'll be at
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minus 2.6% annual rate.
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On the other hand, there's nothing really to choose
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between them as far as optimism or pessimism is concerned
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because by the next quarter,
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data resources has us at 2.4% plus.
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Where as it takes a little bit longer to unwind
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in 1974 second quarter, Townsend Greenspan has flat
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so I guess if you actually averaged out those two quarters,
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you would find that they are pretty much
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in the same ball park.
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That suggests that the pollsters who are picking up the fact
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that it's inflation, which is the number one problem
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worrying the American public, may well turn out to be right
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because when we look at what's happening to prices
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in the fourth quarter of the year,
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we find that not one of our forecasters,
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however optimistic they may seem to you,
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thinks that we'll be having a dandy show on inflation.
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Let me go across the board.
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Data Resources think there'll be a six and a third percent
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increase in prices at that time.
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Wharton School thinks there'll be a seven and six percent
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annual rate of increase in general price at that time.
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Townsend Greenspan thinks that there'll be about
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five and five eighth's percent rate of growth at that time.
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5.57 percent actually.
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Our private forecaster is a bit more optimistic
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and I must say he seems optimistic to me
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because he has the rate of inflation dropping down
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to four and a half percent at that time.
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Well now to put things into perspective,
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what was the rate of inflation in the last quarter
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for which we have actual data?
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Let's look at that number.
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It was 7.9%.
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And so there isn't a one.
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Even the Wharton School who is as pessimistic as to think
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that we'll be doing as badly in the fourth quarter this year
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as we were in the fourth quarter last year.
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And this despite the fact that
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the fourth quarter of last year, the energy shortage had not
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manifested itself until the final part of the quarter.
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So what we have here is an improvement throughout the year.
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Let me give you the first quarter numbers
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for inflation of the four people
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and then I've already given you the fourth quarter.
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Data Resources think that we'll improve from 6.9%,
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first quarter 6.3%.
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Wharton will improve from seven...
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Well now we won't improve.
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We'll go from seven percent to seven and a sixth percent.
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But the private forecaster thinks we'll go from
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seven and a half percent to down to four and a half percent.
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And Townsend Greenspan thinks that this is gonna be
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a god awful quarter with nine and half percent
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price inflation's so that we'll look with relief
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upon subsiding to about five and a half percent.
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I may say that Townsend Greenspan has support from
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Albert Summers who has not prepared his fully revised
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forecast but has indicated how it'll go
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and he expects that prices in the first quarter of the year
262
00:16:09.090 --> 00:16:11.690
will be rising at almost a 10% annual rate
263
00:16:11.690 --> 00:16:16.470
and for the year as a whole, we'll be above eight percent
264
00:16:16.470 --> 00:16:19.480
which means that in the fourth quarter of the year,
265
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I would think that you can't be down very much below
266
00:16:25.110 --> 00:16:28.163
seven percent according to his forecast.
267
00:16:29.580 --> 00:16:33.273
For control on this though, I think I ought to see
268
00:16:34.470 --> 00:16:38.310
what a monitores forecast on prices might be
269
00:16:38.310 --> 00:16:42.920
and I'm going to take as my monitores forecaster
270
00:16:42.920 --> 00:16:46.300
the Argus Organization, which has been brave enough
271
00:16:46.300 --> 00:16:49.270
to make an estimate of worldwide inflation
272
00:16:49.270 --> 00:16:54.270
for many countries for many years to come.
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00:16:54.320 --> 00:16:57.770
And they do this on the basis of their expectation
274
00:16:57.770 --> 00:16:59.470
of what's going to happen to the rate of growth
275
00:16:59.470 --> 00:17:02.030
of the money supply.
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00:17:02.030 --> 00:17:05.850
Well, for the United States they have a nine percent
277
00:17:05.850 --> 00:17:10.850
inflation for the first quarter, going down to 6.9%
278
00:17:10.970 --> 00:17:15.570
by the fourth quarter and actually continuing down
279
00:17:15.570 --> 00:17:18.650
until by the middle of '75, you're down to
280
00:17:18.650 --> 00:17:22.273
not much above five and two thirds percent.
281
00:17:23.120 --> 00:17:27.090
So the monitores forecast here is
282
00:17:27.090 --> 00:17:31.620
about the same as for the others.
283
00:17:31.620 --> 00:17:35.160
Moreover, I don't think I have time to go into
284
00:17:35.160 --> 00:17:39.647
what the western Germany's price increases forecast
285
00:17:39.647 --> 00:17:43.830
for them to be or Japan's or Switzerland or Belgium
286
00:17:43.830 --> 00:17:47.410
or France or the U.K. or Italy but let me say that
287
00:17:47.410 --> 00:17:50.630
there's no place to hide because the 6.9%
288
00:17:50.630 --> 00:17:52.320
in the United States in the fourth quarter
289
00:17:52.320 --> 00:17:54.570
is going to be better, according to their estimates,
290
00:17:54.570 --> 00:17:55.880
than any other country.
291
00:17:55.880 --> 00:17:58.420
Even Switzerland is gonna have seven and a half
292
00:17:58.420 --> 00:18:01.070
and Germany's gonna have nine
293
00:18:01.070 --> 00:18:05.020
and Italy's gonna have 10.6
294
00:18:05.020 --> 00:18:07.560
and the U.K's going to have 11
295
00:18:07.560 --> 00:18:09.180
and Japan, eleven and a half
296
00:18:09.180 --> 00:18:13.393
and worst of all is going to be France for 12%.
297
00:18:14.830 --> 00:18:17.350
So there's no other currency in which
298
00:18:17.350 --> 00:18:20.650
you're going to do better or which the typical consumer
299
00:18:20.650 --> 00:18:24.423
with one unit of the currency is going to do better.
300
00:18:25.520 --> 00:18:27.393
What about unemployment?
301
00:18:28.965 --> 00:18:32.140
Do these inflation numbers imply that
302
00:18:32.140 --> 00:18:34.250
we're gonna have very tight labor markets
303
00:18:34.250 --> 00:18:38.440
and that the inflation is primarily to be expected to come
304
00:18:38.440 --> 00:18:43.343
therefore, from in the first instance a bidding up of wages?
305
00:18:44.890 --> 00:18:49.360
No, not really because as I go across the board,
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00:18:49.360 --> 00:18:53.350
DRI expects six percent inflation by the end of the year
307
00:18:53.350 --> 00:18:58.180
and the private forecaster who was so optimistic on prices,
308
00:18:58.180 --> 00:19:01.683
he expects 6.1% by the end of the year.
309
00:19:02.580 --> 00:19:07.580
And Wharton, which is very pessimistic on profits
310
00:19:07.860 --> 00:19:10.530
as you'll see in a moment and some other things,
311
00:19:10.530 --> 00:19:14.300
is kind of optimistic on unemployment
312
00:19:14.300 --> 00:19:17.280
if you call a five and three quarters percent
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00:19:17.280 --> 00:19:18.730
the unemployment rate for the
314
00:19:19.640 --> 00:19:21.563
last quarter of the year, optimistic.
315
00:19:22.720 --> 00:19:27.720
Townsend Greenspan is 5.9%
316
00:19:28.190 --> 00:19:32.380
and I'll remind you that these all represent
317
00:19:32.380 --> 00:19:35.840
substantial increases in the rate of unemployment
318
00:19:35.840 --> 00:19:39.560
from the last reported number which was 5.2%.
319
00:19:41.120 --> 00:19:44.810
I would suppose that the next reported number,
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00:19:44.810 --> 00:19:48.760
which of course refers to a past period
321
00:19:48.760 --> 00:19:52.683
and which must be due pretty soon,
322
00:19:54.260 --> 00:19:57.260
that probably will be worse than 5.2%.
323
00:19:57.260 --> 00:19:59.740
So there's nothing cataclysmic
324
00:19:59.740 --> 00:20:04.740
or precipitous in these numbers, just a slow climb.
325
00:20:07.060 --> 00:20:12.060
Finally, just to bring the initial survey of the facts
326
00:20:12.490 --> 00:20:17.490
to a close, what can be expected for profits after taxes?
327
00:20:20.840 --> 00:20:25.420
Here, both counseling firms seem to be
328
00:20:25.420 --> 00:20:27.610
very close together to each other.
329
00:20:27.610 --> 00:20:32.270
Data Resource Incorporated is just a shade above
330
00:20:32.270 --> 00:20:37.093
70 billion dollars of corporate profits after taxes, 70.2,
331
00:20:38.550 --> 00:20:42.870
and Townsend Greenspan is 70.9.
332
00:20:42.870 --> 00:20:47.790
How does this compare with the last recorded numbers
333
00:20:47.790 --> 00:20:51.460
for corporate profits after taxes?
334
00:20:51.460 --> 00:20:53.160
It's almost on the nose.
335
00:20:53.160 --> 00:20:56.250
In the last quarter, '73, we have 71 billion.
336
00:20:56.250 --> 00:21:00.790
So profits after taxes, according to everybody
337
00:21:00.790 --> 00:21:04.340
go down the hill from the fourth quarter
338
00:21:04.340 --> 00:21:08.140
of last years numbers but they don't,
339
00:21:08.140 --> 00:21:09.950
according to these counseling organizations,
340
00:21:09.950 --> 00:21:14.400
go down the hill very much and they are back
341
00:21:14.400 --> 00:21:16.910
by the fourth quarter of '74 to where they were
342
00:21:16.910 --> 00:21:19.693
in the fourth quarter of '73.
343
00:21:20.550 --> 00:21:23.280
I should point out, and they would be the first
344
00:21:23.280 --> 00:21:26.770
to point out, that all of the dollar numbers are back.
345
00:21:26.770 --> 00:21:30.600
You realize that in real terms, the profits are not back
346
00:21:30.600 --> 00:21:35.220
because prices have increased during this period.
347
00:21:35.220 --> 00:21:37.940
Moreover, there is reason to think that
348
00:21:37.940 --> 00:21:41.350
if one were to calculate profits in real terms,
349
00:21:41.350 --> 00:21:46.350
carefully taking account of the replacement costs
350
00:21:46.940 --> 00:21:49.700
of the capitol used by the corporations
351
00:21:49.700 --> 00:21:54.210
who are earning profits, that in periods of rising prices,
352
00:21:54.210 --> 00:21:59.210
you overstate real earnings because the tax law
353
00:22:00.800 --> 00:22:05.200
does not permit you to recover reproduction costs.
354
00:22:05.200 --> 00:22:09.400
It only permits you to recover in depreciation allowances.
355
00:22:09.400 --> 00:22:13.110
Historic actual incurred dollar costs.
356
00:22:13.110 --> 00:22:16.920
So these profit pictures that I've been quoting
357
00:22:16.920 --> 00:22:21.490
are optimistic compared to a pessimist
358
00:22:21.490 --> 00:22:24.780
but it doesn't mean that the corporations are better off
359
00:22:24.780 --> 00:22:29.780
in the fourth quarter of this year than they were last year
360
00:22:30.330 --> 00:22:33.020
if these figures turn out to be correct.
361
00:22:33.020 --> 00:22:36.640
Let me however say that there is some difference of opinion
362
00:22:36.640 --> 00:22:39.310
because the Wharton School model
363
00:22:39.310 --> 00:22:44.310
has profits after taxes significantly less.
364
00:22:44.450 --> 00:22:49.450
I had to make a calculation from their profits before taxes
365
00:22:49.890 --> 00:22:54.410
and I won't vouch for the last digit of accuracy
366
00:22:54.410 --> 00:22:56.750
but it seems to me that by the fourth quarter,
367
00:22:56.750 --> 00:22:58.410
they think profits will be down
368
00:22:58.410 --> 00:23:03.410
to 65 billion dollars after taxes.
369
00:23:03.760 --> 00:23:07.590
Their optimistic on unemployment relatively
370
00:23:07.590 --> 00:23:10.740
and their pessimistic on profits
371
00:23:10.740 --> 00:23:14.730
and the private forecaster is in between.
372
00:23:14.730 --> 00:23:19.730
He thinks that profits will be about 67.6 billion dollars
373
00:23:22.140 --> 00:23:25.210
down somewhat but even on his forecast,
374
00:23:25.210 --> 00:23:27.163
they will be on the rise.
375
00:23:28.270 --> 00:23:33.270
Now, what are we to think about the picture?
376
00:23:33.280 --> 00:23:37.560
I think the first thing to say is that
377
00:23:37.560 --> 00:23:39.653
if these numbers are believable,
378
00:23:41.210 --> 00:23:44.530
the alarm which is beginning to go through the country,
379
00:23:44.530 --> 00:23:49.530
that we are moving into Latin American galloping inflation
380
00:23:51.740 --> 00:23:53.453
or cantering inflation.
381
00:23:54.530 --> 00:23:59.530
I've heard this from a number of public figures recently
382
00:23:59.700 --> 00:24:04.587
and many reporters have asked me is it true
383
00:24:05.640 --> 00:24:08.510
that on the basis of what Arthur Burns said
384
00:24:08.510 --> 00:24:10.760
and on the basis of what he didn't say
385
00:24:10.760 --> 00:24:15.030
but might be implied by what his words would suggest,
386
00:24:15.030 --> 00:24:18.730
that we have turned a corner and we are now
387
00:24:18.730 --> 00:24:21.100
at a point of no return and we are moving into
388
00:24:21.100 --> 00:24:26.090
a new phase of more rapid inflation.
389
00:24:26.090 --> 00:24:29.000
More rapid inflation akin to that let's say
390
00:24:29.000 --> 00:24:32.990
of Brazil over the years or Argentina over the years
391
00:24:32.990 --> 00:24:36.810
or Chile over the years or even Mexico.
392
00:24:36.810 --> 00:24:41.810
I may say I see no sign in these figures of that
393
00:24:41.960 --> 00:24:46.680
but it would be enough in terms of having concern
394
00:24:46.680 --> 00:24:51.040
whether we are moving into a new era in which we have
395
00:24:51.040 --> 00:24:54.470
rates of inflation like those of the other
396
00:24:54.470 --> 00:24:56.920
advanced countries of the world.
397
00:24:56.920 --> 00:24:59.220
The countries of western Europe and Japan
398
00:24:59.220 --> 00:25:02.180
who, these last few years, have not been enjoying
399
00:25:04.140 --> 00:25:08.770
the moderate rate of price increase at which American's
400
00:25:08.770 --> 00:25:13.060
complain their price increases are still more.
401
00:25:13.060 --> 00:25:15.850
So I have to agree that there doesn't seem to me to be
402
00:25:15.850 --> 00:25:18.210
a sea change in the numbers.
403
00:25:18.210 --> 00:25:21.670
What I think is probably true is that
404
00:25:21.670 --> 00:25:26.670
when you get prices rising as they will for some time
405
00:25:27.090 --> 00:25:32.090
this winter in two digits rate,
406
00:25:32.330 --> 00:25:34.290
say a 10% annual rate
407
00:25:34.290 --> 00:25:37.210
or 11% annual rate, and I'm thinking now of prices
408
00:25:37.210 --> 00:25:40.130
in which there's a heavy component of food,
409
00:25:40.130 --> 00:25:43.030
in which there's a heavy component of fuel
410
00:25:44.030 --> 00:25:49.030
and other energy sources, then it may be that something
411
00:25:49.710 --> 00:25:52.450
dramatic happens in the mind of the public.
412
00:25:52.450 --> 00:25:55.140
There may be a threshold effect in other words
413
00:25:55.140 --> 00:26:00.140
with respect to the drama and the trauma of inflation.
414
00:26:01.580 --> 00:26:06.470
But if we stick to the actual outlook,
415
00:26:07.840 --> 00:26:11.730
it seems to me that all these different forecasts
416
00:26:11.730 --> 00:26:16.640
have factored into them the fuel shortage.
417
00:26:16.640 --> 00:26:21.410
They have factored into them some considerable delayed
418
00:26:21.410 --> 00:26:25.500
increase in energies and I must say,
419
00:26:25.500 --> 00:26:28.550
I find these forecasts bad enough
420
00:26:28.550 --> 00:26:32.370
because it is stag inflation with a vengeance.
421
00:26:32.370 --> 00:26:35.970
But we do not see on the horizon
422
00:26:38.989 --> 00:26:43.989
an advance to a new uncontrollable rate of inflation.
423
00:26:46.370 --> 00:26:49.850
I wonder therefore, exactly what it was that
424
00:26:49.850 --> 00:26:53.860
Doctor William Fellnor, the newest member of
425
00:26:53.860 --> 00:26:57.660
the Council of Economic Advisors, had in mind
426
00:26:57.660 --> 00:27:01.380
when he talked at the conference board recently
427
00:27:01.380 --> 00:27:05.330
and said this was our last chance to control inflation
428
00:27:05.330 --> 00:27:08.573
and we had better not muff it.
429
00:27:09.780 --> 00:27:13.850
I think that that is a dramatic way simply,
430
00:27:13.850 --> 00:27:17.300
of registering his concern that we've been
431
00:27:17.300 --> 00:27:20.700
running the system with too much steam in the boiler
432
00:27:20.700 --> 00:27:25.700
and have been aiming at too low a rate of unemployment.
433
00:27:26.870 --> 00:27:31.870
Moreover, I've treated recovery as if that were
434
00:27:32.020 --> 00:27:36.560
an optimistic matter because according to these figures,
435
00:27:36.560 --> 00:27:38.960
I think the consensus will be that there was
436
00:27:38.960 --> 00:27:40.870
hardly a recession at all.
437
00:27:40.870 --> 00:27:44.440
Or if there was a recession, it was a bare recession
438
00:27:44.440 --> 00:27:47.120
which barely lasted a couple months and moreover,
439
00:27:47.120 --> 00:27:50.660
since it's explicable by means of an energy shortage,
440
00:27:50.660 --> 00:27:53.970
it's not really a macro economic recession
441
00:27:53.970 --> 00:27:55.130
that should count.
442
00:27:55.130 --> 00:27:58.590
But suppose you are one of the scholars
443
00:27:58.590 --> 00:28:02.403
and there are a few and they're respected scholars,
444
00:28:03.430 --> 00:28:07.980
who thinks that the only way to bring inflation down
445
00:28:07.980 --> 00:28:10.480
and not have it accelerate upward,
446
00:28:10.480 --> 00:28:13.430
is to have a recession of some magnitude.
447
00:28:13.430 --> 00:28:15.650
Then what I've reported on today
448
00:28:15.650 --> 00:28:18.230
is the most pessimistic thing that could be said
449
00:28:18.230 --> 00:28:23.230
because you cannot count, according to these numbers,
450
00:28:23.250 --> 00:28:28.250
upon several quarters of negative real growth.
451
00:28:29.160 --> 00:28:34.160
You cannot count on any dramatic hitting the inflation
452
00:28:35.890 --> 00:28:40.170
where it lives by means of lowering demand
453
00:28:40.170 --> 00:28:43.110
and increasing the supply.
454
00:28:43.110 --> 00:28:48.070
Well I think myself, that scholarly view
455
00:28:48.070 --> 00:28:52.123
that I've just quoted, respectable as it is,
456
00:28:52.980 --> 00:28:56.290
is by and large irrelevant.
457
00:28:56.290 --> 00:28:58.300
I don't mean the one who holds it shouldn't express it.
458
00:28:58.300 --> 00:28:59.970
He should, he should press for it.
459
00:28:59.970 --> 00:29:04.563
But if we had all this trouble in Grand Rapids, Michigan,
460
00:29:05.983 --> 00:29:10.983
in elections from say stand point of the administration,
461
00:29:11.490 --> 00:29:14.760
the incumbent administration, from an environment
462
00:29:14.760 --> 00:29:19.127
in which there's still only 5.2, 5.3, 5.4% unemployment,
463
00:29:22.690 --> 00:29:26.090
think what you're gonna have when you have an environment
464
00:29:26.090 --> 00:29:29.680
in which there is a six percent unemployment
465
00:29:29.680 --> 00:29:31.410
or neighborhood of six percent in which
466
00:29:31.410 --> 00:29:34.170
a good deal of that unemployment has begun
467
00:29:34.170 --> 00:29:37.740
to become long term unemployment.
468
00:29:37.740 --> 00:29:40.760
So there's just so much that the American political system
469
00:29:40.760 --> 00:29:45.760
can stand and therefore, I would say,
470
00:29:46.360 --> 00:29:49.370
to give you my own evaluation, that I think it's a little
471
00:29:49.370 --> 00:29:53.480
premature to have output growing as rapidly as
472
00:29:53.480 --> 00:29:55.300
the highest of the numbers I've reported on
473
00:29:55.300 --> 00:29:56.650
by the fourth quarter.
474
00:29:56.650 --> 00:29:59.580
But I think that the numbers are in the ball park.
475
00:29:59.580 --> 00:30:02.240
I think there is a little bit of optimism
476
00:30:02.240 --> 00:30:04.440
on the rate of increase in prices
477
00:30:04.440 --> 00:30:06.560
because I am concerned that the honeymoon
478
00:30:06.560 --> 00:30:10.310
with respect to wage settlements has come to an end.
479
00:30:10.310 --> 00:30:13.770
But I have no particular quarrel to make with
480
00:30:13.770 --> 00:30:18.770
the rather modest decline in corporate profits after taxes.
481
00:30:19.380 --> 00:30:21.130
If you have any comments or questions
482
00:30:21.130 --> 00:30:23.230
for Professor Samuelson, address them to
483
00:30:23.230 --> 00:30:25.520
Instructional Dynamics Incorporated,
484
00:30:25.520 --> 00:30:29.887
166 East Superior Street, Chicago, Illinois, 60611.