WEBVTT
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Welcome once again,
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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 program was recorded November 1st.
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The first thing that we should talk about today
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are the new third quarter preliminary statistics
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which have come in.
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The rate of growth of the economy
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measured in real terms by the real GNP
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did pick up a little bit from the second quarter,
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more or less as expected.
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However, it didn't pick up as much
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as some people had thought it would.
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So I think the fairest thing to say
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is that for the last two quarters,
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the real GNP of the American economy
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has been growing at about a 3% annual rate.
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Whereas in the previous two quarters to that,
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the annual rate of real growth was a whopping 8%.
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By and large, what's happened is confirmatory then
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of the hypothesis, which is very widely held,
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that the US economy has already moved
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into a growth recession.
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A growth recession being defined as a recession
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in which the rate of growth is still positive,
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not like a genuine full-fledged recession,
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but is significantly less for two or three quarters at least
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than the four plus percent which represents par
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for American growth rates taking into account
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demographic increase and taking into account
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productivity changes.
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The facts, as they've developed, are compatible
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with a continuation of this growth recession
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for at least another two or three or four quarters.
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And I would have to say that
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even before these numbers came in
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there was a noticeable tendency for the fashionable forecast
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to gain in confidence and a
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tendency for those who are more pessimistic
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than the fashionable forecast,
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and who believe in a genuine recession
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to lose adherence or,
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to put it more conservatively,
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not to gain the adherence which they ought
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to be picking up now if there causes in the end to prevail.
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A moral for even those who still believe
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that the most likely outcome is a genuine recession
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have slowly begun to modify their predictions
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and they're pushing that recession
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into later quarters of 1974.
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And at least in the latest one,
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which I've been looked at here,
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I'll avoid names for this purpose
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'cause I don't mean to criticize,
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but the late October forecast
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instead of the last half of 1974
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having a 3% annual decline in real growth,
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rather it now looks for about 2.5% rate of decline.
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Now I don't think that we should spend our time
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in pouring over the fine detail of the outcome
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in order to try to form a judgment
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about just how strong or weak the economy is gonna be
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four or five quarters from now.
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The tools of economic analysis are not
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fine enough given the grossness of the statistical data
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to make such considerations worthwhile.
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But I think it's very important for us
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to stand away from the third quarter numbers
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and to try to see what
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the general forces are that have been operating
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and what are the things that we ought to be
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watching in order to be able to shade
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our opinion about the future.
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Well, the first thing that has to be said,
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in fact, it has to repeated, is this.
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The general economy is doing better
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than American society at large.
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I've had to call attention here again and again
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to the fact that all the
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indicators of consumer sentiment have a tendency
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to deteriorate and deteriorate very badly.
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And if you had a crude confidence theory
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of the business cycle so that department store sales
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and durable consumers good sales could be
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accurately predicted from the degree of optimism
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or pessimism that the American public typically feels
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about itself and about its society,
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then I think you would have to expect there to be
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a rather serious recession.
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However, the past behavior of consumer spending,
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in relationship to past surveys of consumer sentiment,
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do not suggest that consumer sentiment is a factor
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that you should give all that much weight.
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And although right at the moment
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we still are in the constitutional crisis,
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occasioned by the resignation of Elliot Richardson
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and his assistant and the firing of Archibald Cox,
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the political
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seismographs are very volatile,
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and given little time that may cease to be
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quite so important in the future.
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Nevertheless, as I read the case of those
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who believe in a full-fledged recession,
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they are increasingly beginning to base their case
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on a possible shortfall in consumer spending in the future.
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They are forced to do this by the fact
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that the other strong reason for expecting
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a full-fledged recession, the behavior of inventories
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does not seem to be developing in accordance
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with what would be needed in order to have
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a convincing case for a recession.
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I'm referring to the fact that unless inventories
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become high, unless they go through
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a few quarters of excessive rate of increase,
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you're unlikely to find later in '74
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a considerable decumulation of inventories.
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From this view point, we should scrutinize very carefully
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what happened in the third quarter.
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Well, in the third quarter, the inventory
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rate of accumulation annual rate,
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as measured by the Department of Commerce,
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and this involves a lot of corrections
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for a mere price change, did go up.
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It went up from a $4.5 billion rate of accumulation
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in the second quarter and indeed in the first quarter
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about that same level up to 8.7 billion.
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And that is an increase,
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but we still have a long way to go
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before we get to the 17 and $20 billion increases
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which are needed if the slingshot is to be cocked
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very far back into a swing snapback
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and give us the inventory recession
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which will make a growth recession
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become a full-fledged recession.
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I guess we have to reserve judgment on this matter.
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As one of the adherence of the view
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that were in for genuine recession
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has put the data for the third quarter
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are compatible with either scenario.
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They don't actually lend comfort
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to the full-fledged recession hypothesis,
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but they don't deny it either.
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I should also mention another factor which,
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I guess, I think is very important.
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For this purpose, I might quote the view
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of Dr. Michael Evans, who appeared on the same panel
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with me before the Joint Economic Committee
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testifying on the outlook.
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I've quoted the Chase Econometrics models before,
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but I wanna call your attention to two respects
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in which his view is perhaps a little bit different
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from the consensus view.
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First, he is not so optimistic
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about what's going to happen to our
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net exports of goods and services.
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The net exports in goods and services in the third quarter
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were very gratifying.
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They were $4 billion, a surplus of our exports over imports
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'cause these are goods and services,
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this is not just merchandise.
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But my recollection is at the very last month's
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merchandise numbers that came in
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were also quite gratifying.
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They were something like $800 million surplus for the month.
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I don't know what seasonal correction is required,
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but that's an eight or $9-billion surplus
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on a 12-month basis.
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But Dr. Evans thinks that a good deal
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of our improvement in exports is in the agriculture domain.
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And since he believes that in 1974
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food prices and fiber prices are gonna come down,
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then he thinks we're gonna lose some of that
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buoyancy in our exports.
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And he doesn't yet see the strong upswing
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in the competitiveness of our manufacturing imports/exports.
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So that this is a minus factor
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in his particular reading of the future
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if we're not gonna even be able to hold
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the degree of improvement which we had.
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This is very relevant for any of you who wanna make bets
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on whether the dollar is undervalued
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and whether there could be any kind of reoccurrence
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of trouble for the dollar in the clean floating
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or dirty floating markets of the world.
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The other point that Dr. Evans made,
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and I think it's a interesting point to keep in mind,
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it's constant with my own thinking, and that's this.
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Dr. Evans thinks that that drop in food prices,
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which will be the reflection of supply and demand
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just as the big upswing in food prices
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was a reflection of supply and demand,
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he thinks that's a very favorable factor.
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It means that the consumer price index,
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to which wages are tied, will not,
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in the first half of 1974,
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be increasing by as much as 2.5%.
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It also means, and this is probably much more important,
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that the Federal Reserve, as we
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move definitely into the eye of the,
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wind of the growth recession,
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will be much more favorably disposed
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towards countering that recession
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if it doesn't have terrible apprehensions
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about price inflation and about the kind of price inflation
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which the man in the street is most sensitive to,
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namely, food prices.
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So I think that if Dr. Evans expected
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that for some reason food prices
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were gonna be disappointing,
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let's just say some horrible crop situation this autumn,
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yet to come, that this would cause him
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to move his forecast of no recession,
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no genuine recession, only growth recession,
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to a yes, in that case there will be a genuine recession.
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Now I don't know whether I have the courage
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to put this amount of weight
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on that food price behavior.
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I put a great deal of weight on it,
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but whether I would actually change
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from a no recession to a definite recession,
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I'm inclined to doubt.
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Let me call your attention that Henry Kaufman,
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a partner of Salomon Brothers,
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and who, earlier this year, was one of those
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who believed that we were going to have a real money crunch
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and that that was going to precipitate a real recession,
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and we thought that that was a good thing,
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now, apparently, is a little disappointed
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by the course of actual events.
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And in a talk which he gave in Phoenix, Arizona
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on October 23rd, he warned that
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we don't seem to be having that desirable recession.
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And if, in fact, we do things too soon
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to avoid that desirable recession,
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that the results of that will be very serious
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for the long range inflation outlook.
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Indeed, I, myself, take the
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possibility of a genuine recession seriously,
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although I regard it only as
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a high odds bet.
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If I had to bet on a genuine recession,
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(mumbles) very favorable odds.
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But I would take that case a little more seriously
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from the analysts who espouse it.
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If it weren't the fact that, as I tally up
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the opinions of different people,
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I'm not sure that I have in my files a single person
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who expects there to be a recession, a genuine recession,
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and who doesn't want there to be.
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So in my own thinking, I always try to separate out
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what I want and what I think will happen.
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Because I find that unless I do that,
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there's a tendency, a very human and natural tendency,
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for me to try to forecast things that I want to have happen,
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that my heart wants to have happen
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even though my brain perhaps is telling me
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that they're not too likely to happen.
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So I guess you have to take a little bit off the credibility
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of the forecast.
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It's when you learn that they being human beings
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and they being in favor of recessions,
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they may be telling you a little bit more
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about their favored policy recommendations
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and their valued judgments and their therapy ideas
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than about the differences in the way
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that they read the actual record.
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I get a lot of feedback from listeners
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and I would be very happy to learn from any listeners
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of exceptions to what I now stated.
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Now there's still another view about
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the possibility of a recession
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which comes from some of the monetarist camps.
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I have to say, some of the monetarist camps,
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because the monetarist forecast that I have seen
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00:17:15.230 --> 00:17:20.230
now spread all over the map and they are at least
278
00:17:20.330 --> 00:17:24.020
as disbursed as the non-monetarist forecast,
279
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so we're certainly not gonna get any kind
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of a controlled experiment this year.
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Whatever happens, you're gonna be able to quote
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a monetarist, who expect it to happen,
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and you also, I'm saying the same thing,
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are gonna be able to find other monetarist,
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who hadn't expected that to happen.
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00:17:44.950 --> 00:17:49.950
Now some monetarist group like the Argus organization,
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00:17:51.210 --> 00:17:56.210
James Meigs and William Wolman and other economists there,
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I have listed among the optimists.
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00:18:00.600 --> 00:18:04.890
They do expect there to be a slight decline
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in the rate of growth of the GNP in comparison with par,
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but it's rather slight indeed.
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On the other hand, there are other monetarists
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who expect that we are going to be in a recession.
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Now let me quote
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the line of argument which I understand
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to underlie this.
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00:18:33.340 --> 00:18:34.960
These monetarists who expect
298
00:18:34.960 --> 00:18:37.790
there to be a genuine recession,
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00:18:37.790 --> 00:18:41.280
in fact have money GNP forecasts
300
00:18:41.280 --> 00:18:43.223
much like the fashionable forecast.
301
00:18:44.290 --> 00:18:46.940
But they have price
302
00:18:48.980 --> 00:18:53.330
inflation forecasts which are higher
303
00:18:53.330 --> 00:18:55.220
than the fashionable forecast.
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And if we subtract off a higher estimate for price inflation
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00:18:59.420 --> 00:19:02.930
from the same estimate of money increase,
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00:19:02.930 --> 00:19:07.760
we get a lower estimate of real increase.
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00:19:07.760 --> 00:19:09.320
And so I have to ask myself
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whether there is something in monetarism
309
00:19:12.350 --> 00:19:17.350
which should make me respect
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00:19:17.670 --> 00:19:19.960
their price increase.
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00:19:19.960 --> 00:19:22.820
Now I put the question that way because I, myself
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00:19:22.820 --> 00:19:25.030
have certain amount of pessimism
313
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about the behavior of prices.
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00:19:27.770 --> 00:19:31.510
But I wanna see whether there's any reinforcement
315
00:19:31.510 --> 00:19:35.700
for that pessimism from the standpoint of monetarism.
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00:19:35.700 --> 00:19:38.700
And I have to confess to some puzzlement
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00:19:38.700 --> 00:19:43.500
as to why the past patterns of experience
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00:19:43.500 --> 00:19:46.120
which had been analyzed by monetarists
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should have any power to give us resolutions
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00:19:52.510 --> 00:19:57.510
with respect to price behavior peculiarly.
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In other words, why shouldn't one
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rely in one's price estimates upon
323
00:20:06.600 --> 00:20:09.943
the best information one can get for 1974
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about what will be happening to the degree
325
00:20:12.570 --> 00:20:16.080
of excess capacity in the economy
326
00:20:17.310 --> 00:20:21.610
to the behavior of order backlogs
327
00:20:21.610 --> 00:20:24.670
whether as those who expect there to be a recession
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00:20:24.670 --> 00:20:28.870
think there will be inventory coming out of our ears
329
00:20:28.870 --> 00:20:33.870
and plenty of delivery of stuff which people don't want.
330
00:20:33.900 --> 00:20:35.790
Why, under those circumstances,
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should we still expect a price increase?
332
00:20:40.620 --> 00:20:45.620
And as I review the record,
333
00:20:45.720 --> 00:20:50.390
I cannot find where that special relevance
334
00:20:50.390 --> 00:20:54.190
of monetarism should be.
335
00:20:54.190 --> 00:20:57.440
Now let me illustrate.
336
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The Federal Reserve Bank of St. Louis, for a long time,
337
00:21:03.780 --> 00:21:05.700
aside from its estimates of what's gonna happen
338
00:21:05.700 --> 00:21:10.030
in the money GNP, made a breakdown of that
339
00:21:10.030 --> 00:21:14.540
between prices and real output.
340
00:21:14.540 --> 00:21:18.897
And they weren't particularly successful
341
00:21:20.490 --> 00:21:24.170
in their breakdown.
342
00:21:24.170 --> 00:21:28.760
Now it can be argued, I think, that there was nothing
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in the monetarist philosophy which would
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00:21:31.880 --> 00:21:34.980
sanction those particular breakdowns
345
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which they had, and I would agree.
346
00:21:37.130 --> 00:21:40.431
But that's precisely the point that I'm making.
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00:21:40.431 --> 00:21:44.930
If you study the history of the quantity theory of money
348
00:21:44.930 --> 00:21:48.920
and the views of the leading exponents
349
00:21:48.920 --> 00:21:50.150
of the quantity theory of money,
350
00:21:50.150 --> 00:21:54.320
I'm thinking of Alfred Marshall and Irving Fisher
351
00:21:54.320 --> 00:21:58.330
going back a long way, and then in later days
352
00:21:59.730 --> 00:22:04.440
people like Warburton and, in our own time,
353
00:22:04.440 --> 00:22:09.440
Professor Milton Friedman, I recall the wisdom
354
00:22:11.140 --> 00:22:14.750
stated at a conference by Jacob Viner,
355
00:22:14.750 --> 00:22:16.900
who knows that literature very well,
356
00:22:16.900 --> 00:22:20.620
and there he went on record saying
357
00:22:20.620 --> 00:22:22.880
that the quantity theorists of the past,
358
00:22:22.880 --> 00:22:24.970
and by the way he considered himself
359
00:22:24.970 --> 00:22:26.750
a member of that group,
360
00:22:26.750 --> 00:22:31.583
had never had any special way
361
00:22:32.880 --> 00:22:36.010
of analyzing the effects of money
362
00:22:36.010 --> 00:22:39.580
in the MV equal PQ monetary equation
363
00:22:39.580 --> 00:22:41.220
as between the P and Q
364
00:22:41.220 --> 00:22:43.340
and there was actually a libel on them
365
00:22:43.340 --> 00:22:48.340
to claim that, as some of the critics
366
00:22:48.520 --> 00:22:52.670
of monetarism had done, that the monetarist think
367
00:22:52.670 --> 00:22:56.520
that M controls prices and the fiscalists think
368
00:22:56.520 --> 00:23:00.820
that the canes in fiscal policy determines quantity
369
00:23:00.820 --> 00:23:04.290
which leaves the one with kind of a schizoid theory.
370
00:23:04.290 --> 00:23:07.460
He said, there was no warrant for that.
371
00:23:07.460 --> 00:23:12.460
So until one learns what the causal connections are,
372
00:23:13.700 --> 00:23:16.940
I guess, I don't find much extra strength
373
00:23:16.940 --> 00:23:20.710
on the side of a genuine recession
374
00:23:20.710 --> 00:23:25.563
from the monetarist line of reasoning.
375
00:23:26.400 --> 00:23:28.190
Well, now I always try to think
376
00:23:28.190 --> 00:23:29.950
of where trouble could come from
377
00:23:31.160 --> 00:23:36.010
and not to satisfy oneself
378
00:23:36.010 --> 00:23:38.140
with the fashionable forecast.
379
00:23:38.140 --> 00:23:40.570
So let me just try to tick off some of the areas
380
00:23:40.570 --> 00:23:43.600
where it seems to me we ought to be on alert
381
00:23:43.600 --> 00:23:47.410
if our concern is whether there will be
382
00:23:47.410 --> 00:23:50.043
a genuine recession.
383
00:23:51.600 --> 00:23:55.363
I don't think we can dismiss the state of public opinion.
384
00:23:56.980 --> 00:24:00.230
There is a definite possibility that
385
00:24:01.440 --> 00:24:04.080
we are not yet out of any constitutional crisis.
386
00:24:04.080 --> 00:24:09.080
And this could be a definite wet cloth
387
00:24:09.556 --> 00:24:14.040
on the animal spirits of the American consumer
388
00:24:14.040 --> 00:24:17.083
and of the American investor.
389
00:24:18.310 --> 00:24:20.620
In my opinion, it's most likely that
390
00:24:21.590 --> 00:24:24.760
the money GNP is like ol' man river,
391
00:24:24.760 --> 00:24:27.870
it just goes rolling along independently
392
00:24:27.870 --> 00:24:30.990
of Kiplinger's newsletter out of Washington
393
00:24:30.990 --> 00:24:34.950
and independently of the Gallup poll.
394
00:24:34.950 --> 00:24:38.510
But one would be very rash to say that that's true
395
00:24:38.510 --> 00:24:40.760
at 100% level of confidence.
396
00:24:40.760 --> 00:24:43.790
And so it's definitely possible
397
00:24:43.790 --> 00:24:48.540
that there could be some crises
398
00:24:48.540 --> 00:24:51.513
which would begin to cut into business generally.
399
00:24:52.450 --> 00:24:55.940
Second, there's a lot of discussion about
400
00:24:55.940 --> 00:24:59.290
whether we have a energy crisis or not.
401
00:24:59.290 --> 00:25:03.560
And that becomes a semantic question
402
00:25:03.560 --> 00:25:07.603
as to whether the word crisis is a desert.
403
00:25:09.620 --> 00:25:14.480
We certainly have a short-run problem of shortage
404
00:25:14.480 --> 00:25:16.550
under the way we've been controlling prices
405
00:25:16.550 --> 00:25:19.040
and allocating supplies.
406
00:25:19.040 --> 00:25:22.280
And that short-run problem is not gonna go away.
407
00:25:22.280 --> 00:25:25.050
And I should emphasize, it would take another tape
408
00:25:25.050 --> 00:25:27.280
to discuss the details of this,
409
00:25:27.280 --> 00:25:31.780
that that particular short-run problem
410
00:25:31.780 --> 00:25:35.090
was also here before there was any
411
00:25:35.090 --> 00:25:37.223
outbreak of war in the Mideast.
412
00:25:38.310 --> 00:25:40.000
We have to add, though, there has been
413
00:25:40.000 --> 00:25:41.650
an outbreak of war in the Mideast,
414
00:25:41.650 --> 00:25:45.220
we now have a ceasefire, but there has been
415
00:25:45.220 --> 00:25:49.700
a de facto, a decrease of 10 and 20%
416
00:25:49.700 --> 00:25:54.700
of the oil outflow from the Persian Gulf.
417
00:25:55.512 --> 00:25:57.790
Now since the United States is associated
418
00:25:57.790 --> 00:26:01.640
in the minds of some of the Mideast countries,
419
00:26:01.640 --> 00:26:06.200
peculiarly with the support of Israel,
420
00:26:06.200 --> 00:26:07.650
we're not the only country.
421
00:26:07.650 --> 00:26:10.420
I noticed that the Dutch are being discriminated against
422
00:26:10.420 --> 00:26:14.740
in oil shipments because they were not
423
00:26:14.740 --> 00:26:19.070
sufficiently pro Arab during the fighting stage.
424
00:26:19.070 --> 00:26:23.830
But since we're in that camp, then there may be
425
00:26:23.830 --> 00:26:27.860
a greater cut down on the supplies which we depend on
426
00:26:27.860 --> 00:26:32.070
from the Mideast than the cut down for other countries.
427
00:26:32.070 --> 00:26:34.410
And I have to word that very carefully,
428
00:26:34.410 --> 00:26:36.940
because it's understood that we depend
429
00:26:36.940 --> 00:26:38.540
much less in the Mideast.
430
00:26:38.540 --> 00:26:43.280
So that's a favorable factor that makes us less vulnerable.
431
00:26:43.280 --> 00:26:48.280
And Japan, about whom perhaps the Arabian countries
432
00:26:48.500 --> 00:26:51.310
have good feelings now, because Japan did not
433
00:26:51.310 --> 00:26:53.610
rally to the side of Israel.
434
00:26:53.610 --> 00:26:55.520
Japan may be more vulnerable, nevertheless,
435
00:26:55.520 --> 00:26:59.950
because she depends for 90% of her oil there.
436
00:26:59.950 --> 00:27:04.720
But we still have to allow for the possibility
437
00:27:04.720 --> 00:27:07.820
that energy will begin to run short
438
00:27:07.820 --> 00:27:09.770
and we have to allow for the possibility
439
00:27:09.770 --> 00:27:11.220
that the constitutional crisis
440
00:27:11.220 --> 00:27:15.510
and the general inefficiency of the administration
441
00:27:15.510 --> 00:27:20.510
will not lead to a smooth allocation of resources.
442
00:27:21.370 --> 00:27:23.400
And so you could begin to get some shut downs
443
00:27:23.400 --> 00:27:28.280
around the country which are occasioned by
444
00:27:28.280 --> 00:27:30.169
shortages of fuel.
445
00:27:30.169 --> 00:27:31.530
Now I don't wanna argue with anyone
446
00:27:31.530 --> 00:27:34.120
who wants to use elementary text book economics
447
00:27:34.120 --> 00:27:37.340
that if you just auctioned off the scarce supplies,
448
00:27:37.340 --> 00:27:39.220
you'd always have a buyer for a seller.
449
00:27:39.220 --> 00:27:42.020
I just wanna point out that there could be
450
00:27:42.020 --> 00:27:43.770
some trouble from misdirection.
451
00:27:43.770 --> 00:27:47.730
And if you look at past history, there has been many a time
452
00:27:47.730 --> 00:27:51.660
when a flagging boom has been turned into a recession
453
00:27:51.660 --> 00:27:56.150
by exogenous factors such as a very long rail strike
454
00:27:56.150 --> 00:27:57.920
or a very long steel strike.
455
00:27:57.920 --> 00:28:01.840
The most recent notable event of that sort,
456
00:28:01.840 --> 00:28:06.840
as I remember it, was the very long 1959 steel strike.
457
00:28:07.450 --> 00:28:10.180
When it first starts, it's just kind of a holiday
458
00:28:10.180 --> 00:28:13.020
for everybody, the workers get a vacation,
459
00:28:13.020 --> 00:28:15.780
but after a while the inventories begin to run thin
460
00:28:15.780 --> 00:28:19.420
and begins to really dig in deep
461
00:28:19.420 --> 00:28:23.910
and that does affect the macroeconomic figures.
462
00:28:23.910 --> 00:28:28.910
In fact, the 1969, 1970 recession
463
00:28:30.010 --> 00:28:33.100
will go down in the annals in a very silly way
464
00:28:33.100 --> 00:28:37.600
that doesn't truly reflect the macroeconomics that went on,
465
00:28:37.600 --> 00:28:41.590
because we will show that recession lasting
466
00:28:41.590 --> 00:28:44.500
until the General Motors strike was settled
467
00:28:44.500 --> 00:28:49.500
in November of 1970, when in point of fact
468
00:28:49.750 --> 00:28:53.240
there's much analytical reason to expect
469
00:28:53.240 --> 00:28:56.080
that if that strike had been avoided,
470
00:28:56.080 --> 00:28:59.190
the National Bureau, if it was permitted to
471
00:28:59.190 --> 00:29:02.230
have a genuine recession in its records,
472
00:29:02.230 --> 00:29:05.510
would still have changed the timing of the outcome
473
00:29:05.510 --> 00:29:09.560
from that recession by at least a quarter
474
00:29:09.560 --> 00:29:14.560
and it could've been changed by as much as by five months.
475
00:29:15.120 --> 00:29:18.700
Well, let me summarize
476
00:29:18.700 --> 00:29:21.410
by giving you my view.
477
00:29:21.410 --> 00:29:24.140
The continued third quarter slowdown
478
00:29:24.140 --> 00:29:26.060
it seems to me is a good thing.
479
00:29:26.060 --> 00:29:29.490
It seems to me it doesn't matter whether that slowdown
480
00:29:29.490 --> 00:29:32.250
was brought about primarily by demand factors
481
00:29:32.250 --> 00:29:36.320
or supply factors from the standpoint
482
00:29:36.320 --> 00:29:38.780
of some of the good which it will do
483
00:29:38.780 --> 00:29:42.350
in helping us to make a soft landing
484
00:29:42.350 --> 00:29:45.580
or at least not to bump too hard
485
00:29:45.580 --> 00:29:50.550
into the full employment, full capacity ceiling.
486
00:29:51.390 --> 00:29:53.530
I think we're going to have a mixed situation
487
00:29:53.530 --> 00:29:56.220
in which you're gonna have lots of basic industries
488
00:29:56.220 --> 00:29:58.410
that are going to continue to run flat out
489
00:29:58.410 --> 00:29:59.900
for quite a while.
490
00:29:59.900 --> 00:30:04.030
Textiles, papers, paper chemicals, et cetera.
491
00:30:04.030 --> 00:30:06.230
Those provide materials for lots of other
492
00:30:06.230 --> 00:30:08.520
not so basic industries.
493
00:30:08.520 --> 00:30:13.020
And so what the doctor would've ordered, I think,
494
00:30:13.020 --> 00:30:18.020
would be a plateau of let down.
495
00:30:18.880 --> 00:30:23.100
And I don't know that I believe we can keep
496
00:30:23.100 --> 00:30:24.930
a 3% rate of real growth.
497
00:30:24.930 --> 00:30:27.820
What I've said into the Joint Economic Committee,
498
00:30:27.820 --> 00:30:31.630
for example, in policy, was that as things begin
499
00:30:31.630 --> 00:30:35.480
to persist below 2%, then policy should be directed
500
00:30:35.480 --> 00:30:37.190
to doing something about it.
501
00:30:37.190 --> 00:30:41.750
But so far the development seems to me
502
00:30:41.750 --> 00:30:45.290
to be much better than it looked when,
503
00:30:45.290 --> 00:30:46.690
you will recall on these tapes,
504
00:30:46.690 --> 00:30:50.850
I came back from Australia in April, in May,
505
00:30:50.850 --> 00:30:55.640
and listened to all that talk about inevitable money crunch,
506
00:30:55.640 --> 00:30:59.980
more serious than any of the recent money crunches,
507
00:30:59.980 --> 00:31:03.740
we look to be making a much softer landing.
508
00:31:03.740 --> 00:31:06.290
But nature's options are still open.
509
00:31:06.290 --> 00:31:10.400
She still could give us a real recession.
510
00:31:10.400 --> 00:31:14.840
And I should say that the policy options are also still open
511
00:31:14.840 --> 00:31:18.330
and that'll bear discussing at another time.
512
00:31:18.330 --> 00:31:20.010
If you have any comments or questions
513
00:31:20.010 --> 00:31:21.870
for Professor Samuelson, address them to
514
00:31:21.870 --> 00:31:24.260
Instructional Dynamics Incorporated.
515
00:31:24.260 --> 00:31:28.863
166 East Superior Street, Chicago, Illinois 60611.