Tape 42 - 1970 forecast
Loading the media player...
Transcript
Transcripts may contain inaccuracies.
- | Hello again and welcome | 0:02 |
as Instructional Dynamics Incorporated presents | 0:03 | |
Professor Paul Samuelson with his commentary on economics. | 0:06 | |
This is the week, Professor Samuelson, | 0:09 | |
that most of our subscribers have been waiting for, | 0:11 | |
the week you've promised to give us your forecast | 0:14 | |
for the coming year. | 0:17 | |
- | I hope this will not come as an anticlimax, | 0:18 |
but I'm now speaking in the first week in December | 0:20 | |
and trying to look forward to the year 1970. | 0:26 | |
In beginning a forecast for the year that's to come, | 0:31 | |
one tends always to start with the old cliche | 0:35 | |
that this is a particularly difficult time | 0:39 | |
to make a forecast. | 0:41 | |
In an interesting switch on this cliche, | 0:43 | |
Dr. Wallich of Yale and President Nixon's treasury, | 0:47 | |
when recently addressing a business group, | 0:51 | |
put it this way. | 0:55 | |
"1970 is a particularly easy year to forecast. | 0:56 | |
"Because," he went on to explain, | 1:00 | |
"for once everybody-- | 1:03 | |
I'll add almost everybody-- | 1:05 | |
"will agree that it is going to be a year | 1:07 | |
of slower expansion." | 1:10 | |
Now actually in economics there's never really | 1:14 | |
unanimity on anything, | 1:17 | |
but I do believe that Henry Wallich is right. | 1:19 | |
But I think that his would be a piddling victory, | 1:23 | |
because the $64 question is not whether | 1:26 | |
there will be some lessening | 1:28 | |
of inflationary growth in 1970 as compared to 1969, | 1:31 | |
but the real question is, | 1:36 | |
By how much less? | 1:38 | |
After all by this Wallich criterion, | 1:40 | |
1969 was an especially easy year to forecast, | 1:43 | |
since if all you're interested in | 1:48 | |
was the qualitative pattern of events, | 1:50 | |
you could just a year ago | 1:53 | |
have found near universal agreement | 1:54 | |
that money GNP would grow less in 1969 than in 1968. | 1:58 | |
And for once the crowd was obviously right. | 2:03 | |
Well today in making my forecast, | 2:06 | |
I'm after bigger game than the mere qualitative pattern. | 2:09 | |
Surely what the consumers of forecasts would like to know, | 2:14 | |
if somehow they could somewhere learn about this, | 2:18 | |
is by how by how many percentage points | 2:22 | |
the GNP in 1970 will grow, | 2:26 | |
and by how many billion dollars | 2:29 | |
the GNP in 1970 would grow. | 2:31 | |
And how much of that will be real growth, | 2:34 | |
in quantitative terms. | 2:37 | |
And when you pose the question this way, | 2:40 | |
I dare say 1970 is no easier than any other year. | 2:43 | |
Indeed some might insist | 2:48 | |
that it's a more difficult year than the average, | 2:51 | |
which brings us right back to our cliche. | 2:55 | |
Let me explain exactly what I mean by that. | 2:58 | |
Suppose we calculate the divergence of estimates | 3:02 | |
by the different forecasters, | 3:07 | |
and square those divergences and add them up | 3:09 | |
to get the mean square error of the forecasters. | 3:12 | |
I dare say that in 1970 you'll find that to be | 3:15 | |
a high figure and perhaps higher than average. | 3:18 | |
Well it's not quite the same thing. | 3:22 | |
And something that will be larger in a typical year, | 3:25 | |
there is the mean square error of the estimates | 3:28 | |
that have been made by all these forecasters, | 3:32 | |
not compared among each other, | 3:34 | |
but compared with what actually is going to happen | 3:36 | |
when a year from now we meet and have a pretty good | 3:40 | |
reading of how the year's going to end. | 3:44 | |
And it's quite possible that that mean square error | 3:47 | |
of divergence of all the forecasters from the true figure, | 3:51 | |
will be even bigger than last year. | 3:55 | |
Well as has become evident over the weeks, | 3:58 | |
I do have my opinions, | 4:01 | |
and I will not hesitate to state them here. | 4:03 | |
But I suspect that more important than my own final guesses | 4:06 | |
is any help that I might be able to give | 4:10 | |
in interpreting the evidence. | 4:12 | |
That way each person can be helped to form his own forecast | 4:15 | |
and can also, | 4:20 | |
one would hope, | 4:22 | |
be given some notion of the intrinsic imprecision | 4:24 | |
and lack of confidence that he ought to have | 4:28 | |
in that final best forecast of his. | 4:31 | |
I think that's a very useful way to begin | 4:36 | |
by canvassing the spread of opinion. | 4:38 | |
First of course there are those who say that 1970 | 4:41 | |
will be a year of quite severe recession. | 4:45 | |
At the other extreme is another minority, | 4:49 | |
a much smaller minority, | 4:51 | |
those who say that all of the medicines of the economists | 4:53 | |
are quite impotent to affect the inflation | 4:58 | |
which is now in progress. | 5:01 | |
This is because we live in a new era | 5:02 | |
of strong inflationary pressures | 5:04 | |
which simply cannot be controlled | 5:06 | |
by any feasible monetary or fiscal policies. | 5:08 | |
Let me appraise this last view. | 5:15 | |
First, those who take the | 5:20 | |
line | 5:24 | |
that the inflation is simply unstoppable, | 5:25 | |
tend not to be economists. | 5:30 | |
However, I'll take help from any source, | 5:34 | |
and if they can deliver the goods, | 5:36 | |
and come up with a good forecast year in and year out, | 5:38 | |
then who cares whether they've been trained as economists | 5:42 | |
or whether they've been trained as geophysicists. | 5:46 | |
What we want is results. | 5:48 | |
However, I don't know of any one of those | 5:51 | |
who've been arguing in this way, | 5:54 | |
about unstoppable inflation, | 5:55 | |
who has in the past established any respectable record | 5:57 | |
for forecasting the future of the American economy. | 6:00 | |
Nobody, as you know, has a great, near perfect record. | 6:03 | |
But there are different degrees of rocknesses | 6:08 | |
of the different batting averages | 6:12 | |
of the different forecasters, | 6:14 | |
and those impressionistic people | 6:16 | |
who speak in the way that I've been describing, | 6:18 | |
as I run over the few names | 6:21 | |
that I've encountered in the press, | 6:23 | |
it seems to me, | 6:25 | |
have done especially badly over past years. | 6:26 | |
Hence, I would counsel that we cannot give | 6:30 | |
too much weight to their assertions in the matter, | 6:33 | |
as far as their own personal authority is concerned. | 6:38 | |
However, a more respectable position | 6:40 | |
than that inflation is unstoppable, | 6:44 | |
is that | 6:46 | |
the inflation is stronger | 6:50 | |
than most people have been reckoning up until now. | 6:51 | |
That most economists and business analysts | 6:55 | |
and government offcials | 6:58 | |
have been underestimating the strength of the inflation. | 6:59 | |
And therefore this group, | 7:04 | |
in making its forecast for 1970, | 7:07 | |
logically I suppose would forecast higher figures. | 7:09 | |
Now who might be representative of this group? | 7:13 | |
Perhaps Dr. Pierre Rinfret might be. | 7:19 | |
I say perhaps because Pierre Rinfret is a big swinger | 7:22 | |
who covers lots of ground, | 7:27 | |
he's quite a flamboyant speaker, | 7:30 | |
so you really find it very hard to pin him down. | 7:32 | |
But if I track him very carefully, | 7:35 | |
and try to smooth out the crescendos, | 7:39 | |
I think that Rinfret talks as if, | 7:44 | |
if he's saying something, | 7:46 | |
he believes the economy is really quite strong. | 7:47 | |
Now he has said in public for more than a year | 7:52 | |
that interest rates are going to be very high, | 7:56 | |
they're going to be very high in the | 8:00 | |
in 1969, in 1970, in the first years of the 1970s. | 8:03 | |
I believe he has on the podium occasionally spoken of | 8:09 | |
prime rates of 9.5% in the first years of the 1970s. | 8:15 | |
He was one of those who | 8:20 | |
early forecast, | 8:24 | |
or at least his survey suggested, | 8:26 | |
that investment spending would be quite high, | 8:28 | |
and the Boston Rinfret survey of few months ago | 8:32 | |
was more or less confirmed by the Line-Leedy survey | 8:38 | |
of businessmen's intentions to invest, | 8:42 | |
since that time. | 8:44 | |
And more recently we had the McGraw-Hill survey | 8:45 | |
of what businessmen intend to do. | 8:49 | |
And that, | 8:51 | |
to the anxious eyes of government officials waiting for it, | 8:52 | |
turned out to be disappointingly strong. | 8:57 | |
Similarly, the recent official SEC | 9:02 | |
office of business economics | 9:06 | |
more comprehensive survey has come in. | 9:07 | |
And the faces fell of all the government officials | 9:10 | |
when the statistics were finally analyzed, | 9:14 | |
because according to this survey, | 9:17 | |
the first half of next year | 9:20 | |
we'll see plant and equipment expenditures very strong, | 9:21 | |
11% higher if businessmen get their way, | 9:23 | |
and realize their own intentions, | 9:26 | |
than the first half-year of 1969. | 9:32 | |
And so | 9:35 | |
a Rinfret might on this basis say | 9:38 | |
that 1970 will be a strong year. | 9:43 | |
As usual, | 9:47 | |
we have a unimodal distribution | 9:51 | |
with more people toward the middle in these forecasts | 9:53 | |
than at the extremes. | 9:57 | |
And so, flanking those who are calling | 9:59 | |
for a severe recession in all likelihood, | 10:03 | |
calling for it in the sense of forecasting | 10:06 | |
that it is practically inevitable, | 10:09 | |
flanking them but not in so extreme a forecast, | 10:15 | |
but far short of the Rinfret forecast of a strong year, | 10:21 | |
is to be found the vast majority of economists. | 10:26 | |
At this moment, | 10:31 | |
if I were to hold an office pool | 10:33 | |
among all business cycle analysts, | 10:37 | |
let's say the members, | 10:40 | |
and there'd be several hundred | 10:43 | |
of the Business Economists' Association. | 10:44 | |
There'd be several hundred more members covered | 10:47 | |
if I included the economist members | 10:49 | |
of the American Statistical Association. | 10:52 | |
And then bring in from the Econometric Society, | 10:54 | |
and from the American Economic Association, | 10:57 | |
another few hundred, | 11:00 | |
we would then have a sample of about a thousand people | 11:01 | |
who profess to have a view | 11:04 | |
about what's going to happen next year. | 11:05 | |
Now I've not seen a round-up of this group. | 11:08 | |
There will be undoubtedly at the Christmas meetings | 11:12 | |
at the end of this month, | 11:15 | |
just between Christmas and New Years in New York, | 11:16 | |
a session of the American Statistical Association, | 11:19 | |
in which, by the use of modern electronic devices, | 11:22 | |
cards will be punched up | 11:28 | |
giving the answers to questionnaires by this group. | 11:30 | |
And on that very same afternoon, | 11:33 | |
in the very same hour, | 11:36 | |
we will know what the median forecast of this group is. | 11:37 | |
Now what will it be? | 11:41 | |
I can predict I think with some confidence what it would be. | 11:43 | |
According to the largest number, | 11:47 | |
the modal number, | 11:50 | |
and this would probably include about | 11:52 | |
as many as half of all of the analysts, | 11:56 | |
it's a good bet that | 12:01 | |
the National Bureau of Economic Research will record | 12:03 | |
a recession | 12:06 | |
in 1970. | 12:08 | |
Now I say this on the basis | 12:10 | |
of a very strict, narrow, definition | 12:12 | |
of what constitutes a recession. | 12:16 | |
It's the operational test that could be applied | 12:18 | |
by a referee in a Las Vegas bet | 12:24 | |
that involved considerable amount of money, | 12:26 | |
and where the money was held in escrow. | 12:29 | |
In order for there to be a National Bureau recession, | 12:32 | |
it is not necessary that there be a depression | 12:35 | |
in the country, | 12:38 | |
anything like that which we had before World War II. | 12:39 | |
All that is necessary for my present purpose, | 12:42 | |
is that the real GNP | 12:47 | |
for | 12:49 | |
two or more months shall | 12:51 | |
decline. | 12:54 | |
And so if in the fourth quarter, | 12:55 | |
this present quarter of the year, | 12:57 | |
the money GNP rises by only seven or eight billion dollars, | 13:01 | |
which will surely be less than is needed | 13:06 | |
just to keep up with the rate at which prices are rising, | 13:09 | |
as measured by the implicit price deflator, | 13:14 | |
and if in the first quarter of next year | 13:17 | |
a similar performance is realized, | 13:22 | |
Las Vegas will pay off on the bet. | 13:24 | |
But I would say that most of them | 13:27 | |
would in fact project this into | 13:29 | |
the second quarter of the year as well. | 13:32 | |
As a matter of fact as we'll see in a moment, | 13:35 | |
most of these people are always behind the times. | 13:37 | |
It isn't fair to them to take what they say | 13:40 | |
at the meetings after Christmas, | 13:45 | |
because their thinking is always about three weeks late. | 13:47 | |
They're not professionals | 13:50 | |
who spend all their time in this matter. | 13:51 | |
And the climate of opinion changes very rapidly | 13:53 | |
in three weeks. | 13:59 | |
So I will give them the benefit of the doubt, | 14:00 | |
and I will assume that they are cutting their losses | 14:02 | |
on the fourth quarter rate of growth | 14:07 | |
and are projecting this into the first | 14:09 | |
two quarters of next year. | 14:11 | |
And the bulk of the economics profession believes | 14:14 | |
that there will be a recession by this test. | 14:18 | |
With what degree of confidence do they believe this? | 14:23 | |
I don't think I oughta count the number who believe it | 14:27 | |
as against the number who don't believe it. | 14:29 | |
I won't take the group who do believe it. | 14:31 | |
I would say that those typical people, | 14:34 | |
if you press them, | 14:38 | |
would believe it to be something like | 14:40 | |
70/30 in favor of that. | 14:47 | |
Only three tenths' probability | 14:51 | |
that we will not have a recession. | 14:55 | |
This could be a very mild recession, | 14:58 | |
as our history of recessions goes, | 14:59 | |
by this particular test. | 15:02 | |
Now what are we to think about this view? | 15:04 | |
The group that I'm speaking of of course | 15:11 | |
overlap with a smaller group | 15:13 | |
who believe that there will be a severe recession, | 15:16 | |
a recession more severe than that of 1960, 61, | 15:19 | |
and certainly much more severe than that of | 15:23 | |
1967, | 15:29 | |
which was not properly speaking, | 15:30 | |
by the National Bureau of Las Vegas' definition, | 15:31 | |
a recession at all but has to be dismissed | 15:34 | |
as only a mini recession. | 15:37 | |
It's the monetarists of course | 15:41 | |
who are one of the two most vocal groups | 15:44 | |
who believe in the severe recession. | 15:47 | |
Now let me make clear that the adjective severe here | 15:50 | |
does not yet mean | 15:54 | |
severe in the sense of | 15:56 | |
1921. | 16:00 | |
It doesn't certainly mean severe in the sense of 1933. | 16:01 | |
It doesn't even mean as severe yet, | 16:05 | |
except in some of the more eloquent and flamboyant moments, | 16:08 | |
to which we should not hold a speaker, | 16:13 | |
it doesn't mean something like the 1937, 38 recession. | 16:15 | |
But it does mean something as bad or worse | 16:20 | |
than the 1958, 59 recession, | 16:25 | |
and getting towards the | 16:28 | |
1953, 54 recession too. | 16:32 | |
I say there are two such groups | 16:37 | |
because there is a meeting of the minds in part. | 16:39 | |
Now let me illustrate that by recapitulating | 16:44 | |
what I said in one of my tapes a couple of weeks ago. | 16:47 | |
Somebody like | 16:53 | |
a bank monetarist, | 16:57 | |
who believed | 16:59 | |
a month ago | 17:02 | |
that even if the Federal Reserve a month ago | 17:03 | |
amended its ways and caused the money supply | 17:06 | |
to stop growing at zero level, | 17:10 | |
but started its growing at 2-3%, | 17:14 | |
and kept it this way, | 17:17 | |
not only this last month that's behind us | 17:21 | |
but for the next few months, | 17:24 | |
he believed that even if that happens, | 17:25 | |
they've been so tight in the previous five or six months, | 17:27 | |
that they had ensured zero growth in the money GNP | 17:34 | |
in the first two quarters of next year. | 17:38 | |
And then I told you that when I talked to him, | 17:42 | |
I said that a first look at the Wharton School model | 17:44 | |
suggested that it was not so far off from that, | 17:47 | |
that is the new run of the Whatron School model. | 17:50 | |
You can find that written up | 17:52 | |
if you're a subscriber to the Wharton School publications, | 17:54 | |
but you also can find it in a Businessweek of recent date. | 17:57 | |
That model is not as bearish as my monetarist friend, | 18:03 | |
but it's very nearly so, | 18:06 | |
because in the second quarter of the year, | 18:07 | |
it calls for only a four billion increase in GNP, | 18:10 | |
which is an annual rate in money terms, | 18:14 | |
this is all money that I'm speaking of, | 18:16 | |
of barely 1 or 2% which is | 18:22 | |
considering the inaccuracy of all of our data, | 18:25 | |
is not all that different from a flat money GNP. | 18:28 | |
And as I told you my monetarist friend said, | 18:33 | |
"I wish you hadn't told me that | 18:36 | |
"because those fellows are never right. | 18:37 | |
"I hate to be in their company, | 18:38 | |
"and maybe I oughta rethink my position." | 18:40 | |
Well, whether you hate to be in their company or not, | 18:42 | |
the typical macro GNP model | 18:48 | |
is going to louse up any controlled experiment | 18:50 | |
to enable us to find out whether keynesians are right | 18:54 | |
or whether monetarists are right, | 18:57 | |
because a number of these models are calling for | 19:00 | |
a considerable amount of weakness. | 19:04 | |
We'll have to go to overtones to higher order effects, | 19:06 | |
to what the strength is of the last half of the year | 19:09 | |
compared to the first half, | 19:14 | |
to find some powerful cutting edge | 19:16 | |
to judge between the two positions. | 19:19 | |
Actually, I will tip my hand. | 19:22 | |
As I have been saying these many weeks, | 19:25 | |
almost of these monetarist models and GNP models | 19:29 | |
are certainly wrong in that they are underestimating | 19:33 | |
the rate of growth in the fourth quarter. | 19:37 | |
And they are all now beginning to go through | 19:40 | |
agonizing reappraisals as this is brought home | 19:42 | |
by each new week's passing data. | 19:45 | |
And so they all will do what every forecaster does, | 19:48 | |
well not everyone but it's certainly a pattern, | 19:53 | |
if not a failing, | 19:57 | |
and that is they will say, | 19:58 | |
I was right but I was too soon and, | 20:00 | |
Let's just project this pattern a quarter later or two. | 20:04 | |
And so you will start out, | 20:09 | |
if you pick up forecasts right now, | 20:11 | |
I report this to you as surveying the field, | 20:14 | |
by a lot of people saying that the first half | 20:17 | |
is gonna be the weak half | 20:19 | |
and the second half is gonna be stronger. | 20:20 | |
And then if it turns out that they've | 20:22 | |
over-exaggerated the weakness in the first part, | 20:26 | |
they are gradually gonna push the weakness | 20:29 | |
into the last part of the year. | 20:31 | |
It's possible that the monetarists will be the first | 20:34 | |
in this particular line. | 20:39 | |
Now what is my own opinion? | 20:44 | |
If had to bet seriously | 20:48 | |
my family money, | 20:52 | |
I were held to it, | 20:53 | |
and I had to take either side of whether there will be | 20:55 | |
in 1970, a National Bureau recession, | 21:00 | |
then given my ruthers, | 21:03 | |
I would at this time take the side against it. | 21:05 | |
Certainly if the bet could be narrowed down | 21:10 | |
to that period which most analysts think | 21:13 | |
is gonna be the weak period, | 21:15 | |
the first couple quarters of the year, | 21:18 | |
whether those two quarters will in fact | 21:20 | |
show negative real growth of GNP, | 21:22 | |
then I would with some confidence | 21:27 | |
forecast that there will not be two quarters | 21:30 | |
of drop in real GNP. | 21:35 | |
I'm not even sure there will be one quarter of drop. | 21:38 | |
Now, I say I'm not sure. | 21:43 | |
What do I mean? | 21:45 | |
I was talking to a reporter, | 21:47 | |
a financial reporter from the Christian Science Monitor, | 21:49 | |
just this morning, | 21:53 | |
and I told him 60/40 against there being a recession. | 21:53 | |
Now why did I say this? | 21:58 | |
Why in other words am I a little bit more | 21:59 | |
expansionary in my forecast | 22:03 | |
than the crowd? | 22:07 | |
Because I've already now moved off above | 22:08 | |
where the bulk of the forecasters are, | 22:12 | |
as I described to you earlier. | 22:15 | |
Well in the first place, | 22:17 | |
already I see that they're wrong on the weakness | 22:19 | |
that they've forecast for the fourth quarter. | 22:21 | |
That's a fact nattus. | 22:24 | |
Secondly, and this carries great weight with me, | 22:25 | |
the SEC report on plant and equipment expenditures | 22:29 | |
is high. | 22:33 | |
Now I don't say that those businessmen | 22:34 | |
aren't going to realize their intentions, | 22:35 | |
but I do think that you cannot disregard evidence, | 22:37 | |
at least I've learned that I'm burned | 22:40 | |
when I do disregard evidence, | 22:41 | |
and I think those forecasts surveys | 22:43 | |
are trying to tell us something | 22:44 | |
about the frame of mind of business. | 22:46 | |
And it's very hard to see a serious recession | 22:49 | |
given that effect. | 22:53 | |
So my own best guess is, | 22:59 | |
that the real rate of growth of GNP | 23:01 | |
in 1970, | 23:06 | |
will be slower than it was in 1969, | 23:07 | |
just as it was slower than it was in 1968. | 23:11 | |
It'll be more a question of | 23:14 | |
1% real growth | 23:20 | |
than of 6% of just a little way back. | 23:23 | |
Yes I said 6% and I meant real growth. | 23:27 | |
That's what the number was in the first half of 1968. | 23:29 | |
And I wouldn't like to be held | 23:33 | |
as to whether it's one or whether it's two | 23:36 | |
or whether it's a half, | 23:38 | |
but it seems to me that's the ballpark. | 23:40 | |
This means an increase in unemployment, | 23:44 | |
it means definitely unemployment will be above 4%. | 23:45 | |
It doesn't mean I think that unemployment | 23:48 | |
will be above 5%. | 23:50 | |
This means a tough profit situation, | 23:52 | |
a further erosion of profits. | 23:55 | |
What does this mean for interest rates? | 23:57 | |
It seems to me it means that interest rates | 24:01 | |
will be a little bit lower than they are now. | 24:04 | |
But I think it means that it'll be only a little bit | 24:07 | |
lower than they are now, | 24:10 | |
because there still will be a problem of inflation. | 24:12 | |
Indeed, if the major economic problem | 24:16 | |
of the new Nixon team | 24:19 | |
has been to bring a rate of price inflation of 6%, | 24:20 | |
say in the consumer's price index, | 24:26 | |
and at the last reading, the third quarter, | 24:28 | |
5.5% in the implicit price deflator, | 24:31 | |
if the task is to bring that down to 2% or 3%, | 24:35 | |
then that is an impossible task. | 24:41 | |
If I took seriously Paul McCracken's statement | 24:45 | |
to 2,000 businessmen, that, | 24:49 | |
don't look beyond the valley, | 24:51 | |
because after a couple of quarters of softness, | 24:52 | |
we are not going to let the economy resume | 24:55 | |
at 7 and 8% money GNP growth, | 24:58 | |
but only at, | 25:01 | |
I think he said 4 or 5%, | 25:03 | |
but if he said 5 or 6% it doesn't change my point, | 25:04 | |
then such remaining stocks as I own I would actually sell. | 25:08 | |
Because I am quite sure that we cannot bring | 25:15 | |
the rate of price increase down | 25:19 | |
as measured by the comprehensive say, | 25:20 | |
GNP implicit deflator, | 25:23 | |
to very much below 4%. | 25:27 | |
I think we'll do very well if we get to 3.5%, | 25:29 | |
and I don't expect, | 25:32 | |
unless the economy is weaker than I believe, | 25:33 | |
that we will get to that. | 25:37 | |
But I certainly don't think you can get it below 3%. | 25:39 | |
And if we have then 3% of price increase, | 25:42 | |
and only say 5% of money GNP increase, | 25:45 | |
this means for a long time to come, | 25:49 | |
businessmen must look forward to only a 2% | 25:50 | |
real growth increase. | 25:53 | |
And that I think would be the kind of emphysema | 25:55 | |
that I warned against, | 25:59 | |
that was my main concern. | 26:01 | |
My main concern was not that inflation would snow-ball. | 26:03 | |
My main concern was not that inflation was uncontrollable. | 26:06 | |
My main concern was not that the Federal Reserve | 26:09 | |
would, according to the monetarists' view, | 26:14 | |
in other words, not a view that I was able to accept, | 26:16 | |
plunge us into a rather severe recession. | 26:19 | |
My main concern is that we have a long term | 26:22 | |
problem of an incomes policy, | 26:26 | |
of a wage push combined with demand pull inflation, | 26:30 | |
and until we weigh of make much headway on that, | 26:34 | |
if we insist upon making headway on that, | 26:36 | |
is by running a rather stagnant | 26:39 | |
a rather retarding | 26:43 | |
a rather slow-growing economy. | 26:45 | |
And hence, I don't know whether the forecast | 26:50 | |
that I've given you is a cheerful one. | 26:53 | |
It's a more expansionary one than most, | 26:55 | |
but that doesn't necessarily mean that more is better | 26:58 | |
in the present situation. | 27:01 | |
Now what does this mean for the stock market? | 27:02 | |
It's not my business to forecast movements | 27:06 | |
in the index numbers of stock prices. | 27:09 | |
My guess is that the most favorable thing | 27:12 | |
that could happen to the stock market | 27:16 | |
would be that in the next few months | 27:18 | |
the economy is indeed quite weak, | 27:21 | |
along the lines of the majority of the analysts, | 27:24 | |
and that the men in Wall Street | 27:26 | |
see that the medicine is working, | 27:29 | |
they see beyond the valley, | 27:30 | |
even though Paul McCracken told them not to, | 27:33 | |
and this I think would cause great encouragement | 27:35 | |
to the market and the market could then | 27:38 | |
go considerably above the 800 level. | 27:41 | |
However, I believe it's gonna be more nearly a balance, | 27:45 | |
and that means that every one of you | 27:51 | |
must be your own stock market forecaster. | 27:54 | |
- | Thank you, Professor Paul Samuelson of MIT. | 27:57 |
If you have questions or comments, | 27:59 | |
send them to Instructional Dynamics Incorporated, | 28:01 | |
166 East Superior Street, Chicago, 60611. | 28:04 |
Item Info
The preservation of the Duke University Libraries Digital Collections and the Duke Digital Repository programs are supported in part by the Lowell and Eileen Aptman Digital Preservation Fund