Tape 52 - Answers to subscribers; inquiries; revised forecast
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- | Hello again, and welcome as MIT professor, Paul Samuelson | 0:02 |
discusses the current economic scene. | 0:05 | |
This bi-weekly series is produced for | 0:07 | |
Instructional Dynamics Incorporated of Chicago, | 0:09 | |
and was recorded on June 12th, 1970. | 0:12 | |
Professor Samuelson, we have a couple of questions today | 0:16 | |
and our first one comes from a subscriber who asks | 0:18 | |
could it be possible in these United States | 0:21 | |
to have the government secretly stabilize the stock market | 0:23 | |
with the money that was recently appropriated | 0:27 | |
to increase the debt limit? | 0:29 | |
- | The answer to that question, I think is no. | 0:32 |
It's very difficult for the United States government | 0:35 | |
to do anything secretly. | 0:37 | |
We do have and have had in the past | 0:40 | |
stabilization operations in the Treasury Department | 0:43 | |
of the foreign exchange rate from special funds | 0:47 | |
which were made available to the Treasury | 0:51 | |
because of the revaluation of gold | 0:53 | |
in Franklin Roosevelt's era of 1933, | 0:56 | |
but as far as I know, except for the CIA, | 0:59 | |
which has a budget that is not debated publicly, | 1:03 | |
there is no real possibility within the framework | 1:07 | |
of the United States government | 1:10 | |
to have a secret stabilization fund | 1:12 | |
operated by the government | 1:16 | |
to stabilize the stock market. | 1:18 | |
That's the simple answer to the question, | 1:22 | |
but let me go on. | 1:23 | |
There's another point. | 1:27 | |
The questioner asked whether this could be done | 1:29 | |
with funds recently appropriated to increase the debt limit. | 1:32 | |
The answer to that is unequivocally no | 1:36 | |
because the debt limit was increased | 1:38 | |
only in order to cover | 1:42 | |
expenditures already obligated | 1:45 | |
and in process of being made. | 1:48 | |
So there is no melon in Washington | 1:50 | |
voted by Congress which can be cut up in a discretionary way | 1:54 | |
at the will of the present administration. | 1:58 | |
Let me go on and reformulate the question. | 2:04 | |
Should Congress legislate | 2:07 | |
a fund of money made available | 2:11 | |
to the executive branch of the government | 2:14 | |
for the purpose of stabilizing the stock market, | 2:17 | |
either secretly or publicly? | 2:20 | |
Now that's a more complicated issue in general. | 2:24 | |
In one of my earlier tapes, I commented | 2:28 | |
upon precisely this possibility. | 2:31 | |
We have open market operations by the | 2:35 | |
Federal Reserve Board. | 2:37 | |
That is the 12 Federal Reserve banks, | 2:41 | |
and these open market operations take place | 2:43 | |
in terms of | 2:46 | |
typically short-term government Treasury bills, | 2:48 | |
more rarely long-term government bonds. | 2:52 | |
But there is, I believe, no statutory limitation | 2:55 | |
to having the Federal Reserve | 2:59 | |
have a wider spectrum of assets | 3:02 | |
in terms of which they make their open market operations, | 3:05 | |
which they presume are of a stabilizing type. | 3:09 | |
The late Per Jacobsson was the Director General | 3:14 | |
of the International Monetary Fund | 3:18 | |
at the time he died or just before he died. | 3:21 | |
He acquired quite a reputation | 3:25 | |
in the many years that he served in Basel, Switzerland, | 3:27 | |
at the Bank for International Settlements. | 3:30 | |
He was a formidable | 3:34 | |
fighter against inflation. | 3:37 | |
In speech after speech from Basel, | 3:40 | |
in memorandum after memorandum, | 3:42 | |
he castigated the mixed economies | 3:44 | |
between the war periods for their profligate ways, | 3:49 | |
and when in the 1950s and 1960s, | 3:52 | |
he became Director General of the Monetary Fund, | 3:57 | |
by and large he led the good fight against inflation. | 4:00 | |
Nevertheless, as I remember his once saying to me, | 4:05 | |
he had advocated, and did advocate, | 4:10 | |
that in time of deep depression, | 4:13 | |
the central bank should support | 4:15 | |
more than gilt-edged government bonds. | 4:18 | |
As I recall, it had been his proposal | 4:22 | |
in the Great Depression that the Federal Reserve, | 4:25 | |
the central bank, the Bank of Japan, | 4:28 | |
the Bank of England, the Bank of Sweden, | 4:30 | |
depending upon the country, be prepared | 4:32 | |
to make open market purchases | 4:34 | |
in terms of municipal bonds. | 4:37 | |
Well, in a creative age we can be creative | 4:40 | |
and it would be a possibility to delegate | 4:44 | |
to the Federal Reserve, and then this | 4:46 | |
could be a matter of secrecy, | 4:48 | |
if secrecy were desirable. | 4:50 | |
On the other hand, it's not clear | 4:52 | |
whether secrecy in this instance is desirable. | 4:54 | |
I presume my questioner takes it for granted | 4:57 | |
that the only good stock market | 5:01 | |
is a stock market that is high, that is up, | 5:03 | |
that is growing, and that stabilization is a euphemism | 5:05 | |
for supporting the market. | 5:09 | |
Let me not, for the moment, pronounce on that question, | 5:11 | |
but assume that he is right. | 5:14 | |
If the Federal Reserve were engaged in a salvage operation | 5:17 | |
in supporting the Dow Jones Averages, | 5:21 | |
let us say at 630 or at | 5:23 | |
600 on the Dow Index, | 5:26 | |
you recall that the stock market averages | 5:29 | |
went down to 630 last month | 5:32 | |
at their point of greatest weakness. | 5:36 | |
If at that point they were going to be supporting the market | 5:39 | |
it might be that they would want to make | 5:42 | |
a very bold announcement to that effect. | 5:44 | |
When you have a run on the banking system | 5:46 | |
within the country, we have known ever since | 5:49 | |
the 19th century days of Walter Bagehot, | 5:51 | |
that the central bank meets that internal drain | 5:54 | |
by bold monetary creation, | 5:59 | |
announcing to the public exactly what it is doing, | 6:02 | |
knowing that if it is credible | 6:06 | |
in its claim that it will pay out the money | 6:09 | |
and enable the bank system to pay out, | 6:12 | |
then the depositors will no longer wish to | 6:14 | |
have their money out, and so it is | 6:16 | |
if it was known that the United States Treasury | 6:19 | |
or the Federal Reserve was supporting the stock market, | 6:23 | |
keeping it from going down at the level of 630, | 6:26 | |
then many people who could regard 630 as the bottom | 6:29 | |
would come in and it might well be | 6:33 | |
that there would be no need for the Federal Reserve | 6:36 | |
to do much in the way of stabilization. | 6:40 | |
I may say that that was actually the experience | 6:42 | |
in Victorian England on | 6:45 | |
occasion after occasion. | 6:48 | |
When there was a crisis and an internal drain, | 6:49 | |
the Prime Minister would write a letter | 6:52 | |
to the Bank of England giving it the right | 6:56 | |
to create money to meet that drain, | 6:58 | |
and I think in every case, but certainly | 7:00 | |
in almost every case, the mere fact | 7:02 | |
that it was known that the Prime Minister | 7:05 | |
had written the letter, made it unnecessary, in fact, | 7:07 | |
for the central bank, the Bank of England | 7:10 | |
to create the money. | 7:14 | |
Nonetheless, I would raise the question | 7:17 | |
not whether the United States instrumentalities | 7:19 | |
have the power, but whether it would be | 7:22 | |
a particularly desirable thing for the government | 7:25 | |
to stabilize the stock market | 7:29 | |
at one level rather than another. | 7:31 | |
In my earlier tape, in an earlier tape, | 7:35 | |
I talked, you will remember, about the operations | 7:39 | |
which the Japanese government, | 7:42 | |
through the Bank of Japan, | 7:45 | |
had used, in stabilizing the Tokyo market, | 7:47 | |
and I mentioned the fact that | 7:50 | |
the Italian government under Mussolini, | 7:52 | |
had acquired a considerable equity interest | 7:54 | |
in the large corporations of Italy | 7:57 | |
as a result of such a stabilization operation. | 8:01 | |
I don't say that I am dogmatically in principle | 8:04 | |
against that, but I'm not sure | 8:07 | |
that at the current juncture of things | 8:12 | |
we know exactly what is the good value | 8:15 | |
that we would wish to have the Dow Jones be at | 8:18 | |
in the United States. | 8:23 | |
Later in this tape, when I give a reappraisal | 8:24 | |
on the basis of all the new evidence | 8:28 | |
of the general outlook for the economy, | 8:30 | |
I hope to say a few words about | 8:33 | |
how correct or incorrect the | 8:36 | |
existing level of stock prices may be, | 8:39 | |
but let me just at this point say | 8:42 | |
that there would be a great danger | 8:44 | |
that if the government were out to stabilize | 8:46 | |
they would do what governments have done | 8:48 | |
in the field of agriculture all over the world. | 8:51 | |
The ever-normal granary programs, | 8:55 | |
as they are euphemistically described, | 8:57 | |
allegedly have for their purpose | 9:00 | |
the evening out of good crop years with bad crop years. | 9:02 | |
The government is to help store, | 9:07 | |
as Joseph did in Egypt, | 9:09 | |
as a result of divine information. | 9:12 | |
In a dream he was told that there would be | 9:17 | |
seven lean years and seven fat years. | 9:18 | |
Unfortunately governments do not have divine information. | 9:22 | |
They have to forecast like other people and they have not | 9:25 | |
shown particularly better forecasting ability. | 9:29 | |
I will not say that they have shown worse. | 9:31 | |
I don't really want to go into that particular issue, | 9:34 | |
but I do wish to mention, and I think economists | 9:36 | |
of many different political persuasions | 9:40 | |
will agree with this, that there is a great tendency | 9:43 | |
for stabilization operations actually to be | 9:46 | |
price raising operations, and I do not think | 9:49 | |
it has been established that | 9:53 | |
what is needed in the United States at this | 9:55 | |
state of affairs is a rather revolutionary | 9:58 | |
change in our practice aimed at keeping the stock market | 10:01 | |
always growing and always | 10:05 | |
at a very high level. | 10:07 | |
- | We have a second question here. | 10:11 |
This one's got a multiple part to it. | 10:13 | |
Is productivity really increasing? | 10:15 | |
How meaningful is output per man hour? | 10:17 | |
Output as compared to what? | 10:20 | |
Are military goods included in this output? | 10:22 | |
Wouldn't it be more beneficial to have, if possible, | 10:25 | |
a separation of government goods and services | 10:28 | |
from the private sector, have a public GNP | 10:30 | |
and a private GNP sector for NI statistical analysis? | 10:33 | |
What's your opinion? | 10:37 | |
- | There are many parts to this question. | 10:38 |
Let me try to answer them one by one. | 10:40 | |
Is productivity really increasing? | 10:43 | |
The answer to that is | 10:45 | |
in most years, in most quarters, yes, | 10:46 | |
and at about a rate of | 10:49 | |
3% on the average. | 10:53 | |
However, in the first quarter of this year, | 10:56 | |
as I recall, and that's the last | 10:59 | |
time for which we have any statistics, | 11:04 | |
there was virtually no increase in productivity, | 11:06 | |
and by and large, in the last several quarters, | 11:09 | |
the increase in productivity has been very low indeed, | 11:12 | |
much less than the long-term average. | 11:16 | |
This is understandable because it has been | 11:20 | |
a systematic pattern in our business cycle history | 11:22 | |
that productivity increases most | 11:25 | |
as you come out of a recession | 11:28 | |
or out of a period of retardation, | 11:29 | |
and in those first several quarters of a new expansion | 11:32 | |
you get your greatest increases in productivity. | 11:36 | |
By the same token, when you go into a decline, | 11:39 | |
and are in a decline, | 11:43 | |
then productivity increases least. | 11:45 | |
It's easy to understand. | 11:49 | |
Business firms do not quite believe that | 11:50 | |
a retardation period, a period of contraction is on them. | 11:53 | |
In tight labor markets, which they very well remember | 11:58 | |
from the recent past, they are inclined to | 12:03 | |
hoard their labor power, not fire people | 12:05 | |
at the first signal that their output is down. | 12:08 | |
They keep them on the payroll, | 12:11 | |
but they aren't really doing very much, | 12:12 | |
and this shows itself in a | 12:14 | |
considerable decrease in output. | 12:16 | |
The question that I would ask, | 12:19 | |
I'm adding a question as part of my answer, | 12:21 | |
is whether productivity in the last | 12:23 | |
recent quarters, a year or two, | 12:27 | |
has been weak | 12:30 | |
after we correct for the trend of output itself, | 12:32 | |
because if it were, and if this is the | 12:36 | |
beginning of a new trend, that would be a rather | 12:38 | |
ominous outlook | 12:41 | |
for profits and also for the behavior of the real GNP. | 12:45 | |
Let me move on quickly. | 12:49 | |
How meaningful is output per hour? | 12:51 | |
The answer to that is | 12:54 | |
our statistics on output per hour, | 12:55 | |
and productivity generally, are pretty poor. | 12:57 | |
The Bureau of Labor statistics compiles | 13:01 | |
the best that they can contrive for us, | 13:02 | |
but there are great data difficulties | 13:05 | |
in gathering information, and there are equally great | 13:07 | |
conceptual difficulties. | 13:12 | |
Let me mention two sectors where these are | 13:14 | |
at their most acute. | 13:18 | |
In the service area, we find it | 13:20 | |
very difficult to define output. | 13:23 | |
It's easy to define input, | 13:25 | |
and if we could define output well, | 13:26 | |
then by taking the ratio of one to the other, | 13:28 | |
you could see what's happening to productivity. | 13:30 | |
But so often in the service areas, | 13:32 | |
we have to measure output by input itself | 13:34 | |
and therefore, changes in productivity | 13:37 | |
become a mere mockery. | 13:39 | |
It tautologically is impossible. | 13:42 | |
The instance which we give in economics classrooms of course | 13:45 | |
is often that of a doctor's visit. | 13:49 | |
A doctor's visit has gone up from | 13:51 | |
three dollars an office visit | 13:54 | |
or five dollars an office visit | 13:56 | |
often to 10 and 15 dollars. | 13:57 | |
Perhaps in your part of the country it's more than that. | 14:01 | |
I'm now talking about a general practitioner, | 14:03 | |
not a specialist visit, because of course with a | 14:05 | |
certain kind of specialist, | 14:09 | |
the rates could be much, much higher than that. | 14:10 | |
Does that mean that the cost of living has | 14:14 | |
doubled, tripled, increased fivefold? | 14:17 | |
Well, we don't know if the doctor has better education, | 14:20 | |
which has taken him longer years of study, | 14:24 | |
if he has an electrocardiogram, | 14:26 | |
better methods of diagnosis, then in terms of output | 14:28 | |
you may be getting almost as much per dollar | 14:33 | |
as earlier, but we have no easy way | 14:37 | |
of measuring that output, so my answer to the question | 14:40 | |
is that it is only the trends | 14:43 | |
in output per man hour which are meaningful. | 14:45 | |
The absolute levels are not very meaningful, | 14:48 | |
and even those trends can get out of kilter. | 14:51 | |
Now, the further question I'm asked | 14:54 | |
is our military goods included in this output? | 14:57 | |
The answer to that is that | 14:59 | |
in the total production index, military goods are included. | 15:02 | |
In the total real gross national product, | 15:06 | |
military goods are included, and therefore, | 15:08 | |
measures of output based upon those aggregates | 15:10 | |
do include military goods. | 15:13 | |
But we do have in the accounts, | 15:15 | |
a separation of sectors. | 15:18 | |
We have in the GNP accounts, for example, | 15:21 | |
a separation of government goods and services | 15:23 | |
from the private sector, we have separate figures of input | 15:25 | |
into the government sector, for example, | 15:28 | |
government payrolls and employment, | 15:31 | |
and so it is possible to separate | 15:33 | |
the private domestic productivity | 15:37 | |
from the overall GNP. | 15:40 | |
I should add just in conclusion | 15:44 | |
that it is the government sector itself | 15:47 | |
which makes for one of the greatest areas of difficulty | 15:49 | |
because there is no measure of physical output | 15:52 | |
for the government sector | 15:56 | |
attempted by the Department of Commerce, | 15:57 | |
and every time a civil servant | 15:59 | |
gets an increase in his nominal pay, | 16:03 | |
even though he is not working any harder than before, | 16:05 | |
that shows up as an increase | 16:08 | |
in the money, GNP. | 16:11 | |
Moreover, every time | 16:14 | |
a new computer is put into government, | 16:17 | |
and a civil servant thereby becomes more efficient, | 16:20 | |
that genuine improvement, which enables | 16:24 | |
fewer people to provide the same | 16:27 | |
public sector services for us, | 16:29 | |
or permits the same number of people | 16:31 | |
to provide us with a larger quantum | 16:34 | |
of public sector services, | 16:37 | |
that doesn't register at all in the | 16:40 | |
official GNP numbers. | 16:44 | |
Next question. | 16:47 | |
- | The break in copper preceded the 1937 recession. | 16:49 |
How do you account for the high price of copper now? | 16:52 | |
Increases in production have always | 16:55 | |
brought down prices in the past. | 16:57 | |
What's the current situation like? | 16:59 | |
- | I'm not an expert in the field of the copper industry, | 17:01 |
but let me try to field the question as best I can. | 17:05 | |
We know that not every industry shares, | 17:10 | |
in perfect concordant unison, with the business cycle, | 17:13 | |
so if a particular industry, such as copper, | 17:17 | |
in this recessionary period, | 17:20 | |
were out of line, there would be nothing | 17:23 | |
very remarkable about that. | 17:25 | |
Let me therefore talk about the | 17:26 | |
general, sensitive staple prices. | 17:29 | |
The researches of the National Bureau of Economic Research | 17:33 | |
on leading indicators, coincidental indicators, | 17:37 | |
lagging indicators, reinforced by similar research | 17:40 | |
in the Department of Commerce in Washington, | 17:43 | |
has arrived at the conclusion | 17:47 | |
that one of the leading indicators | 17:49 | |
is sensitive staple prices, | 17:51 | |
and so generally speaking, | 17:55 | |
to the degree that copper is such a good, | 17:57 | |
we would expect its price to break early | 18:02 | |
in any contraction, sometimes even in anticipation. | 18:06 | |
You may remember, if your memory goes back a long way, | 18:10 | |
that the rather serious 1920-1921 recession, | 18:13 | |
which was the post-World War I recession, | 18:18 | |
started in May of 1920 | 18:22 | |
with a bad break in the Tokyo silk market | 18:26 | |
and this spread to a number of other staple commodities | 18:29 | |
and it was a serious recession before it was finished. | 18:32 | |
Now, this time | 18:35 | |
there are some special features. | 18:39 | |
One, although the United States is now in recession, | 18:42 | |
the international economy has been booming. | 18:47 | |
Western Germany until recently has shown a very | 18:50 | |
great rise in production. | 18:53 | |
Japan, until very recently has shown a rise in production, | 18:57 | |
so that although we have been in a period of retardation, | 19:01 | |
going back really to the middle of 1968, | 19:05 | |
and probably in a period of recession, | 19:08 | |
certainly mini recession and maybe something more than that, | 19:12 | |
going back to last fall, | 19:15 | |
the international economy, generally speaking, | 19:18 | |
has been booming up until very recent times, | 19:21 | |
and there's no question about it | 19:25 | |
that one of the things that has kept | 19:26 | |
the price of copper high has been | 19:28 | |
the very strong international demand. | 19:31 | |
One of the things that has saved the bacon | 19:33 | |
for our steel companies | 19:35 | |
has been the great strength | 19:37 | |
in steel markets abroad, | 19:39 | |
with the result that even our high cost steel industry | 19:42 | |
has been able to capture some exports, | 19:46 | |
which in a more normal year, | 19:49 | |
it would not be able to get, | 19:51 | |
and more important from its viewpoint, | 19:53 | |
the usual quantum of imports into this country | 19:56 | |
that press against any voluntary quota agreements, | 20:01 | |
would have been much, much larger | 20:04 | |
except the steel mills abroad were pretty much booked up. | 20:06 | |
So I would say that that's an important element | 20:10 | |
in connection with the price of copper. | 20:12 | |
Let me move on now to a second reason. | 20:15 | |
The price of copper is a rigged price. | 20:19 | |
We have not had a free market in copper. | 20:23 | |
The principal producers, | 20:26 | |
miners of cotton | 20:31 | |
have maintained in this country to special customers | 20:32 | |
a rate much, much lower than those | 20:37 | |
which you see quoted on the Mercantile Exchange, | 20:40 | |
and which you see quoted on the London Exchange. | 20:43 | |
In fact, it is the London Commodity Exchange | 20:45 | |
which primarily reflects and forms | 20:48 | |
the world price of free copper. | 20:52 | |
And so if you have a price which previously | 20:56 | |
has not been reflecting supply and demand, | 21:00 | |
even if the balance of supply and demand | 21:03 | |
should turn less favorable, | 21:05 | |
that administered price could be expected | 21:07 | |
to hold up because it may still be too low | 21:10 | |
in terms of fundamental supply and demand. | 21:14 | |
I would say those are the principal | 21:17 | |
reasons that occur to me. | 21:19 | |
I'm sorry, I suggested we not go on to | 21:21 | |
the other couple of questions that have accumulated | 21:26 | |
because our time is running out | 21:28 | |
and I would like to comment upon | 21:30 | |
the changing economic forces | 21:33 | |
that I discern in the present environment. | 21:36 | |
I would say that since I returned to this topic | 21:42 | |
on these tapes, that I have regarded the news | 21:46 | |
as it comes in as more bearish, | 21:50 | |
as looking toward | 21:52 | |
greater weakness in the economy | 21:55 | |
than I had reported on earlier occasions to you. | 21:58 | |
Let me very rapidly tick off | 22:01 | |
these more bearish bits of news. | 22:05 | |
First, we have the May unemployment numbers. | 22:09 | |
These shot up from 4.8% to 5%. | 22:13 | |
This is a really remarkable phenomenon. | 22:17 | |
As late as last December, we had 3 1/2% unemployment, | 22:21 | |
which seemed very low admittedly. | 22:25 | |
But who would have thought that in five months time | 22:27 | |
you would go from 3.5% up to a full 5%? | 22:30 | |
There may be precedents for so drastic a change | 22:36 | |
in our post-World War II history, | 22:39 | |
but I must confess that I can't recall | 22:42 | |
any such precedent. | 22:45 | |
If you examine those figures, | 22:47 | |
there is an ominous composition to them. | 22:48 | |
This time the increase in unemployment | 22:52 | |
was not primarily due | 22:54 | |
to a great increase in the labor force. | 22:56 | |
I'm talking now about the May numbers. | 22:58 | |
A good deal of the increase in measured unemployment | 23:01 | |
since December has been | 23:05 | |
due to a rather unusually large | 23:08 | |
expansion of the labor force, | 23:11 | |
but not in the May figures. | 23:13 | |
The May figures have gone up because | 23:15 | |
white production employees | 23:18 | |
have been laid off, | 23:22 | |
and although I haven't yet seen | 23:24 | |
the May production index figure, | 23:26 | |
it seems to me that on the basis of this bit of evidence, | 23:30 | |
we cannot regard it as strong, | 23:32 | |
and so I think we must expect that | 23:33 | |
we now have nine out of the last 10 months | 23:36 | |
showing at least small declines in the | 23:39 | |
Federal Reserve Board index of production. | 23:41 | |
That being the case, I'm putting all these straws together, | 23:46 | |
including the fact that the May retail sales | 23:50 | |
on a seasonally corrected basis were down, | 23:53 | |
I take very little comfort in these comparisons | 23:56 | |
with the year earlier, although I know | 23:58 | |
retailers like to make them. | 24:00 | |
I like to take the smooth | 24:01 | |
seasonally corrected figures. | 24:05 | |
They're down a bit. | 24:06 | |
On the basis of all this, it seems to me | 24:08 | |
that in the face of a great increase in | 24:11 | |
disposable incomes of people, | 24:14 | |
due to the Social Security Benefit increase | 24:16 | |
that I certainly have said enough about on earlier tapes | 24:19 | |
and the increase in government pay, | 24:21 | |
that one has to bet | 24:23 | |
that the second quarter in real terms, | 24:27 | |
I'm not speaking in money, nominal terms, | 24:30 | |
in real terms, that the second quarter does not look | 24:33 | |
to be a quarter of positive increase | 24:36 | |
in real output, and one would suppose that | 24:39 | |
the real output will not decline as rapidly | 24:43 | |
as in the first quarter, which was | 24:46 | |
more than a 3% annual rate, but that | 24:48 | |
a barely level or some negative figure | 24:51 | |
is perhaps indicated. | 24:54 | |
Now, if this simply meant that one changes | 24:56 | |
one's turning point from | 25:01 | |
April being the turning point to | 25:03 | |
June being the trough, I don't think that | 25:06 | |
that would be too serious, but let me comment | 25:09 | |
on a further deterioration in the situation. | 25:13 | |
One of the puzzles to all of us has been | 25:16 | |
the fact that businessmen, in the various surveys | 25:18 | |
of intentions with respect to fixed investments, | 25:23 | |
investment in plant equipment, | 25:27 | |
have been giving such high figures. | 25:28 | |
We now have the new official | 25:30 | |
SEC Department of Commerce survey | 25:32 | |
and this shows a decline, | 25:35 | |
a decline to, I recall, about 7 1/2% | 25:38 | |
from what had been reported to us as about 10 1/2%. | 25:41 | |
Unfortunately, that 10 1/2% involved a clerical error, | 25:45 | |
I now learn, and it was nine-something, | 25:48 | |
but in any case, you have | 25:52 | |
a good, solid 2% decline. | 25:54 | |
What's so important about 2%? | 25:58 | |
What's important in my mind about 2% is | 26:02 | |
that this is the indicated figure, | 26:04 | |
and most of us had been doubting that | 26:07 | |
they would make their previous indicated figure. | 26:09 | |
Maybe now we have to second guess these numbers | 26:12 | |
and assume that plant equipment expenditure | 26:15 | |
will not be 7% just because they say so, | 26:17 | |
and there's a great deal of, if I had time, | 26:21 | |
capital appropriations data and other information | 26:24 | |
which suggests that. | 26:27 | |
So it looks as if what we economists call the | 26:28 | |
acceleration principle accelerator | 26:31 | |
is really beginning to bite in. | 26:33 | |
Maybe all this is related | 26:36 | |
in a causal way in part to the | 26:38 | |
very weakness of the stock market. | 26:41 | |
Nevertheless, on the basis of all this, | 26:44 | |
since I try to track the economy | 26:46 | |
and change my opinion as rapidly as I can, | 26:48 | |
cut my losses, I think that | 26:52 | |
one has to be concerned that the | 26:56 | |
last half of the year will not be as strong | 26:58 | |
as previously indicated. | 27:01 | |
Maybe the third quarter will be even stronger | 27:02 | |
than the fourth quarter in terms of real growth, | 27:04 | |
which would be a rather ominous thing. | 27:06 | |
And so in subsequent tapes | 27:08 | |
I hope to give this reappraisal of the situation | 27:11 | |
as it now appears to me. | 27:15 | |
- | Thank you, Professor Samuelson. | 27:17 |
If you have any questions or comments, | 27:19 | |
address them to Instructional Dynamics Incorporated, | 27:21 | |
166 East Superior Street, | 27:24 | |
Chicago, Illinois, 60611. | 27:26 |
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