Tape 74 - 1971: official first quarter analysis
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| - | Instructional Dynamics Incorporated presents | 0:02 |
| Professor Paul Samuelson of MIT, | 0:04 | |
| discussing the current economic scene. | 0:06 | |
| This bi-weekly series was recorded | 0:08 | |
| on April 16th, 1971. | 0:11 | |
| - | This is an important day in terms of economic forecasting | 0:14 |
| because, just yesterday, | 0:18 | |
| for appearance in | 0:21 | |
| this morning's newspapers, we have learned | 0:22 | |
| what the numbers were for the GNP | 0:26 | |
| for the first quarter of 1971. | 0:29 | |
| These estimates of course are provisional | 0:32 | |
| and are subject to change, | 0:34 | |
| but, what they show is a whopping $28.5 billion increase | 0:35 | |
| in the money GNP. | 0:40 | |
| In terms of annual rate, this is something like | 0:43 | |
| a 12% increase in nominal or money GNP. | 0:46 | |
| Over the fourth quarter of last year. | 0:51 | |
| In terms of real output it is also a fairly whopping figure | 0:54 | |
| 6.5% annual rate increase in real output. | 0:58 | |
| The headlines have rather played up | 1:03 | |
| the size of the expansion, | 1:07 | |
| pointing out that a $28.5 billion increase | 1:08 | |
| is greater than we've had for more than eight years now, | 1:11 | |
| on the money front. | 1:16 | |
| And on the real front, the 6.5% increase | 1:17 | |
| is more than we've had since the first half of 1968. | 1:20 | |
| The behavior of prices, of course, | 1:26 | |
| has been a little bit, | 1:29 | |
| disappointing because, | 1:31 | |
| we still have a 5.2% increase in the GNP | 1:33 | |
| price deflator, the overall price deflator. | 1:39 | |
| This number is better than the more than 5.5% | 1:42 | |
| of the previous quarter, | 1:46 | |
| and it will look still better | 1:48 | |
| if you take out government pay increases, | 1:50 | |
| and look only at the deflator for the private sector, | 1:52 | |
| which has gone down from, | 1:56 | |
| something definitely, | 1:58 | |
| far above 5% to something, | 2:01 | |
| not too much above 4%. | 2:06 | |
| Still, | 2:10 | |
| if you recall that, | 2:12 | |
| autos are an important part of the recovery, | 2:15 | |
| and if you will recall that | 2:18 | |
| the contribution of autos to the price deflator | 2:20 | |
| has always been a restraining one, | 2:23 | |
| we understand the upswing in the fourth quarter, | 2:26 | |
| in the reported private, | 2:30 | |
| deflator numbers, | 2:34 | |
| because there were no automobiles to speak of, | 2:36 | |
| and we had reason to expect, | 2:38 | |
| at least as much improvement | 2:41 | |
| in that index | 2:45 | |
| because autos are such an important part of the recovery. | 2:46 | |
| Superficially, then, one can say | 2:52 | |
| that the overall numbers look optimistic. | 2:54 | |
| Superficially one can say the price front, | 2:58 | |
| as far as the GNP numbers are concerned, | 3:02 | |
| still looks rather | 3:04 | |
| pessimistic. | 3:09 | |
| Let me turn to analyze the numbers. | 3:12 | |
| To see whether they bear out the first part of the statement | 3:16 | |
| which is, somewhat optimistic. | 3:19 | |
| When the numbers were produced, | 3:22 | |
| the government had a press conference, | 3:24 | |
| Dr. George Schultz, head of | 3:28 | |
| the Office of Management and Budget, | 3:31 | |
| president Nixon's able, | 3:33 | |
| number two man for domestic affairs, | 3:35 | |
| conducted that press conference, | 3:37 | |
| and he found reason for a certain amount | 3:38 | |
| of comfort and optimism from the figures. | 3:41 | |
| He said, it's true they're not quite as strong as, | 3:45 | |
| some of the people inside the government had hoped for, | 3:50 | |
| but, they are definitely stronger | 3:53 | |
| than certain pessimists had been forecasting. | 3:55 | |
| 28.5 billion is definitely more than 22 billion. | 3:59 | |
| Which he attributed to certain pessimists. | 4:03 | |
| I think he had in mind Dr. Otto Eckstein | 4:05 | |
| of Harvard University, who in a preliminary release, | 4:08 | |
| had estimated only 22, or 23 billion for the GNP | 4:12 | |
| in the first quarter in comparison with the fourth quarter. | 4:17 | |
| Since I have been one of the most outspoken critics | 4:23 | |
| of the February forecast, | 4:27 | |
| by the Nixon administration, | 4:32 | |
| I wish to make it clear that $28.5 billion | 4:35 | |
| is not more than I had been expecting, | 4:40 | |
| it is not more than I had been reporting, | 4:44 | |
| seemed likely on this tape, | 4:47 | |
| on the contrary, it's just about, | 4:50 | |
| close to what I had expected | 4:53 | |
| in terms of all that I'd heard from other forecasters, | 4:55 | |
| during the quarter itself. | 4:59 | |
| I'm just now re-reviewing, | 5:03 | |
| the spread of forecasts which | 5:06 | |
| constitute the fashionable forecast | 5:09 | |
| that a group of people who, | 5:12 | |
| at the end of December, were speaking of 1045 to 1050, | 5:15 | |
| billion dollars for the money GNP, | 5:20 | |
| and which the government said was, | 5:23 | |
| too pessimistic and that 1065 was the better number. | 5:26 | |
| You will recall from earlier tapes | 5:31 | |
| that the spread of opinion, said that, | 5:33 | |
| because of the rebound from the General Motors strike, | 5:37 | |
| possibly because of some borrowing against, | 5:40 | |
| the, possible steel strike, | 5:43 | |
| there was to be expected a 25 to $35 billion increase | 5:46 | |
| in the first quarter of the year over the fourth quarter, | 5:50 | |
| 28.5 billion is on the, | 5:54 | |
| low side within that range. | 5:59 | |
| I suppose that's why Professor Walter Heller | 6:03 | |
| of the University of Minnesota, | 6:05 | |
| when he was interviewed, | 6:07 | |
| yesterday, about the numbers, said | 6:09 | |
| this was a lackluster performance. | 6:11 | |
| That in order to realize the administration's goal | 6:13 | |
| and forecast of 1065, you had to have four quarter, | 6:17 | |
| increases of 30 billion each, | 6:22 | |
| and in your biggest quarter, | 6:24 | |
| where you have an artificial factor helping you, | 6:26 | |
| you did not even reach the 30 billion. | 6:28 | |
| By and large, I think that one must concur with this. | 6:34 | |
| The Department of Commerce itself has said | 6:40 | |
| that about 20 billion of the increase | 6:42 | |
| is attributable to autos itself. | 6:44 | |
| That means that about, | 6:47 | |
| 8.5, 9 billion, less than one third of the increase, | 6:49 | |
| is attributable to other factors. | 6:53 | |
| It's quite evident that if those other factors, | 6:56 | |
| continue to show no better performance, | 7:01 | |
| than they seem to have shown in the first quarter, | 7:03 | |
| then with the impetus of autos behind us | 7:10 | |
| and it already is now behind us | 7:13 | |
| as far as a rebound is concerned, | 7:15 | |
| we are now adjusted to the post-strike situation. | 7:17 | |
| With that impetus behind us, it would not be too easy | 7:21 | |
| to realize the low side of the fashionable estimate. | 7:25 | |
| So, | 7:30 | |
| I think that we all can take some comfort | 7:33 | |
| from the 28.5 billion, | 7:36 | |
| things looked so bad in January and February, | 7:39 | |
| that there must have been many doubts | 7:42 | |
| in the mind of the president himself, | 7:44 | |
| that his advisors were right in assuring him | 7:47 | |
| that the rebound from the General Motors strike | 7:50 | |
| was going to create a sizeable increase. | 7:52 | |
| The really pessimistic possibility | 7:55 | |
| has not materialized | 7:58 | |
| and we should all be very thankful for that. | 7:59 | |
| I think more important than the size of the first quarter, | 8:02 | |
| increments, | 8:07 | |
| which, one has to regard, | 8:09 | |
| on an informed basis as being, | 8:12 | |
| a bit lackluster and a bit, disappointing | 8:14 | |
| and a bit modest, | 8:18 | |
| despite the headlines. | 8:20 | |
| Is the fact that in the last month of the first quarter, | 8:22 | |
| round about March, maybe for the last five weeks, | 8:27 | |
| maybe the last six weeks or so, | 8:31 | |
| there has for the first time begun to show, | 8:33 | |
| some signs of cheerfulness | 8:37 | |
| in the business expansion picture. | 8:41 | |
| I don't regard it as a source of any cheerfulness | 8:43 | |
| that you have a rebound in General Motors from the strike. | 8:47 | |
| Just to fill the pipelines due to the loss in output | 8:50 | |
| of the strike, even if none of those cars, | 8:54 | |
| in the end, were gonna get sold, | 8:57 | |
| would, | 8:59 | |
| give you a tremendous increase in the automobile | 9:01 | |
| and related industries. | 9:04 | |
| All through the first quarter, | 9:06 | |
| the actual sales of automobiles, was, | 9:08 | |
| disappointing, in terms of model year strength. | 9:13 | |
| And the only sales which weren't disappointing | 9:18 | |
| were those of imports. | 9:20 | |
| Now it's nice to be able to say | 9:22 | |
| that in the month of March and in the first part of April, | 9:24 | |
| there are beginning to be some signs | 9:28 | |
| of better automobile sales, so, | 9:29 | |
| we might very well have a model year | 9:33 | |
| of total sales if we could extrapolate this particular rate | 9:36 | |
| of, more than 8 million, 9 million, 10 million | 9:40 | |
| from which, of course, we have to subtract | 9:44 | |
| the growing amount of imports. | 9:46 | |
| The imports of Volkswagens the imports of Toyotas, | 9:49 | |
| the imports of Datsuns, in particular, | 9:52 | |
| are still very strong, | 9:56 | |
| and the comeback, the Toynbean, | 9:58 | |
| response, | 10:03 | |
| successful response to the challenge of these imports, | 10:04 | |
| in the form the Vega, in the form of the Pinto, | 10:08 | |
| in the form of, | 10:11 | |
| the, American Motors small car, | 10:14 | |
| and in the form of certain improvised, | 10:18 | |
| car models by Chrysler, | 10:24 | |
| which doesn't have a genuine small car. | 10:25 | |
| That so far has not shown itself in a favorable light. | 10:28 | |
| It's too soon, of course, to say that the Vega | 10:33 | |
| is not going to be a wildly successful car, | 10:36 | |
| and the Pinto, | 10:39 | |
| but one's general impression is, | 10:41 | |
| that when a model is absolutely right, | 10:44 | |
| when it becomes a sensational success, | 10:47 | |
| this shows itself very early. | 10:51 | |
| This tended to be true of the Falcon, | 10:55 | |
| I should say though, in all fairness, | 10:58 | |
| it wasn't true of the Volkswagen, | 10:59 | |
| when the Volkswagen first appeared on the American scene, | 11:01 | |
| it was sold in small numbers | 11:04 | |
| and it appeared as a bug, as a beetle, | 11:06 | |
| and it took a little bit of time to get used to it. | 11:08 | |
| And so, it may be that we have some good news ahead | 11:11 | |
| as far as the competitiveness | 11:14 | |
| of the American small cars is concerned. | 11:16 | |
| Retail sales other than automobiles, | 11:21 | |
| for the very first time, | 11:24 | |
| have begun to look a bit better in March and April. | 11:26 | |
| We get chain store sales. | 11:30 | |
| I have in mind Sears, Roebuck, W.T. Grant and company, | 11:33 | |
| J.C. Penney company, and so forth. | 11:37 | |
| And, for the first time, | 11:40 | |
| those are beginning to show more respectable | 11:42 | |
| comparisons, | 11:45 | |
| in terms of last year. | 11:46 | |
| Moreover, because Easter was later, I believe it was, | 11:49 | |
| this year than last year, | 11:54 | |
| you have to make some adjustments for that. | 11:55 | |
| And, | 11:58 | |
| that all the more points up the fact, | 12:00 | |
| there is a little bit of improvement. | 12:02 | |
| For the first time retail sales are increasing | 12:04 | |
| over last year by more than the increase in prices | 12:08 | |
| so there actually is an increase in real volume. | 12:11 | |
| I should say that, profits are reckoned in terms of money, | 12:13 | |
| so it's by no means to be poo-pooed if, | 12:17 | |
| you have a 5% increase in retail sales | 12:21 | |
| and there's a 5% increase in prices, | 12:24 | |
| you mustn't say to yourself, well there's a zero increase | 12:26 | |
| in real output, and therefore nothing has been accomplished. | 12:28 | |
| It may be, that as far as what's carried down to profits | 12:30 | |
| in the department store, realm, | 12:34 | |
| that, | 12:37 | |
| there are some crumbs of comfort in those numbers. | 12:38 | |
| But in any case, we're now moving to 7% increase | 12:42 | |
| in terms of a year ago. | 12:45 | |
| Seasonally corrected, and there are great pitfalls | 12:47 | |
| in seasonal corrections, | 12:50 | |
| retail sales have shown little improvement. | 12:52 | |
| Therefore we have some reason to hope. | 12:55 | |
| What it is that we have reason to hope for? | 12:58 | |
| I think we have reason to hope | 13:00 | |
| that 1050 is attainable, | 13:02 | |
| that 1055 is attainable. | 13:07 | |
| I don't see on the basis of the present evidence, | 13:09 | |
| that we are on our way to, | 13:13 | |
| 2% in money terms above the fashionable forecast, | 13:17 | |
| or a 1.5% in real terms | 13:21 | |
| above the fashionable forecast. | 13:25 | |
| It just means that we are in a | 13:28 | |
| definite recovery | 13:33 | |
| and, we should, | 13:35 | |
| take comfort from that. | 13:39 | |
| Now let's try to be future oriented | 13:41 | |
| and, see, | 13:43 | |
| where we stand, | 13:45 | |
| what the bulk of the present evidence suggests, | 13:47 | |
| with respect to future forecasts. | 13:51 | |
| From this viewpoint, it is, | 13:53 | |
| of some usefulness to go over all the different forecasts, | 13:56 | |
| I won't enumerate them, in any detail, | 14:01 | |
| and see what they were expecting for the first quarter | 14:04 | |
| what's actually happened for the first quarter, | 14:08 | |
| and, | 14:10 | |
| where, perhaps they should be modified | 14:11 | |
| with respect to the future. | 14:15 | |
| Leaving out the Otto Eckstein forecast of 22 billion, | 14:18 | |
| which was not, I believe, his forecast, | 14:22 | |
| let's say, | 14:27 | |
| as the quarter was beginning, | 14:28 | |
| but was his pessimistic seismographic reading | 14:31 | |
| of the developments as they developed within the quarter. | 14:35 | |
| And going back now to what people expected for the quarter. | 14:39 | |
| Of all the forecasts which I have before me | 14:42 | |
| and I've got about a dozen strewn on my desk in front of me. | 14:44 | |
| The only one which I see there | 14:48 | |
| which had, less than 28.5 billion increase in GNP, | 14:51 | |
| and I'm now taking only forecasts which were based, | 14:56 | |
| premised upon the, strike, | 15:00 | |
| knowing how deep the strike had been in the auto industry, | 15:04 | |
| with the Wharton School forecast, | 15:07 | |
| the Wharton School forecast was something like $27 billion, | 15:09 | |
| and, | 15:13 | |
| it, slightly, | 15:15 | |
| underestimated, | 15:18 | |
| the actual amount of the rise. | 15:19 | |
| This reminds me, to point out to you, | 15:23 | |
| I'm trying to, | 15:26 | |
| find some elements of cheer, | 15:29 | |
| in the situation, well no, I correct myself, | 15:32 | |
| I'm not trying to find elements of cheer in the situation, | 15:34 | |
| I'm trying as best I can just to, | 15:36 | |
| call the shots as they are, without regard to | 15:41 | |
| what I hope will happen for the good of my country, | 15:46 | |
| and without regard to any position that I myself have taken, | 15:48 | |
| with respect to the likely pattern for the year. | 15:53 | |
| There is a respect, though, in which, | 15:56 | |
| the current quarter numbers, | 15:58 | |
| look to me to be hopeful on the expansionary side. | 16:01 | |
| I have not been able to find a detailed breakdown | 16:06 | |
| of the GNP, | 16:10 | |
| by components. | 16:13 | |
| But, I have, | 16:15 | |
| seen enough to confirm the judgment | 16:17 | |
| that inventory accumulation has been, | 16:21 | |
| very modest indeed in the first quarter of the year. | 16:25 | |
| We had a report that January inventories were actually down, | 16:30 | |
| that was later revised. | 16:34 | |
| And, | 16:37 | |
| the paradox was removed of an actual decrease. | 16:40 | |
| Since, | 16:44 | |
| in January we still were having the tremendous rebound, | 16:45 | |
| that rebound is now over, it was over, | 16:47 | |
| probably, by the end of February, | 16:50 | |
| it was so surprising to see | 16:53 | |
| that inventories actually went down in that period. | 16:54 | |
| Well they didn't, | 16:57 | |
| but the fact that, | 16:58 | |
| the numbers look to be in the neighborhood of zero, | 17:00 | |
| and the February numbers, which I guess are | 17:04 | |
| the only numbers that we have at this point | 17:06 | |
| which were also very modest, | 17:08 | |
| suggests that final GNP, which is GNP, | 17:10 | |
| purified of its inventory swings, | 17:16 | |
| was, a bit better than the $28.5 billion number. | 17:19 | |
| Final GNP probably increased, | 17:24 | |
| more like $30 billion. | 17:27 | |
| Now, a dollar is a dollar is a dollar, | 17:29 | |
| why, do I think that, | 17:32 | |
| it matters, | 17:37 | |
| that final GNP was strong when actual GNP, | 17:38 | |
| wasn't that strong? | 17:43 | |
| It matters because, very often, | 17:44 | |
| if we're trying to predict into the future, | 17:47 | |
| if we get a very good quarter | 17:49 | |
| because of inventory piling up, | 17:50 | |
| and it may pile up merely because it can't be sold, | 17:53 | |
| then you pay for that in the rate of increase | 17:56 | |
| in the following quarters. | 17:59 | |
| Whereas, if you had a pretty good quarter, | 18:01 | |
| based upon, | 18:03 | |
| very modest inventory accumulation, | 18:05 | |
| almost no accumulation at all, | 18:10 | |
| which is far below par for a growing economy, | 18:11 | |
| for a growing economy, | 18:16 | |
| growing in real terms at, | 18:18 | |
| 4.5%, let's say, which is par for the course, | 18:21 | |
| inventories can be growing, | 18:26 | |
| at something, like, | 18:30 | |
| 5 to 10 billion a year. | 18:34 | |
| And that's just, | 18:36 | |
| equilibrium, that just is normality. | 18:38 | |
| Well, we probably have had inventories just growing by, | 18:41 | |
| couple of billion, two, three billion, annual rate. | 18:45 | |
| Why did inventories, | 18:51 | |
| grow so little? | 18:53 | |
| One would like to think it's because sales are so brisk | 18:54 | |
| that, | 18:57 | |
| merchandise has just been stripped from the shelves | 18:59 | |
| of the retailers and the wholesalers and the manufacturers. | 19:01 | |
| If that is so, and I may say that I'm exaggerating, | 19:06 | |
| there isn't any great evidence of that, | 19:09 | |
| but, with inventories rather on the lean side, | 19:11 | |
| we can expect some reordering. | 19:15 | |
| Some increases in the production line, | 19:18 | |
| and this is a much healthier 28.5 billion increase | 19:21 | |
| because it's so very modest on the side of inventories. | 19:25 | |
| Let me, | 19:30 | |
| appraise the situation, | 19:32 | |
| the strength in the situation, | 19:35 | |
| from the standpoint of a monetarist's approach. | 19:36 | |
| I haven't been able to make the calculation unfortunately, | 19:42 | |
| I wish I could, I started to try to do it | 19:45 | |
| on the back of an envelope, | 19:47 | |
| but you really need a computer for this purpose. | 19:48 | |
| I have the famous Arthur Laffer model, | 19:51 | |
| I have its equations, which I've discussed in earlier tapes, | 19:56 | |
| and, which, | 20:02 | |
| was part of the case for the, | 20:04 | |
| more expansionary target, | 20:07 | |
| forecast by the government, | 20:09 | |
| at least in the mind of Dr. George Shultz. | 20:12 | |
| Now, that model as I remind you, | 20:15 | |
| is one where the increase in the money GNP, | 20:18 | |
| is determined by the increase in money, | 20:21 | |
| in the current quarter itself. | 20:24 | |
| That would be the first quarter of the year. | 20:27 | |
| It's also amplified by an increase in stock market prices. | 20:29 | |
| And it is amplified, | 20:35 | |
| by a rebound from the strike, | 20:39 | |
| because there's a strike variable in it. | 20:41 | |
| If I could quantify, the variables in it, | 20:44 | |
| I would have to put, a very high rate of increase | 20:49 | |
| of the money supply. | 20:52 | |
| Depending upon which periods you use, | 20:56 | |
| it would seem that, | 20:59 | |
| it'd be more like 7 and 8%, | 21:02 | |
| increase the money supply in the first quarter of the year. | 21:04 | |
| This is the money supply narrowly defined. | 21:07 | |
| The money supply broadly defined, | 21:09 | |
| I believe a monetarist, depending on how he handled CDs | 21:12 | |
| and some other matters, | 21:16 | |
| would put in the neighborhood of 15 to 20%, | 21:18 | |
| a frightening, rate of increase, | 21:21 | |
| for one who thinks that, | 21:25 | |
| the best basis for predicting future changes | 21:28 | |
| in the price level and future changes in the nominal GNP, | 21:31 | |
| is from a M2 measure of the money supply. | 21:34 | |
| Well now, if I put in a 7 to 8% increase | 21:38 | |
| in the checkable bank deposits plus currency, | 21:41 | |
| if I make no correction | 21:45 | |
| for the change in government bank deposits | 21:47 | |
| which is perhaps part of that process. | 21:49 | |
| And if I put in, what we all know to be the case | 21:51 | |
| that the stock market has been rising, it, | 21:54 | |
| is now, well over 900. | 21:58 | |
| And if I convert that into an annual rate of increase | 22:01 | |
| in the quarter, that is very considerable. | 22:04 | |
| When I do all that, I would suppose, | 22:08 | |
| and if any of my subscribers has done this, | 22:11 | |
| I will hope that he will write in and correct my guess | 22:14 | |
| by giving me the fact, | 22:18 | |
| I would suppose that the Laffer model, | 22:19 | |
| might show something like 35 to 40 billion, | 22:21 | |
| increase in the GNP, indicated for the first quarter | 22:25 | |
| over the fourth quarter of last year. | 22:29 | |
| The St. Louis model, has a more moderate, | 22:34 | |
| increase, to be expected, | 22:39 | |
| on the basis of the money supply. | 22:43 | |
| We have to take the 7 or 8% increase in the money supply | 22:46 | |
| for the first quarter itself, and then we have to realize | 22:49 | |
| that in the, | 22:52 | |
| fourth quarter, the rate of money growth | 22:55 | |
| was on the modest side, less than the 5% aimed for. | 22:58 | |
| And earlier it was in the neighborhood of 5% | 23:02 | |
| and so you have to take some kind of an average | 23:06 | |
| of those particular numbers in order to apply, | 23:09 | |
| the, | 23:12 | |
| Federal Reserve Bank of St. Louis model. | 23:15 | |
| It is very hard to appraise | 23:21 | |
| because it does not have the strike situation in it. | 23:24 | |
| And so it would actually have grossly, | 23:29 | |
| well I look at the actual model, | 23:33 | |
| and if I take, | 23:37 | |
| 990, correct it for the strike, for the fourth quarter, | 23:41 | |
| it would go to something like 1015, | 23:48 | |
| which I make to be a $25 billion increase. | 23:51 | |
| So I must really modify a remark I made earlier, | 23:53 | |
| which is, that, | 23:57 | |
| every model except the Wharton model predicts | 24:00 | |
| more than 28 billion. | 24:02 | |
| But I really don't have to eat those words | 24:04 | |
| because, I now realize that I've made a big adjustment | 24:07 | |
| in the fourth quarter for the strike | 24:10 | |
| but I haven't made any adjustments in the first quarter | 24:12 | |
| for the strike as the St. Louis people | 24:14 | |
| presumably would want me to do, | 24:17 | |
| in appraising the underlying strength of the demand | 24:19 | |
| and when I make that adjustment, | 24:22 | |
| perhaps a 30 billion increase would be consistent | 24:24 | |
| with its particular model. | 24:27 | |
| The St. Louis model, unlike the Laffer model, | 24:29 | |
| tells us more about the future | 24:34 | |
| because there is some evidence, | 24:35 | |
| that 90 days ago, | 24:39 | |
| when the Open Market Committee met, | 24:41 | |
| that, it, definitely was aiming | 24:43 | |
| at more than the rate of increase in the money supply | 24:47 | |
| that it had been aiming at through most of 1970. | 24:51 | |
| If 5% was the figure for much of 1970, | 24:56 | |
| 90 days ago or so, the Federal Reserve, | 25:00 | |
| under pressure perhaps from public opinion, | 25:05 | |
| under pressure from the White House, | 25:07 | |
| under pressure from Congress, | 25:09 | |
| under, | 25:10 | |
| self pressure because of the apparent sluggishness | 25:12 | |
| of the rebound, it began definitely to aim, | 25:16 | |
| for something like a, | 25:20 | |
| I'm remembering this from memory only, | 25:23 | |
| I think it was something like 7.5% increase | 25:26 | |
| in the money supply. | 25:28 | |
| They expressed their targets now more definitely | 25:30 | |
| in terms of changes in the money aggregates. | 25:33 | |
| This of course would enrage a monetarist, | 25:37 | |
| who could according to his tenets accuse them | 25:40 | |
| of impatience, of being stampeded, | 25:44 | |
| of not recognizing the lags in the process. | 25:47 | |
| But from the standpoint of somebody like myself, | 25:52 | |
| who believes in a leaning against the wind philosophy, | 25:56 | |
| I think that it was good policy for them | 25:59 | |
| to have aimed for something like 7.5% | 26:02 | |
| to ensure that the corner was definitely turned, | 26:06 | |
| and I'm perfectly prepared to recommend, | 26:11 | |
| sometime at the end of the summer | 26:14 | |
| if there's more strength in the economy | 26:17 | |
| than seems now indicated | 26:19 | |
| if the Washington people should be more nearly right, | 26:22 | |
| to recommend that the money supply for some months | 26:26 | |
| and even quarters be brought down to a 3% increase | 26:29 | |
| in the money supply, depending upon, | 26:33 | |
| what is called for at that time. | 26:35 | |
| I am raising my own numbers for the year, | 26:39 | |
| based upon the fact that the variables | 26:43 | |
| which I feed in to any forecast, | 26:47 | |
| seems to me to be rising. | 26:49 | |
| The government deficit obviously is now | 26:51 | |
| going to be much larger | 26:56 | |
| than was called for in the budget, and so, | 26:57 | |
| if on the basis of the likely budget numbers, | 26:59 | |
| I thought that, say a number like 1045, was justified, | 27:02 | |
| it would seem to me that a number like 1053 or 1055, | 27:06 | |
| would be more justified on the basis of | 27:12 | |
| what seems to be indicated by the expansion in the budget | 27:14 | |
| which is now going on, | 27:19 | |
| and the expansion in the general monetary sphere. | 27:20 | |
| - | If you have any questions or comments | 27:25 |
| for Professor Samuelson, address them to | 27:26 | |
| Instructional Dynamics Incorporated, | 27:28 | |
| 166 East Superior Street, | 27:30 | |
| Chicago, Illinois, 60611. | 27:33 |
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