Tape 140 - Third period GNP; soft landing?
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| - | Welcome once again, | 0:02 |
| as MIT professor Paul Samuelson | 0:03 | |
| discusses the current economic scene. | 0:05 | |
| This series is produced by | 0:07 | |
| Instructional Dynamics Incorporated. | 0:08 | |
| This program was recorded November 1st. | 0:10 | |
| - | The first thing that we should talk about today | 0:13 |
| are the new third quarter preliminary statistics | 0:17 | |
| which have come in. | 0:20 | |
| The rate of growth of the economy | 0:24 | |
| measured in real terms by the real GNP | 0:27 | |
| did pick up a little bit from the second quarter, | 0:31 | |
| more or less as expected. | 0:33 | |
| However, it didn't pick up as much | 0:36 | |
| as some people had thought it would. | 0:39 | |
| So I think the fairest thing to say | 0:43 | |
| is that for the last two quarters, | 0:46 | |
| the real GNP of the American economy | 0:48 | |
| has been growing at about a 3% annual rate. | 0:51 | |
| Whereas in the previous two quarters to that, | 0:57 | |
| the annual rate of real growth was a whopping 8%. | 1:01 | |
| By and large, what's happened is confirmatory then | 1:07 | |
| of the hypothesis, which is very widely held, | 1:11 | |
| that the US economy has already moved | 1:15 | |
| into a growth recession. | 1:19 | |
| A growth recession being defined as a recession | 1:22 | |
| in which the rate of growth is still positive, | 1:25 | |
| not like a genuine full-fledged recession, | 1:30 | |
| but is significantly less for two or three quarters at least | 1:34 | |
| than the four plus percent which represents par | 1:39 | |
| for American growth rates taking into account | 1:44 | |
| demographic increase and taking into account | 1:47 | |
| productivity changes. | 1:50 | |
| The facts, as they've developed, are compatible | 1:53 | |
| with a continuation of this growth recession | 1:58 | |
| for at least another two or three or four quarters. | 2:01 | |
| And I would have to say that | 2:07 | |
| even before these numbers came in | 2:09 | |
| there was a noticeable tendency for the fashionable forecast | 2:12 | |
| to gain in confidence and a | 2:18 | |
| tendency for those who are more pessimistic | 2:24 | |
| than the fashionable forecast, | 2:27 | |
| and who believe in a genuine recession | 2:29 | |
| to lose adherence or, | 2:34 | |
| to put it more conservatively, | 2:38 | |
| not to gain the adherence which they ought | 2:40 | |
| to be picking up now if there causes in the end to prevail. | 2:43 | |
| A moral for even those who still believe | 2:50 | |
| that the most likely outcome is a genuine recession | 2:54 | |
| have slowly begun to modify their predictions | 2:59 | |
| and they're pushing that recession | 3:04 | |
| into later quarters of 1974. | 3:06 | |
| And at least in the latest one, | 3:12 | |
| which I've been looked at here, | 3:15 | |
| I'll avoid names for this purpose | 3:17 | |
| 'cause I don't mean to criticize, | 3:21 | |
| but the late October forecast | 3:24 | |
| instead of the last half of 1974 | 3:27 | |
| having a 3% annual decline in real growth, | 3:31 | |
| rather it now looks for about 2.5% rate of decline. | 3:36 | |
| Now I don't think that we should spend our time | 3:44 | |
| in pouring over the fine detail of the outcome | 3:48 | |
| in order to try to form a judgment | 3:52 | |
| about just how strong or weak the economy is gonna be | 3:55 | |
| four or five quarters from now. | 3:58 | |
| The tools of economic analysis are not | 4:01 | |
| fine enough given the grossness of the statistical data | 4:07 | |
| to make such considerations worthwhile. | 4:12 | |
| But I think it's very important for us | 4:16 | |
| to stand away from the third quarter numbers | 4:18 | |
| and to try to see what | 4:22 | |
| the general forces are that have been operating | 4:26 | |
| and what are the things that we ought to be | 4:28 | |
| watching in order to be able to shade | 4:30 | |
| our opinion about the future. | 4:34 | |
| Well, the first thing that has to be said, | 4:37 | |
| in fact, it has to repeated, is this. | 4:38 | |
| The general economy is doing better | 4:42 | |
| than American society at large. | 4:44 | |
| I've had to call attention here again and again | 4:48 | |
| to the fact that all the | 4:52 | |
| indicators of consumer sentiment have a tendency | 4:57 | |
| to deteriorate and deteriorate very badly. | 5:01 | |
| And if you had a crude confidence theory | 5:04 | |
| of the business cycle so that department store sales | 5:08 | |
| and durable consumers good sales could be | 5:12 | |
| accurately predicted from the degree of optimism | 5:17 | |
| or pessimism that the American public typically feels | 5:21 | |
| about itself and about its society, | 5:26 | |
| then I think you would have to expect there to be | 5:29 | |
| a rather serious recession. | 5:32 | |
| However, the past behavior of consumer spending, | 5:36 | |
| in relationship to past surveys of consumer sentiment, | 5:39 | |
| do not suggest that consumer sentiment is a factor | 5:43 | |
| that you should give all that much weight. | 5:47 | |
| And although right at the moment | 5:51 | |
| we still are in the constitutional crisis, | 5:54 | |
| occasioned by the resignation of Elliot Richardson | 5:57 | |
| and his assistant and the firing of Archibald Cox, | 6:01 | |
| the political | 6:09 | |
| seismographs are very volatile, | 6:14 | |
| and given little time that may cease to be | 6:17 | |
| quite so important in the future. | 6:21 | |
| Nevertheless, as I read the case of those | 6:26 | |
| who believe in a full-fledged recession, | 6:31 | |
| they are increasingly beginning to base their case | 6:34 | |
| on a possible shortfall in consumer spending in the future. | 6:40 | |
| They are forced to do this by the fact | 6:47 | |
| that the other strong reason for expecting | 6:51 | |
| a full-fledged recession, the behavior of inventories | 6:56 | |
| does not seem to be developing in accordance | 7:01 | |
| with what would be needed in order to have | 7:05 | |
| a convincing case for a recession. | 7:08 | |
| I'm referring to the fact that unless inventories | 7:12 | |
| become high, unless they go through | 7:17 | |
| a few quarters of excessive rate of increase, | 7:20 | |
| you're unlikely to find later in '74 | 7:25 | |
| a considerable decumulation of inventories. | 7:30 | |
| From this view point, we should scrutinize very carefully | 7:37 | |
| what happened in the third quarter. | 7:39 | |
| Well, in the third quarter, the inventory | 7:41 | |
| rate of accumulation annual rate, | 7:46 | |
| as measured by the Department of Commerce, | 7:47 | |
| and this involves a lot of corrections | 7:50 | |
| for a mere price change, did go up. | 7:52 | |
| It went up from a $4.5 billion rate of accumulation | 7:56 | |
| in the second quarter and indeed in the first quarter | 8:01 | |
| about that same level up to 8.7 billion. | 8:04 | |
| And that is an increase, | 8:11 | |
| but we still have a long way to go | 8:15 | |
| before we get to the 17 and $20 billion increases | 8:17 | |
| which are needed if the slingshot is to be cocked | 8:22 | |
| very far back into a swing snapback | 8:26 | |
| and give us the inventory recession | 8:31 | |
| which will make a growth recession | 8:34 | |
| become a full-fledged recession. | 8:36 | |
| I guess we have to reserve judgment on this matter. | 8:40 | |
| As one of the adherence of the view | 8:46 | |
| that were in for genuine recession | 8:49 | |
| has put the data for the third quarter | 8:52 | |
| are compatible with either scenario. | 8:58 | |
| They don't actually lend comfort | 9:01 | |
| to the full-fledged recession hypothesis, | 9:04 | |
| but they don't deny it either. | 9:08 | |
| I should also mention another factor which, | 9:11 | |
| I guess, I think is very important. | 9:13 | |
| For this purpose, I might quote the view | 9:16 | |
| of Dr. Michael Evans, who appeared on the same panel | 9:19 | |
| with me before the Joint Economic Committee | 9:23 | |
| testifying on the outlook. | 9:28 | |
| I've quoted the Chase Econometrics models before, | 9:31 | |
| but I wanna call your attention to two respects | 9:36 | |
| in which his view is perhaps a little bit different | 9:40 | |
| from the consensus view. | 9:44 | |
| First, he is not so optimistic | 9:48 | |
| about what's going to happen to our | 9:52 | |
| net exports of goods and services. | 9:54 | |
| The net exports in goods and services in the third quarter | 9:57 | |
| were very gratifying. | 10:02 | |
| They were $4 billion, a surplus of our exports over imports | 10:05 | |
| 'cause these are goods and services, | 10:10 | |
| this is not just merchandise. | 10:12 | |
| But my recollection is at the very last month's | 10:13 | |
| merchandise numbers that came in | 10:16 | |
| were also quite gratifying. | 10:18 | |
| They were something like $800 million surplus for the month. | 10:20 | |
| I don't know what seasonal correction is required, | 10:24 | |
| but that's an eight or $9-billion surplus | 10:28 | |
| on a 12-month basis. | 10:32 | |
| But Dr. Evans thinks that a good deal | 10:35 | |
| of our improvement in exports is in the agriculture domain. | 10:39 | |
| And since he believes that in 1974 | 10:44 | |
| food prices and fiber prices are gonna come down, | 10:47 | |
| then he thinks we're gonna lose some of that | 10:51 | |
| buoyancy in our exports. | 10:54 | |
| And he doesn't yet see the strong upswing | 10:56 | |
| in the competitiveness of our manufacturing imports/exports. | 11:00 | |
| So that this is a minus factor | 11:05 | |
| in his particular reading of the future | 11:10 | |
| if we're not gonna even be able to hold | 11:14 | |
| the degree of improvement which we had. | 11:16 | |
| This is very relevant for any of you who wanna make bets | 11:17 | |
| on whether the dollar is undervalued | 11:21 | |
| and whether there could be any kind of reoccurrence | 11:23 | |
| of trouble for the dollar in the clean floating | 11:28 | |
| or dirty floating markets of the world. | 11:33 | |
| The other point that Dr. Evans made, | 11:37 | |
| and I think it's a interesting point to keep in mind, | 11:39 | |
| it's constant with my own thinking, and that's this. | 11:42 | |
| Dr. Evans thinks that that drop in food prices, | 11:47 | |
| which will be the reflection of supply and demand | 11:50 | |
| just as the big upswing in food prices | 11:53 | |
| was a reflection of supply and demand, | 11:55 | |
| he thinks that's a very favorable factor. | 11:59 | |
| It means that the consumer price index, | 12:01 | |
| to which wages are tied, will not, | 12:05 | |
| in the first half of 1974, | 12:07 | |
| be increasing by as much as 2.5%. | 12:12 | |
| It also means, and this is probably much more important, | 12:20 | |
| that the Federal Reserve, as we | 12:23 | |
| move definitely into the eye of the, | 12:28 | |
| wind of the growth recession, | 12:33 | |
| will be much more favorably disposed | 12:36 | |
| towards countering that recession | 12:38 | |
| if it doesn't have terrible apprehensions | 12:41 | |
| about price inflation and about the kind of price inflation | 12:44 | |
| which the man in the street is most sensitive to, | 12:49 | |
| namely, food prices. | 12:53 | |
| So I think that if Dr. Evans expected | 12:55 | |
| that for some reason food prices | 13:01 | |
| were gonna be disappointing, | 13:06 | |
| let's just say some horrible crop situation this autumn, | 13:07 | |
| yet to come, that this would cause him | 13:11 | |
| to move his forecast of no recession, | 13:15 | |
| no genuine recession, only growth recession, | 13:21 | |
| to a yes, in that case there will be a genuine recession. | 13:24 | |
| Now I don't know whether I have the courage | 13:30 | |
| to put this amount of weight | 13:32 | |
| on that food price behavior. | 13:36 | |
| I put a great deal of weight on it, | 13:39 | |
| but whether I would actually change | 13:40 | |
| from a no recession to a definite recession, | 13:42 | |
| I'm inclined to doubt. | 13:48 | |
| Let me call your attention that Henry Kaufman, | 13:52 | |
| a partner of Salomon Brothers, | 13:58 | |
| and who, earlier this year, was one of those | 14:01 | |
| who believed that we were going to have a real money crunch | 14:03 | |
| and that that was going to precipitate a real recession, | 14:09 | |
| and we thought that that was a good thing, | 14:16 | |
| now, apparently, is a little disappointed | 14:19 | |
| by the course of actual events. | 14:22 | |
| And in a talk which he gave in Phoenix, Arizona | 14:25 | |
| on October 23rd, he warned that | 14:30 | |
| we don't seem to be having that desirable recession. | 14:35 | |
| And if, in fact, we do things too soon | 14:40 | |
| to avoid that desirable recession, | 14:45 | |
| that the results of that will be very serious | 14:48 | |
| for the long range inflation outlook. | 14:53 | |
| Indeed, I, myself, take the | 14:59 | |
| possibility of a genuine recession seriously, | 15:05 | |
| although I regard it only as | 15:07 | |
| a high odds bet. | 15:11 | |
| If I had to bet on a genuine recession, | 15:15 | |
| (mumbles) very favorable odds. | 15:18 | |
| But I would take that case a little more seriously | 15:21 | |
| from the analysts who espouse it. | 15:23 | |
| If it weren't the fact that, as I tally up | 15:26 | |
| the opinions of different people, | 15:32 | |
| I'm not sure that I have in my files a single person | 15:34 | |
| who expects there to be a recession, a genuine recession, | 15:37 | |
| and who doesn't want there to be. | 15:41 | |
| So in my own thinking, I always try to separate out | 15:43 | |
| what I want and what I think will happen. | 15:46 | |
| Because I find that unless I do that, | 15:48 | |
| there's a tendency, a very human and natural tendency, | 15:52 | |
| for me to try to forecast things that I want to have happen, | 15:56 | |
| that my heart wants to have happen | 16:01 | |
| even though my brain perhaps is telling me | 16:03 | |
| that they're not too likely to happen. | 16:07 | |
| So I guess you have to take a little bit off the credibility | 16:09 | |
| of the forecast. | 16:15 | |
| It's when you learn that they being human beings | 16:17 | |
| and they being in favor of recessions, | 16:21 | |
| they may be telling you a little bit more | 16:27 | |
| about their favored policy recommendations | 16:28 | |
| and their valued judgments and their therapy ideas | 16:32 | |
| than about the differences in the way | 16:35 | |
| that they read the actual record. | 16:37 | |
| I get a lot of feedback from listeners | 16:42 | |
| and I would be very happy to learn from any listeners | 16:44 | |
| of exceptions to what I now stated. | 16:49 | |
| Now there's still another view about | 16:55 | |
| the possibility of a recession | 17:00 | |
| which comes from some of the monetarist camps. | 17:03 | |
| I have to say, some of the monetarist camps, | 17:07 | |
| because the monetarist forecast that I have seen | 17:09 | |
| now spread all over the map and they are at least | 17:15 | |
| as disbursed as the non-monetarist forecast, | 17:20 | |
| so we're certainly not gonna get any kind | 17:24 | |
| of a controlled experiment this year. | 17:26 | |
| Whatever happens, you're gonna be able to quote | 17:29 | |
| a monetarist, who expect it to happen, | 17:31 | |
| and you also, I'm saying the same thing, | 17:35 | |
| are gonna be able to find other monetarist, | 17:39 | |
| who hadn't expected that to happen. | 17:41 | |
| Now some monetarist group like the Argus organization, | 17:44 | |
| James Meigs and William Wolman and other economists there, | 17:51 | |
| I have listed among the optimists. | 17:57 | |
| They do expect there to be a slight decline | 18:00 | |
| in the rate of growth of the GNP in comparison with par, | 18:04 | |
| but it's rather slight indeed. | 18:09 | |
| On the other hand, there are other monetarists | 18:12 | |
| who expect that we are going to be in a recession. | 18:16 | |
| Now let me quote | 18:19 | |
| the line of argument which I understand | 18:24 | |
| to underlie this. | 18:28 | |
| These monetarists who expect | 18:33 | |
| there to be a genuine recession, | 18:34 | |
| in fact have money GNP forecasts | 18:37 | |
| much like the fashionable forecast. | 18:41 | |
| But they have price | 18:44 | |
| inflation forecasts which are higher | 18:48 | |
| than the fashionable forecast. | 18:53 | |
| And if we subtract off a higher estimate for price inflation | 18:55 | |
| from the same estimate of money increase, | 18:59 | |
| we get a lower estimate of real increase. | 19:02 | |
| And so I have to ask myself | 19:07 | |
| whether there is something in monetarism | 19:09 | |
| which should make me respect | 19:12 | |
| their price increase. | 19:17 | |
| Now I put the question that way because I, myself | 19:19 | |
| have certain amount of pessimism | 19:22 | |
| about the behavior of prices. | 19:25 | |
| But I wanna see whether there's any reinforcement | 19:27 | |
| for that pessimism from the standpoint of monetarism. | 19:31 | |
| And I have to confess to some puzzlement | 19:35 | |
| as to why the past patterns of experience | 19:38 | |
| which had been analyzed by monetarists | 19:43 | |
| should have any power to give us resolutions | 19:46 | |
| with respect to price behavior peculiarly. | 19:52 | |
| In other words, why shouldn't one | 19:57 | |
| rely in one's price estimates upon | 20:02 | |
| the best information one can get for 1974 | 20:06 | |
| about what will be happening to the degree | 20:09 | |
| of excess capacity in the economy | 20:12 | |
| to the behavior of order backlogs | 20:17 | |
| whether as those who expect there to be a recession | 20:21 | |
| think there will be inventory coming out of our ears | 20:24 | |
| and plenty of delivery of stuff which people don't want. | 20:28 | |
| Why, under those circumstances, | 20:33 | |
| should we still expect a price increase? | 20:35 | |
| And as I review the record, | 20:40 | |
| I cannot find where that special relevance | 20:45 | |
| of monetarism should be. | 20:50 | |
| Now let me illustrate. | 20:54 | |
| The Federal Reserve Bank of St. Louis, for a long time, | 20:57 | |
| aside from its estimates of what's gonna happen | 21:03 | |
| in the money GNP, made a breakdown of that | 21:05 | |
| between prices and real output. | 21:10 | |
| And they weren't particularly successful | 21:14 | |
| in their breakdown. | 21:20 | |
| Now it can be argued, I think, that there was nothing | 21:24 | |
| in the monetarist philosophy which would | 21:28 | |
| sanction those particular breakdowns | 21:31 | |
| which they had, and I would agree. | 21:34 | |
| But that's precisely the point that I'm making. | 21:37 | |
| If you study the history of the quantity theory of money | 21:40 | |
| and the views of the leading exponents | 21:44 | |
| of the quantity theory of money, | 21:48 | |
| I'm thinking of Alfred Marshall and Irving Fisher | 21:50 | |
| going back a long way, and then in later days | 21:54 | |
| people like Warburton and, in our own time, | 21:59 | |
| Professor Milton Friedman, I recall the wisdom | 22:04 | |
| stated at a conference by Jacob Viner, | 22:11 | |
| who knows that literature very well, | 22:14 | |
| and there he went on record saying | 22:16 | |
| that the quantity theorists of the past, | 22:20 | |
| and by the way he considered himself | 22:22 | |
| a member of that group, | 22:24 | |
| had never had any special way | 22:26 | |
| of analyzing the effects of money | 22:32 | |
| in the MV equal PQ monetary equation | 22:36 | |
| as between the P and Q | 22:39 | |
| and there was actually a libel on them | 22:41 | |
| to claim that, as some of the critics | 22:43 | |
| of monetarism had done, that the monetarist think | 22:48 | |
| that M controls prices and the fiscalists think | 22:52 | |
| that the canes in fiscal policy determines quantity | 22:56 | |
| which leaves the one with kind of a schizoid theory. | 23:00 | |
| He said, there was no warrant for that. | 23:04 | |
| So until one learns what the causal connections are, | 23:07 | |
| I guess, I don't find much extra strength | 23:13 | |
| on the side of a genuine recession | 23:16 | |
| from the monetarist line of reasoning. | 23:20 | |
| Well, now I always try to think | 23:26 | |
| of where trouble could come from | 23:28 | |
| and not to satisfy oneself | 23:31 | |
| with the fashionable forecast. | 23:36 | |
| So let me just try to tick off some of the areas | 23:38 | |
| where it seems to me we ought to be on alert | 23:40 | |
| if our concern is whether there will be | 23:43 | |
| a genuine recession. | 23:47 | |
| I don't think we can dismiss the state of public opinion. | 23:51 | |
| There is a definite possibility that | 23:56 | |
| we are not yet out of any constitutional crisis. | 24:01 | |
| And this could be a definite wet cloth | 24:04 | |
| on the animal spirits of the American consumer | 24:09 | |
| and of the American investor. | 24:14 | |
| In my opinion, it's most likely that | 24:18 | |
| the money GNP is like ol' man river, | 24:21 | |
| it just goes rolling along independently | 24:24 | |
| of Kiplinger's newsletter out of Washington | 24:27 | |
| and independently of the Gallup poll. | 24:30 | |
| But one would be very rash to say that that's true | 24:34 | |
| at 100% level of confidence. | 24:38 | |
| And so it's definitely possible | 24:40 | |
| that there could be some crises | 24:43 | |
| which would begin to cut into business generally. | 24:48 | |
| Second, there's a lot of discussion about | 24:52 | |
| whether we have a energy crisis or not. | 24:55 | |
| And that becomes a semantic question | 24:59 | |
| as to whether the word crisis is a desert. | 25:03 | |
| We certainly have a short-run problem of shortage | 25:09 | |
| under the way we've been controlling prices | 25:14 | |
| and allocating supplies. | 25:16 | |
| And that short-run problem is not gonna go away. | 25:19 | |
| And I should emphasize, it would take another tape | 25:22 | |
| to discuss the details of this, | 25:25 | |
| that that particular short-run problem | 25:27 | |
| was also here before there was any | 25:31 | |
| outbreak of war in the Mideast. | 25:35 | |
| We have to add, though, there has been | 25:38 | |
| an outbreak of war in the Mideast, | 25:40 | |
| we now have a ceasefire, but there has been | 25:41 | |
| a de facto, a decrease of 10 and 20% | 25:45 | |
| of the oil outflow from the Persian Gulf. | 25:49 | |
| Now since the United States is associated | 25:55 | |
| in the minds of some of the Mideast countries, | 25:57 | |
| peculiarly with the support of Israel, | 26:01 | |
| we're not the only country. | 26:06 | |
| I noticed that the Dutch are being discriminated against | 26:07 | |
| in oil shipments because they were not | 26:10 | |
| sufficiently pro Arab during the fighting stage. | 26:14 | |
| But since we're in that camp, then there may be | 26:19 | |
| a greater cut down on the supplies which we depend on | 26:23 | |
| from the Mideast than the cut down for other countries. | 26:27 | |
| And I have to word that very carefully, | 26:32 | |
| because it's understood that we depend | 26:34 | |
| much less in the Mideast. | 26:36 | |
| So that's a favorable factor that makes us less vulnerable. | 26:38 | |
| And Japan, about whom perhaps the Arabian countries | 26:43 | |
| have good feelings now, because Japan did not | 26:48 | |
| rally to the side of Israel. | 26:51 | |
| Japan may be more vulnerable, nevertheless, | 26:53 | |
| because she depends for 90% of her oil there. | 26:55 | |
| But we still have to allow for the possibility | 26:59 | |
| that energy will begin to run short | 27:04 | |
| and we have to allow for the possibility | 27:07 | |
| that the constitutional crisis | 27:09 | |
| and the general inefficiency of the administration | 27:11 | |
| will not lead to a smooth allocation of resources. | 27:15 | |
| And so you could begin to get some shut downs | 27:21 | |
| around the country which are occasioned by | 27:23 | |
| shortages of fuel. | 27:28 | |
| Now I don't wanna argue with anyone | 27:30 | |
| who wants to use elementary text book economics | 27:31 | |
| that if you just auctioned off the scarce supplies, | 27:34 | |
| you'd always have a buyer for a seller. | 27:37 | |
| I just wanna point out that there could be | 27:39 | |
| some trouble from misdirection. | 27:42 | |
| And if you look at past history, there has been many a time | 27:43 | |
| when a flagging boom has been turned into a recession | 27:47 | |
| by exogenous factors such as a very long rail strike | 27:51 | |
| or a very long steel strike. | 27:56 | |
| The most recent notable event of that sort, | 27:57 | |
| as I remember it, was the very long 1959 steel strike. | 28:01 | |
| When it first starts, it's just kind of a holiday | 28:07 | |
| for everybody, the workers get a vacation, | 28:10 | |
| but after a while the inventories begin to run thin | 28:13 | |
| and begins to really dig in deep | 28:15 | |
| and that does affect the macroeconomic figures. | 28:19 | |
| In fact, the 1969, 1970 recession | 28:23 | |
| will go down in the annals in a very silly way | 28:30 | |
| that doesn't truly reflect the macroeconomics that went on, | 28:33 | |
| because we will show that recession lasting | 28:37 | |
| until the General Motors strike was settled | 28:41 | |
| in November of 1970, when in point of fact | 28:44 | |
| there's much analytical reason to expect | 28:49 | |
| that if that strike had been avoided, | 28:53 | |
| the National Bureau, if it was permitted to | 28:56 | |
| have a genuine recession in its records, | 28:59 | |
| would still have changed the timing of the outcome | 29:02 | |
| from that recession by at least a quarter | 29:05 | |
| and it could've been changed by as much as by five months. | 29:09 | |
| Well, let me summarize | 29:15 | |
| by giving you my view. | 29:18 | |
| The continued third quarter slowdown | 29:21 | |
| it seems to me is a good thing. | 29:24 | |
| It seems to me it doesn't matter whether that slowdown | 29:26 | |
| was brought about primarily by demand factors | 29:29 | |
| or supply factors from the standpoint | 29:32 | |
| of some of the good which it will do | 29:36 | |
| in helping us to make a soft landing | 29:38 | |
| or at least not to bump too hard | 29:42 | |
| into the full employment, full capacity ceiling. | 29:45 | |
| I think we're going to have a mixed situation | 29:51 | |
| in which you're gonna have lots of basic industries | 29:53 | |
| that are going to continue to run flat out | 29:56 | |
| for quite a while. | 29:58 | |
| Textiles, papers, paper chemicals, et cetera. | 29:59 | |
| Those provide materials for lots of other | 30:04 | |
| not so basic industries. | 30:06 | |
| And so what the doctor would've ordered, I think, | 30:08 | |
| would be a plateau of let down. | 30:13 | |
| And I don't know that I believe we can keep | 30:18 | |
| a 3% rate of real growth. | 30:23 | |
| What I've said into the Joint Economic Committee, | 30:24 | |
| for example, in policy, was that as things begin | 30:27 | |
| to persist below 2%, then policy should be directed | 30:31 | |
| to doing something about it. | 30:35 | |
| But so far the development seems to me | 30:37 | |
| to be much better than it looked when, | 30:41 | |
| you will recall on these tapes, | 30:45 | |
| I came back from Australia in April, in May, | 30:46 | |
| and listened to all that talk about inevitable money crunch, | 30:50 | |
| more serious than any of the recent money crunches, | 30:55 | |
| we look to be making a much softer landing. | 30:59 | |
| But nature's options are still open. | 31:03 | |
| She still could give us a real recession. | 31:06 | |
| And I should say that the policy options are also still open | 31:10 | |
| and that'll bear discussing at another time. | 31:14 | |
| - | If you have any comments or questions | 31:18 |
| for Professor Samuelson, address them to | 31:20 | |
| Instructional Dynamics Incorporated. | 31:21 | |
| 166 East Superior Street, Chicago, Illinois 60611. | 31:24 |
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