Tape 10 - 1969 forecast amplification; decrease in growth rate of monetary supply

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-	Hello.	0:02
	Instructional Dynamics Incorporated welcomes you	0:02
	to this weekly series of commentaries	0:05
	on the current economic scene.	0:07
	Reporting to you will be one of the the nation's	0:09
	leading economists, Professor Milton Friedman	0:11
	of the University of Chicago.	0:13
-	Got to the increase in the prime rate to seven percent.	0:17
	It's been widely heralded	0:19
	as the strongly contractionary influence.	0:20
	Does that affect your forecast in our last tape	0:23
	that the first half of 1969 would be scrapped?	0:25
-	No, it doesn't.	0:28
	The increase in the prime rate is the consequence	0:30
	of other forces, not a cause.	0:35
	What's been happening is that you have had	0:37
	a very expansionary economy.	0:39
	The economy being so expansionary	0:42
	it has increased the demand for loans.	0:44
	The demand for loans being so high,	0:46
	the banks have been hard put to it to satisfy that demand.	0:49
	As a result, they had had to find some way	0:52
	in which to ration the credit,	0:55
	to ration the amount they could loan	0:57
	to the customers who wanted it.	1:00
	An increase in price is the obvious way	1:02
	for free market to do it.	1:04
	But I think that the rise in the prime rate to seven percent	1:05
	is simply a sign that the demand has been very strong	1:10
	and not at all in any way	1:13
	in itself an independent force making for contraction.	1:15
	Suppose a prime rate hadn't been raised,	1:19
	given limited funds to lend out,	1:22
	the banks would have had to choose	1:23
	whom to lend it to in some other way.	1:25
	They might have rationed it to favorite customers.	1:26
	They might have given it to people who promised	1:29
	a whole large deposits with it.	1:31
	However they had rationed it out,	1:32
	the amount of loans made available would've been the same.	1:35
	The only difference would've been, who paid the price?	1:38
	One point that interested me in the discussion of this event	1:41
	came up in the course of an editorial in Wall Street Journal	1:45
	which expressed essentially	1:50
	the view I've been expressing now	1:52
	that the increase in the prime rate was a consequence	1:54
	of a strong demand for credit rather than a cost.	1:57
	But in the course of that review,	2:01
	it come at it that afterall,	2:03
	the interest rate was a price of money,	2:04
	and money being scarce in the sense	2:07
	that there was a strong demand for it,	2:10
	what else would you expect	2:12
	but that the price of money would go up?	2:14
	In this state, it seems to me to reflect	2:16
	a major confusion in understanding	2:18
	of monetary and credit affairs and financial affairs	2:21
	because it embodies a basic confusion	2:25
	that has plagued the Federal Reserve System	2:29
	and other central banks for a long time,	2:31
	namely the confusion between credit and money.	2:34
	When people use the term money in the way in which	2:39
	the Wall Street Journal was using it,	2:43
	they weren't referring to money	2:44
	in the sense of the pieces of paper	2:46
	that we carry around in our pockets.	2:48
	They were referring to the money in the sense of loans,	2:50
	in the sense of credit.	2:53
	And the interest rate is not the price of money,	2:54
	it is the price of credit.	2:57
	Credit is a very different thing from money.	2:59
	Some credit does have a close relation to money	3:01
	when a commercial bank makes a loan to an individual	3:05
	and the counterpart to that on its books	3:11
	is a deposit liability.	3:13
	That deposit liability may in turn be transferred	3:15
	from that bank to other banks.	3:18
	That deposit liability is a money	3:20
	which is a counterpart to credit.	3:22
	However, much money has nothing to do with credit.	3:24
	If we back to early days	3:27
	when money was dug out to the ground	3:29
	in the form of gold, it's obvious, it's the gold mine	3:31
	and the flow of money from the gold mines	3:34
	had little to do with credit.	3:36
	Similarly, when money is credit by governments	3:38
	to pay for their expenses as happened in this country	3:40
	and to a greater extent in other countries,	3:44
	that increase is a quality of money	3:46
	but it does not have any effect on credit.	3:48
	In the other side of the picture,	3:50
	most credit is not generated through money.	3:52
	It's not generated through commercial banks.	3:55
	If you take a total volume of credit in this country,	3:58
	what does it consist of?	4:01
	It consists not only of bank loans.	4:02
	It consists of trade credit, which is very large.	4:04
	It consists of short term commercial paper	4:07
	in the commercial paper market.	4:10
	It consists of bonds, of stocks, of mortgages	4:11
	and an enormously large volume of items,	4:15
	very much larger in total.	4:19
	And that part of a credit, which comes	4:21
	from the Federal Reserve System	4:24
	or even from the commercial banks at home.	4:25
	So I would argue that interest rate	4:28
	is a price of credit.	4:31
	And what we saw in the market in the last few weeks	4:33
	was a strong demand for credit,	4:37
	the price of credit went up.	4:39
	What is the price of money?	4:41
	That's the other part of the picture.	4:43
	The price of money are as a volume of goods and services	4:44
	you have to give up to get some money.	4:48
	In order for you to get a dollar,	4:51
	you have to work a certain amount of time	4:53
	or you have to sell a certain amount of goods.	4:55
	That's the price of the dollar.	4:57
	Or upside down, you might say	5:00
	that the price level is the upside down,	5:03
	the inverse of the price of money.	5:07
	When money becomes plentiful, that is,	5:10
	when you have an increase in the quantity of money	5:12
	at a rapid rate, this tends	5:14
	to lower the price of money,	5:20
	just as an increase in wheat lowers the price of wheat.	5:21
	An increase in the volume of copper	5:25
	tends to lower the price of copper.	5:27
	And similarly, if you have a rapid increase	5:29
	in the quantity of money,	5:30
	that tends to lower the price of money in the sense	5:31
	that you have to have fewer goods and services	5:34
	to buy you money, or put the other way around.	5:36
	It raises the money price of goods and serves.	5:39
	And it reduces the purchasing power of money.	5:42
	That's what you mean by saying it lowers the price of money.	5:45
	In this sense, I emphasize this because	5:48
	I believe this confusion between money	5:52
	and these two senses is a source of enormous confusion	5:54
	about the factors that affect interest rates.	6:00
	It is widely believed that if you have	6:01
	"easy money policy", that as a Federal Reserve	6:06
	is increasing the quantity of money rapidly,	6:09
	that must mean low interest rates.	6:11
	Why?	6:13
	By this analogy that if you have a lot of money,	6:14
	then the price of money must be low.	6:17
	If interest rates are the price of money,	6:18
	interest rates must be low.	6:20
	But as the analysis I've just given makes clear	6:21
	that isn't the right conclusion.	6:24
	If you have a lot of money, then the cost of money,	6:26
	the price of money in terms of goods will be low,	6:29
	which means price level will go up,	6:31
	but there is no reason in and of it selself.	6:33
	Why that should make the price of credit low.	6:35
	And in fact, you will note that our recent experience	6:39
	is a very dramatic example of this.	6:43
	The rise in the prime rate means a substantial rise,	6:46
	is a reflection of a rising cost of credit	6:49
	and it's going a long work, an enormous increase	6:52
	or a very rapid increase in the rate of which	6:55
	money is being created as I mentioned in my last day.	6:57
	The quantity of money has been growing	7:01
	at the rate of about over	7:03
	11% to 12% per year for the past year.	7:05
	If that rapid increase were to be lower in the price	7:09
	of credit money in the sense of the interest rates,	7:13
	you oughta have lower interest rates	7:16
	and said, we have higher interest rates.	7:17
	But what we do have of course is a lower price of money	7:19
	in the terms of goods at higher price level.	7:22
	While I'm talking about this subject , I think might	7:25
	make one more point about the forecast	7:27
	for this coming year.	7:30
	It's a point in Mr. Samuelson made in his	7:32
	interesting and extensive forecast discussion,	7:36
	but I would like to underline than stress.	7:40
	That point is that independently,	7:42
	of the forecast about the level of GNP for the year 1969,	7:46
	the kind of forecast I described in my last tape,	7:52
	and that I believe to hold	7:55
	is qualitatively very different	7:57
	from the forecast	8:00
	Profession Samuelson made so far	8:03
	is a pattern over the year is concerned.	8:06
	As he pointed out, his forecast was if anything	8:08
	for a relatively slow first and second half,	8:11
	and then a speed up in the rate of growth of the GNP	8:14
	in the third and fourth, I'm sorry,	8:17
	in the first and second quarters of the year.	8:19
	Then a speed up in the GNP	8:21
	in the third and fourth quarters of the year.	8:23
	As I emphasized in my last tape,	8:27
	those of us who would stress	8:29
	the role of the quantity of money	8:30
	must make a forecast in the opposite direction.	8:32
	The quantity of money has been rising very rapidly	8:35
	in the past six months.	8:38
	That speaks, if anything, for a rapid rate of growth in GNP,	8:39
	a continued inflationary pressure	8:43
	in the first half of this year.	8:45
	There are some signs that the Fed may be getting ready	8:47
	to step on the brake	8:50
	and to reduce the rate of monetary growth.	8:51
	If they do so, if they produce the kind of credit crunch	8:53
	that Professor Samuelson said was a real possibility	8:57
	in the first six months of this year,	9:00
	the effects of that on GNP and on spending	9:02
	won't be felt til later in the year.	9:05
	And that would produce a pattern of a very rapid increase	9:08
	during the first half and slow down during the second half.	9:11
	Now one point I want to emphasize to avoid misunderstanding,	9:14
	when I talk about a lag of six months or so,	9:18
	that is a lag between the actions of monetary authorities	9:20
	on the quantity of money	9:24
	and its effects on spending income prices and so on.	9:26
	I am not talking about its effects on	9:31
	bond markets or stock markets or money markets.	9:33
	The kind of thing that goes under a money crunch.	9:38
	That effect comes much earlier.	9:40
	And if indeed there is a money crunch,	9:42
	it will not,	9:45
	if there is a money crunch which is going to produce	9:47
	a slowdown in the second half of 1969,	9:50
	it will have to come early in '69 rather than later.	9:53
-	I have here a newspaper story reporting	9:56
	on a recent commerce department news release.	9:58
	According to the story, and I quote,	10:00
	much of the dues powering the unexpectedly strong	10:02
	showing of the GNP in the fourth quarter	10:05
	comes from business spending for new plants and equipment.	10:08
	Expenditures for housing, inventory investment	10:12
	and outlays by state and local governments	10:14
	are also running strong.	10:16
	Would you comment on this?	10:18
-	That's a fascinating story	10:20
	because of course, as I've already implied,	10:22
	while a strong showing of the GNP in the fourth quarter	10:26
	was unexpected to the Commerce Department	10:29
	and to the other commentators who expected	10:32
	the surtax to slow down the economy,	10:36
	it was not unexpected to those of us	10:39
	who would put most weight on monetary change.	10:41
	But the reason I find it fascinating	10:44
	is a very different one.	10:46
	This story stresses an increase in business spending	10:48
	as if it was something to be explained,	10:53
	as if it was an unusual phenomenon.	10:54
	What fascinates me about it is that this pattern of spending	10:58
	is precisely what should've been expected	11:01
	from what I would regard as a correct analysis	11:05
	of the impact of the surcharge	11:10
	along with a rapid rate of monetary expenditure.	11:13
	Let me see if I can make that more exclusive.	11:17
	The increase in taxes, on the one hand,	11:21
	reduce the income available to tax payers.	11:25
	Most of whom, mostly, consumers.	11:28
	It would not be surprising if that led	11:31
	to a decline in their spending.	11:34
	The reason why it nonetheless cannot be expected	11:38
	to be contractionary is because	11:41
	the other side of that picture is	11:43
	if the tax surcharge reduce the amount,	11:44
	which the federal government had to borrow	11:47
	on the credit market, it took the pressure	11:49
	off the credit market.	11:51
	But what does that mean?	11:53
	That means that there was a larger supply of funds	11:55
	for other purposes than would've been available.	11:58
	That means that the rates of interest	12:02
	were lower than they otherwise would've been.	12:04
	That means it was money available, funds available.	12:07
	I'm getting into the same trap	12:10
	of using money to mean credit	12:12
	when I shouldn't be using it in that sense.	12:14
	I should be using it to mean,	12:15
	I should be using the term credit.	12:18
	There were funds available or credit available	12:20
	precisely for the business spending	12:22
	for new plants and equipment,	12:25
	precisely for the expenditures for housing and so on.	12:26
	That the Commerce Department in that story	12:30
	emphasizes as having unexpectedly as they say	12:32
	produce a strong showing of the GNP on the fourth quarter.	12:36
	To summarize, what one would've expected is	12:40
	that a tax increase would tend to shift the composition	12:43
	of spending, but not necessarily the order it's told.	12:47
	It would tend to shift the composition of spending away	12:51
	from spending by tax payers.	12:54
	In this case, particularly on consumption	12:59
	two spending of a kind	13:01
	that would be particularly sensitive	13:04
	to an increased availability of credit,	13:06
	of loanable funds into a lower price	13:10
	for those loanable funds.	13:13
	And that is precisely what happened in this episode.	13:14
-	Doctor, do you feel recent action by the Federal	13:17
	raising short term interest rates	13:19
	while not changing Regulation Q	13:21
	that will cause a credit crunch?	13:24
	If so, how much of the equation	13:25
	the rate of growth of the monetary supply	13:27
	do you feel they are looking for?	13:29
-	This ties in very much to the comment	13:31
	we've just been making.	13:33
	The subscriber asks about recent action	13:35
	by the Fed raising short term interest rates.	13:38
	There has been no reason to action by the Fed	13:40
	raising short term interest rates	13:43
	other than the increase in the discount rate a while back.	13:45
	That increase in the discount rate	13:49
	was, as I've emphasized before, a belated reaction	13:52
	to the rising market rates	13:55
	and could not be expected to have much effect on anything.	13:57
	Indeed, the increase in the discount rate	14:01
	has been accompanied, for reasons	14:05
	which I may say have very little to do with it,	14:07
	while substantial rise in the amount of borrowing	14:09
	by member banks from the Fed.	14:13
	It's also been accompanied by a federal funds rate	14:17
	that from time to time has got up	14:19
	to something nearly seven percent,	14:21
	six and half, six and three quarter percent,	14:23
	and the federal funds rate being so much higher	14:24
	than the discount rate suggests	14:28
	that the discount rate has not been biting very much.	14:29
	So I'm not sure that there has been any recent action	14:34
	by the Fed raising short term interest rates	14:37
	in the sense in which a subscriber means.	14:39
	The recent action by the Fed in promoting	14:42
	an acceleration of monetary expansion	14:45
	has been raising all interest rates short and long,	14:47
	as a result of a boom that has been developing.	14:50
	However, the failure of the fed to change Regulation Q	14:53
	can be expected to have significant monetary effects	14:59
	because that means that it will be difficult for banks	15:02
	to raise funds through CDs.	15:04
	They will have to shift deposits from	15:07
	time to demand deposits,	15:10
	demand deposits have a higher reserve requirements on 'em.	15:11
	This means that the given volume of reserve money	15:14
	made available by the fed will tend to be	15:18
	a more restrictive factor on the expansion of deposits.	15:21
	The money supply by the commercial banks.	15:27
	But I am particularly interested in the second half	15:30
	of the subscriber's comment in which he says,	15:33
	how much of a decrease in the rate of growth	15:35
	of the monetary supply do you feel they are looking for?	15:37
	Unfortunately, I don't believe they are looking	15:41
	for one decrease or another.	15:44
	Unfortunately, the major complaint I have had	15:47
	about the Federal Reserve is that in guiding their policy,	15:49
	they do not express it in terms of the rate of growth	15:53
	of the money supply.	15:55
	They have tended for long to control their policy	15:57
	that guide their policy in terms of what they believe,	16:00
	the effect to their policy is on interest rates.	16:03
	If you look at their,	16:06
	if you look at their directives,	16:09
	the directives that are issued to the people	16:10
	who operate the open market in New York,	16:13
	these directives are always in terms	16:15
	of keeping credit conditions either	16:17
	about it as they are or making them a little tighter	16:21
	or making them a little easier.	16:24
	You will not find very much reference	16:26
	in those directives to the money supply.	16:28
	And time and again, they have stressed	16:31
	that the Federal Reserve cannot look at a single number,	16:35
	it cannot look just at the rate of growth	16:37
	of the money supply.	16:39
	It must look at everything that is going on.	16:40
	It must take account of the effect of its actions	16:42
	on the short term rate and on the long term rate	16:44
	on the availability of credit,	16:47
	on the possibility of the problems of the treasury	16:49
	and floating bonds and so on.	16:52
	As a result, I doubt very much	16:54
	if you could get any expression from the Federal Reserve	16:56
	of their policy, any statement of their policy	16:59
	in terms of what's been happening	17:02
	to the rate of growth of the money supply.	17:03
	This is the real danger	17:06
	because I believe the real danger is	17:08
	that because they guide their policy	17:11
	in terms of other criteria,	17:13
	they may produce a much sharper decline	17:16
	in the rate of growth of the money supply	17:19
	than it would be good for the economy.	17:20
	Or then they themselves, after the event,	17:23
	will wish they had produced.	17:25
	That certainly is the experience of earlier time.	17:27
	That certainly is the experience of 1966	17:31
	of the credit crunch in this still earlier times.	17:34
	The question might be, if they do tighten up,	17:37
	what rate of decrease in the money supply	17:41
	will they bring about?	17:43
	That's a much harder question to answer.	17:46
	The money supply, in the sense in which I've been	17:48
	referring to, it is currency plus	17:51
	all deposits of commercial banks	17:53
	has been growing at the rate of about 12% per year.	17:54
	A shift to something like four or five percent a year	17:58
	would be a major shift.	18:02
	That would bring a very real tightness	18:04
	into the money market.	18:07
	Because while, as I emphasized earlier,	18:09
	money and credit are very different things,	18:13
	I do not mean to deny for a moment	18:17
	that what the Fed does on the monetary side	18:20
	does have some both short term and long term effects	18:22
	on the credit markets.	18:25
	This is partly because in our system,	18:27
	the Fed happens to operate through the credit markets.	18:31
	When the Fed tightens really what it does	18:34
	primarily is to sell government bonds on the open market.	18:38
	By selling those government bonds,	18:43
	bonds are paid for by deposits on banks.	18:45
	These deposits are debited against the bank's balance	18:50
	at the Reserve system and essentially are destroyed	18:53
	as if you use currency to buy a bond	18:56
	and the Fed then burned up the currency.	18:59
	That's the way in which the Fed is able	19:02
	to reduce the money supply.	19:05
	But the process of doing that means	19:07
	that it does by those bonds.	19:08
	If it buys a bond, in order to buy 'em,	19:11
	it has to bid up their price.	19:13
	It has to change their price.	19:15
	I'm sorry, I was talking about buying bonds.	19:19
	That's when it expands.	19:21
	I got myself confused.	19:22
	Let me go back.	19:24
	It sells the bonds to tighten it up.	19:25
	It sells bonds in order to get the proceeds to burn out.	19:27
	When it sells a bond, what does it do?	19:30
	It drives down the price of a bond,	19:32
	that means it drives up the interest rate, the yield.	19:35
	It drives it up temporarily, in the process.	19:37
	Similarly, the commercial banks	19:42
	now find themselves trapped for funds	19:46
	and the process whereby they reduce their deposits	19:49
	is by calling loans or refusing to extend loans.	19:52
	And that too tends to raise interest rates.	19:56
	So in our system, I emphasize our system	19:59
	because if we had a monetary system	20:02
	in which the quantity of money	20:04
	was being increased or decreased,	20:05
	let us say by government passing out handouts	20:07
	or imposing taxes on people and taking back the money.	20:11
	Or by opening up gold mines or closing gold mines.	20:15
	Under those kinds of a monetary system,	20:18
	even as initial effect on the credit market	20:20
	might not be felt.	20:23
	But under our system, the process of changing	20:24
	the quantity of money does have initial effects	20:28
	on the credit markets.	20:30
	These effects are, I say, temporary	20:32
	because once the fed has decreased the quantity of money,	20:36
	this tends to work its way through the system,	20:41
	to lead to a reduction and total spending and total income	20:44
	and thus after a time to a reduction	20:47
	of the demand for loans which stands to lower interest rates	20:50
	back to where they were before or still lower.	20:54
	The temporary effect takes something like about six months,	20:57
	and after that you go the other way.	20:59
	So as I say,	21:02
	if the Fed does in fact stay up on the tie on the brink,	21:08
	if it does bring them right a monetary growth	21:13
	from something like 12% down to something like 4%.	21:15
	And the reason I take those numbers	21:19
	is because that's about the magnitude of change	21:20
	that the fed has produced in earlier periods	21:23
	when it has stepped hard on the brake.	21:26
	It will make such a change	21:28
	that will have some significant effects	21:30
	on the credit markets in the short run.	21:32
	Its short run effects will be to	21:34
	raise interest rates and make them somewhat tighter.	21:37
	Perhaps I'm wrong in extrapolating	21:41
	from Fed's past experience.	21:43
	Perhaps this time, they will do what,	21:45
	in my opinion would be the right thing,	21:49
	which would be to look at the rate of growth to my supply	21:51
	and to take taper it off.	21:54
	My advice would be	21:58
	not to go and one full step all the way from where we are	22:02
	to where we would ultimately like to be.	22:05
	But in order to avoid two severe shock to the economy,	22:07
	do it in steps.	22:11
	If the rate of growth of the money supply	22:12
	is now something to be in the order of 11 to 12%,	22:14
	if the ultimate rate of growth that I would like	22:17
	as a long run matter would be in the order of about	22:19
	five to six percent.	22:22
	What I would like to see if the Fed moving	22:24
	from 12 to something like eight or nine	22:26
	for a period of three, four, five, six months,	22:29
	and then moving gradually, maybe to seven	22:31
	and then down to six.	22:34
	And then holding it there.	22:35
	And thus giving the economy time to adjust to it.	22:36
	But I have no confidence whatsoever	22:40
	that the Fed will follow this policy.	22:42
	I think they are more likely to follow the policy	22:44
	that they have always in the past	22:46
	of stepping on the brake too hard.	22:48
	Whenever I have said this to people,	22:50
	I have time and again been asked the question,	22:52
	but surely, the Fed must be learning.	22:55
	Aren't they getting the message?	22:56
	Afterall, you and other people like you	22:59
	have been criticizing them precisely along these lines	23:00
	for a long time.	23:03
	Many people have found your criticisms effective	23:05
	because the experience seemed to be in conformity	23:08
	with what you have been saying.	23:12
	Surely, the fed must also	23:14
	and they're getting the message.	23:17
	I wish I could believe that.	23:19
	The people of the Fed are extremely abled people.	23:21
	I have no question about either their ability	23:23
	or their integrity or their desire to do the right thing.	23:26
	They also would like to have a slow down in inflation	23:30
	into avoid instability.	23:32
	But the difficultly is that there is no great incentive,	23:35
	no great force leading them	23:40
	to adapt their opinions to the way that the evidence.	23:45
	If any private business, being run for profit,	23:49
	had followed a policy which diverged as much	23:54
	from the actual facts as a Fed policy had,	23:58
	if it had promised its stockholders	24:00
	as much as a Fed has promised the world	24:04
	and performed so far away from that promise,	24:08
	the people around that enterprise	24:12
	would be out of a job.	24:13
	They would be bankrupt.	24:16
	Of course, if not bankrupt,	24:18
	somebody would've made a takeover a bit	24:19
	and taken over the enterprise	24:22
	and so we're on a new track.	24:23
	As a result, I have always been impressed by the fact	24:26
	that people who are in competitive businesses	24:28
	are very much more open-minded,	24:31
	very much more ready to change their opinion,	24:34
	to listen to adverse evidence.	24:35
	And are either government officials on the one hand	24:38
	or my colleagues, college professors on the other,	24:40
	if I may be unfaithful to my tribe.	24:43
	The different is, precisely the one I've sided,	24:47
	if a college professor gets up before his class	24:51
	and says the wrong thing 40 years in a row,	24:53
	there's a little incentive on him.	24:56
	He doesn't lose any pay.	24:58
	His students maybe less misinstructed	25:01
	but he isn't gonna get bankrupt.	25:04
	He isn't going to be driven out by irate stockholders.	25:06
	If the Federal Reserve System makes a mistake,	25:09
	they have control over the press releases,	25:13
	they will blame it on	25:16
	the malpractice, misbehavior,	25:17
	greedy businessman or grasping labor leaders	25:23
	or bad fiscal policy or something of this sort.	25:28
	And there is no force that is sat in motion	25:32
	by their mistakes, which in any way,	25:36
	establishes a pressure on to adjust and to adapt.	25:39
	And there's nothing harder in the world	25:43
	than for anybody, you or I	25:46
	are no different from others.	25:48
	There's nothing harder in the world	25:49
	than for us to admit that we've been wrong	25:51
	and somebody else has been right.	25:53
	And that is why you find over and over again	25:55
	in administrative organizations	25:59
	that once a mistake in policy has been made,	26:01
	it is extremely difficult to get that mistake rectified,	26:04
	to get it I changed.	26:08
	This is true not merely in monetary affairs.	26:10
	Look at the most obvious example.	26:12
	Was in Robert Mcnamara's Guidance of the Defense department.	26:16
	Once he committed himself to what was originally known	26:23
	as the TFX F-111, the fighter plane	26:27
	that was going to be a joint fighter plane	26:32
	for the army in the Navy and the Air Force,	26:33
	for the Air Force and the Navy and whatnot.	26:35
	He was stuck.	26:39
	If he had known before he made that commitment	26:40
	what came out later about the problems	26:43
	that were going to arise about the costs,	26:45
	there isn't a slightest doubt that he never	26:47
	would've engaged in the venture.	26:48
	But once he publicly committed himself to the venture,	26:50
	it was almost impossible for him to back down.	26:53
	Exactly the same thing in my opinion is true.	26:56
	The people on the Fed,	26:58
	there's the reason why I have so little confidence,	27:00
	that they have gotten the message	27:03
	and are in fact going to honor their policy	27:05
	in the way in which I was suggesting.	27:07
	This is Dr. Friedman reporting.	27:09
-	Thank you, sir.	27:13
	If you have questions or comments	27:14
	or suggestions for topics you would like discussed	27:16
	in this series, please send them to	27:18
	Instructional Dynamics Incorporated,	27:20
	166 East Superior Street, Chicago 60611.	27:23

Item Info

Title:

Tape 10 - 1969 forecast amplification; decrease in growth rate of monetary supply

Date:

1969

Contributor:

Friedman, Milton, 1912-2006

Subject:

Format:

audiocassettes

Language:

English

Digital Collection:

Paul A. Samuelson papers, 1933-2010 and undated

Source Collection:

Paul A. Samuelson papers, 1933-2010

Series:

Economics Cassette Series: Milton Friedman

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CC BY-NC 4.0

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Identifier:

RL10082-CS-0202
ref2544_nza
samuelsonpaul
duke:325225
pstau001202
ark:/87924/r4251g24d
50f50174-8d2c-4d29-81ec-0b53ac7c30a3

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Tape 10 - 1969 forecast amplification; decrease in growth rate of monetary supply

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