Tape 33 - Nixon Welfare Proposal, Revision of Money Supply Figures Subscribers' Questions / Paul A. Samuelson papers, 1933-2010 and undated / Duke Digital Repository

Interviewer

Hello, this is Instructional Dynamics

0:02

inviting you to another of our bi-weekly interviews

0:04

with Dr. Milton Friedman, Professor of Economics,

0:07

at the University of Chicago.

0:10

We are taping this interview on August 21st.

0:12

Professor Friedman, the welfare proposal

0:16

that President Nixon made in his recent television report

0:18

seems to have more than a family resemblance

0:22

to your negative income tax.

0:24

Is that resemblance purely coincidental?

0:26

Milton

I wouldn't say purely coincidental.

0:29

But I should say that I had not myself been specifically

0:32

involved in detail with the preparation

0:36

of the particular proposal that President Nixon made.

0:39

But that proposal is very similar to the one in part of it.

0:43

Part of it is very similar to the kind of negative

0:49

income tax that I have proposed for many years.

0:52

The similarity is first, in its general form,

0:55

that it involves an arrangement,

0:58

whereby, people on welfare would have an incentive to work

1:02

by enabling them to keep a certain fraction

1:06

of the income which they earn from outside activities.

1:08

Under most present arrangements,

1:13

if a welfare recipient gets an extra $100 in earnings

1:15

and is honest about it and reports it,

1:18

his welfare check goes down $100,

1:21

and therefore, he doesn't have much of an incentive

1:23

to get such additional income.

1:24

Now, this is one of the main reasons

1:27

why I've always been in favor

1:28

of a negative income tax arrangement

1:30

under which there would be some incentive to work.

1:32

Of course, this particular feature of the negative income

1:36

tax and the general outline of the negative income tax

1:40

has been widely taken up by many people.

1:42

It's become very, very large, very popular as an alternative

1:46

to the present, almost intolerable, system of welfare.

1:50

So, it was inevitable that sooner or later,

1:54

a proposal along those lines was going to be made.

1:57

Perhaps the features that are closest,

2:00

however, between my particular proposal

2:03

and the proposal President Nixon made

2:05

are the numbers involved.

2:07

I have always argued that at the present stage

2:09

with the kind of income tax we have,

2:13

with the kind of welfare arrangements we have,

2:15

and appropriate level at which to begin,

2:18

would be to have roughly the present income tax

2:21

exemptions and then a 50% tax rate.

2:24

This is not very far from the proposal President Nixon made.

2:28

The rate is the same, but the exemptions he's suggested

2:32

are somewhat higher as is perhaps befitting

2:36

the amount of inflation that we've had

2:39

since I first made these kinds of proposals.

2:42

Again, as I say, this is coincidental

2:45

in the sense that these ideas have been around.

2:47

There's nothing proprietary about 'em,

2:51

but certainly there is a very close resemblance.

2:53

Interviewer

What are the main differences

2:56

from the straightforward income tax?

2:58

Milton

Well, most of the main differences

3:00

from the straightforward negative income tax

3:02

were introduced for fairly obvious political reasons.

3:05

In most respects, I think these differences

3:09

are not attractive, that is it's from my point of view.

3:13

I would prefer an absolutely straightforward

3:15

negative income tax because that seems to be the only way

3:17

in which you will get the enormous advantage

3:20

of getting rid of the present welfare bureaucracy.

3:22

The kind of compromise that President Nixon has proposed

3:25

threatens, in some ways, to keep you

3:28

with the worst of both worlds.

3:31

That is to say, you will have some of the extra,

3:34

immediate monetary costs involved

3:37

in shifting to a negative income tax.

3:39

On the other hand, you will not get anything,

3:40

like to the full, the great advantage

3:43

that you might get of dispensing

3:45

with the whole enormous welfare bureaucracy.

3:48

Let me indicate more specifically,

3:50

however, what the main differences are.

3:52

First of all, certain groups which, in a comprehensive

3:54

negative income tax would be covered or excluded.

3:57

These include the people now receiving assistance

4:00

under categorical programs for old age,

4:03

blindness, disability, and so on.

4:06

In the second place, the President's proposal

4:08

is for a family plan.

4:11

It excludes single individuals, the status affair

4:12

of husbands and wife, families without children,

4:16

was left very ambiguous in the address

4:19

and it is not clear exactly how they will be handled.

4:23

Secondly, second main problem,

4:26

aside from the exclusion of these various groups,

4:29

a second main problem is how the program

4:32

is going to tie in with the state and local programs.

4:35

The proposal made by the President,

4:42

is that the federal portion

4:45

of the assistance to the States,

4:49

be in the form essentially, of a negative income tax.

4:52

That would replace the present state programs

4:56

only in those 20 states in which the payments

4:59

recommended by the President are higher than the payments

5:04

that are now being made to people on welfare.

5:09

These are mostly low income states.

5:11

They are states like Mississippi, Alabama,

5:13

Missouri, and states of that kind.

5:16

In which, present payments to recipients are,

5:18

in some cases, disgracefully low.

5:20

In those states, the recipients receiving $1600 a year

5:24

are allowed to earn up to

5:31

$720 without reduction

5:34

in their welfare payments at all a year.

5:38

In those states, the recipients would be entirely

5:40

on a negative income tax and the state administration

5:42

would be, could be largely eliminated.

5:45

In the other states, presumably,

5:49

the arrangement is that the federal contribution

5:52

to total welfare expenditures would be calculated

5:58

on the basis of the President's family security arrangement.

6:01

But then the state, or the city,

6:05

would add to it its own contribution.

6:07

For example, in New York City, New York State, Illinois,

6:10

Chicago, California, present payments

6:15

to welfare recipients are decidedly higher

6:18

than the payments that would be provided

6:21

under the scheme suggested by the President.

6:23

This additional sum would then be paid

6:26

under whatever rules the state provides.

6:28

It is has always seemed to me, highly desirable

6:31

to have this kind of a two layer system.

6:33

It is absurd to have the same level of relief assistance

6:35

for people living in rural Mississippi

6:38

and people living in urban New York.

6:40

The capacities of the community

6:43

to support them is varied differently,

6:45

what a given amount of money will buy is very different,

6:47

the level that makes sense in one place

6:50

does not make sense in another.

6:52

And the right way to achieve this is by the kind of a device

6:53

that the President has suggested.

6:56

Mainly, having a federal program

6:57

that provides a very minimum standard throughout the country

6:59

but is on the low side, is geared to the places

7:02

where an appropriate level is fairly low,

7:06

and then to have the states out of their own funds,

7:08

and the wealthier states,

7:11

and the states that want to do more, supplement them.

7:12

However, the desirable way to have them supplemented

7:14

is by a supplementary negative income tax arrangement.

7:17

Just as we have a state positive income tax

7:20

piled on top of a federal positive income tax,

7:23

it's perfectly feasible, technically,

7:25

to have a negative income tax on a state level

7:27

piled on top of a federal negative income tax.

7:29

But as I understand the President's proposal

7:32

it does not require that states, in making their payments,

7:34

should also use the negative income tax route

7:39

unless that raises a real problem

7:43

with meshing the state and local programs.

7:44

There are ways of meshing it,

7:46

which could completely undermine

7:48

the incentive feature of the President's proposal.

7:49

For example, if state's took the line

7:55

that the amount that they paid was going to be reduced

7:57

dollar for dollar by recipient's earnings,

8:00

the incentive affect would be completely lost.

8:03

The third, very interesting difference,

8:06

and one that I think is rather an improvement

8:09

on the original scheme, is the idea of having an initial

8:11

bracket, as it were, of a zero tax rate.

8:16

That is, this is the idea that if a person is on welfare,

8:19

for the first $720 he earns, $60 a month,

8:23

that should be treated as not reducing

8:27

in any way, his welfare payment.

8:29

Now, this makes a good deal of sense

8:31

in that there are obviously costs attached

8:34

to taking a job rather than being on welfare alone.

8:38

More important, it seems to me,

8:44

the crucial step is to give people as much of an incentive

8:47

as possible to make that first step off the welfare road.

8:50

Now, once they've made that, well then it seems to me,

8:54

you are likely to discourage and much less

8:56

from staying on at work by a higher rate later on.

8:58

And therefore, it does seem to me to make some sense

9:04

to have an initial $720 bracket

9:07

before the negative income tax rate of 50% starts to bite.

9:11

Perhaps the most publicized difference,

9:17

certainly the one that the President emphasized,

9:19

he had a real problem on this,

9:21

because during the course of the campaign

9:23

he had repeatedly stated that he would,

9:25

under no circumstances, support a guaranteed income proposal

9:27

by which he meant a negative income tax

9:32

and yet, here he was doing so,

9:34

and in order to differentiate himself from it,

9:35

and to establish that this was not the same program,

9:37

he made a great deal, and put a great deal of emphasis

9:40

on a work requirement, on the requirement

9:42

that no, that aside from mothers

9:44

of very young children,

9:49

any other recipients, potential recipients,

9:52

of assistance under the program,

9:55

would only get it if they agreed

9:56

to take training, or to take an available job.

9:58

And so this work requirement has been greatly emphasized.

10:00

Now, from one point of view it makes enormous sense

10:05

if it were a feasible and practical proposal.

10:08

Obviously, there are very few people

10:13

who feel that we ought to make

10:16

federal assistance,

10:20

or state and local assistance for that matter,

10:21

available to people who deliberately choose not to work.

10:23

I have never regarded the positive and the negative

10:28

income tax myself as clearly a positive good.

10:30

My own approach has been that we are now stuck

10:34

in a welfare proposal arrangement that should never

10:37

have been allowed to grow to the levels it has,

10:39

probably should never have been started,

10:42

but once started it has had the affect

10:44

of causing millions of people to be on welfare and relief

10:46

who never would have been there in the first place

10:49

if we hadn't had the whole program,

10:51

and once we've put them there,

10:52

once we've induced them to stay there,

10:54

we've got an obligation to 'em.

10:56

We can't simply pull out the rug from under

10:57

which you might like to do,

10:59

and throw them out in the streets.

11:00

Consideration is a shear humanity make that impossible

11:02

and therefore, you have to have a way of getting off

11:06

of our present system of going

11:08

from where we are to where we'd like to be

11:10

and I've always regarded the negative income tax,

11:11

therefore, not as a positive good in itself,

11:14

but as an effective device for enabling us

11:17

to pair down the number of people

11:20

who are on the relief roles and to render assistance

11:23

in a more humane and less demeaning fashion.

11:27

And therefore, from this point of view,

11:33

I certainly agree with the value's implicit

11:34

in requiring a work requirement.

11:38

On the other hand, I think it has a practical matter

11:41

from the point of view of the way it will

11:45

in fact actually work, a highly undesirable feature.

11:46

It is not in fact and it'd be impossible to enforce it.

11:50

The attempt to enforce it

11:53

will immediately raise the question,

11:55

as it has already been raised in discussion,

11:58

what good does it do to say that people have to go to work

12:00

unless you provide jobs for 'em,

12:04

and therefore, it has an inevitable effect

12:05

to tend to force on the government,

12:08

the role of employer of last resort.

12:11

Now this sounds like a very desirable thing.

12:14

It sounds like a fine thing to say

12:17

that if a man can't find a job in the private market

12:18

he should have the government provide a job for him.

12:21

But in fact, it seems to me, it would be

12:24

a terribly destructive program to undertake.

12:26

We had experience with this in the 1930's

12:29

with the Leaf Raking Program.

12:31

That is exactly what you would have again.

12:33

What you would have again would be

12:34

an enormous waste of man power at very great cost,

12:35

which would be satisfactory neither

12:39

from the point of the view of the people involved

12:40

nor from the point of view of the pubic at large.

12:43

Now, just as, are well-meaning, well-intentioned

12:46

relief programs that put millions of people on relief,

12:49

who would otherwise not be there.

12:52

So this kind of a program would condemn millions of people

12:54

to more or less permanent governmental employment

12:57

who have no business being there.

13:00

Well for these, in addition, one of the great advantages

13:01

of the negative income tax in its initial and proper form

13:05

is that it eliminates the necessity of prying and snooping

13:07

into the private lives of individuals

13:12

and lets you have a good deal more impersonality.

13:14

It carries over the notion of market freedom.

13:16

Under this arrangement you still have to have the snooping.

13:20

You have to keep checking to see

13:23

whether people are able to take jobs.

13:24

You have to get the government involved to a greater extent

13:27

than it now is in the employment business, and so on.

13:30

So in practice, I think the provision

13:32

is not going to be very effective

13:35

and is not a very desirable provision.

13:37

Interviewer

Are there any unresolved issues?

13:40

Milton

Yes, indeed there are two major ones

13:43

that will come up to plague the program

13:47

and will have to be resolved sooner or later.

13:51

One is who is going to do the administration?

13:53

From the negative income tax point of view, the desirable

13:56

thing is have Internal Review Service administer it.

13:59

This has the great virtue of meshing

14:02

the positive with the negative income tax

14:05

and from the end of perhaps improving collections

14:07

and eliminating cheating under the positive income tax.

14:10

It also has the virtue of making a first step

14:13

on getting rid of your welfare bureaucracy.

14:16

On the other hand, organizations of course,

14:19

don't easily give up functions,

14:22

or don't easily refrain from grabbing for new ones,

14:25

and so there is great pressure

14:28

in the Social Security Administration

14:29

to have the administration of the program

14:31

assigned to the Social Security Administration.

14:32

That issue has not yet been resolved.

14:34

The second major issue is a relation to food stamp plans.

14:37

The sensible thing to do

14:40

is to have this replace the food stamp plans.

14:42

After all, there is no point

14:44

in giving assistance both in the form of money

14:46

and in the form of specific items and specific goods.

14:48

But immediately of course,

14:51

the senators from the agricultural states,

14:53

who regard the food stamp plans as an agricultural subsidy,

14:58

not as a way of assisting the poor,

15:01

have been up in arms at the idea

15:03

that this might involve a reduction in the food stamp plans.

15:05

So that problem will have to be resolved.

15:08

Interviewer

One major charge

15:10

is that Nixon's levels are too modest.

15:12

Do you agree?

15:15

Milton

Far from it.

15:16

I think that it would be,

15:17

the whole idea of a negative income tax,

15:20

would be objectionable.

15:23

If the level of support under it were to be made very high.

15:25

It would be objectionable for several reasons.

15:29

One of those is the fact that the number of people

15:32

involved would then get very, very large.

15:36

You would then be in a position of making a governmental

15:38

payments, direct governmental subsidy payments,

15:42

to a very large fragment of the population.

15:47

More important, the incentive for people,

15:49

the incentive for some people to say by hook or crook,

15:54

they're not going to work, and they're just going to live

15:58

on the dole, and whatever's paid to 'em

15:59

would become much larger.

16:02

50% is still quite a slice and will reduce incentive

16:03

and if it would be possible for people,

16:08

without working or without taking jobs,

16:10

to live at a level that's moderately comfortable,

16:14

a considerable number of people might do it.

16:17

I think you can defend a kind of a negative income tax

16:20

of this arrangement if and only if

16:24

the bottom minimum level is sufficiently low

16:26

so that relatively few people will in fact,

16:29

be willing to accept it instead of the kind of level

16:32

that can be obtained by employment.

16:36

In the second place, the cost would be enormous.

16:37

The cost of raising the minimum level goes up

16:43

both because of the direct outlays

16:46

and because it involves, in essence,

16:49

undermining the positive income tax.

16:51

Interviewer

Let us turn now to a very different area

16:54

and one that is very close to your heart, I know.

16:57

The money supply figures have been receiving

17:01

much attention in the papers recently.

17:04

Revisions announced by the Fed are said to show

17:07

that the Fed has not been tightening recently.

17:11

Are you persuaded?

17:15

Milton

Well, not quite.

17:16

Now this has been a very interesting statistical exercise.

17:18

The Fed has revised one particular series.

17:23

Its series on M1, money narrowly defined

17:26

currency and demand deposits.

17:29

It has revised these for what unquestionably

17:30

was a defect in the earlier figures.

17:34

Now, this is a highly complicated technical defect

17:36

that has to do with the particular handling

17:39

of the bookkeeping items involved,

17:41

in the repayment of Euro dollar loans,

17:46

of loans from Euro dollar banks,

17:50

and particularly loans negotiated

17:52

through the branches of American banks in Europe,

17:56

for the parent bank in New York or Chicago.

17:59

And certain ways of handling on the books,

18:03

these arrangements turned in essentially,

18:07

to a rather sophisticated version

18:11

of what you and I know as the kiting of checks.

18:15

Whereby, the banks were able to reduce

18:17

the amount of reserves they required,

18:20

essentially by such a process.

18:22

The Fed recently put in some regulations

18:24

designed to eliminate this process

18:27

and in doing so, they also revised the money supply figures

18:29

to eliminate the understatement that had been produced.

18:33

The questionable item, or the problem,

18:37

is really how those revisions were spread back over time.

18:39

They're apparently, the Fed made a survey of banks

18:46

to get some information on the basis

18:50

of which to spread it back over time.

18:51

But we have still do not have enough information

18:53

to know how comprehensive and reliable that is.

18:56

At any rate, it so turned out that the Fed's revisions

18:58

were concentrated in the past few months

19:01

and were almost as if designed to counter the criticism

19:04

that I and other people have been making of them

19:10

that in the past three months,

19:12

they shifted sharply to tighten.

19:14

Now, it may be that those are correct revisions

19:16

but it should be noted that there are other defects

19:19

in the figures that the Fed is now working on,

19:24

that the Fed has announced that it is going to revise

19:26

the seasonal shown by the figures

19:29

and get a new seasonally adjusted series.

19:32

And all of the evidence I have been able

19:34

to look at suggests that if the Fed had made

19:36

all its revisions at one time,

19:39

instead of making them in pieces,

19:41

you would have had a picture that is almost the same

19:43

as the picture shown by the unrevised figures.

19:45

That these two changes they were going to make

19:47

would offset one another.

19:50

From that point of view, I think it is very unfortunate

19:51

that they did not choose to make them

19:54

simultaneously at the same time.

19:55

By first revising them in one direction,

19:57

and then revising them back in the other,

19:59

the Fed is likely to undermine the credibility

20:01

of these figures and its own creditability

20:03

as a supplier of such figures.

20:05

I should emphasize that the revisions

20:07

from any longer point of view are not very important.

20:09

They are a minor change amounting to less than,

20:13

to roughly, about 1, 1.5% in the level of the series.

20:16

However, from the point of view of movements

20:21

over a period of two or three months,

20:23

that can be very large and very disturbing.

20:25

Yet, when all this is said and done,

20:29

if you look at the figures, and not only of these single

20:30

figures they revised, but the whole collection of figures,

20:35

the conclusion I have reached on a careful restudy

20:38

of the figures is that it does not change the basic picture.

20:41

It moderates it but it does not change it.

20:45

Under the old figures, M1 alone,

20:47

that is currency plus demand deposits,

20:50

had risen from December 1968 to April 1969

20:52

at an annual rate of 4.1% and from April to July at 0.2%.

20:57

That is, you had gone from a 4% rate of rise

21:03

to a 0% rate of rise.

21:06

Under the new revised figures, that first figure,

21:08

December to April, is raised from 4.2 to 4.6%.

21:13

The second figure is raised from 0.2 to 3.2% by much more.

21:18

But nonetheless, even in these figures,

21:23

which received the major attention

21:25

from the Fed's statisticians,

21:28

there is still is a distinct an depreciable

21:30

retardation in the rate of growth in the last three months.

21:32

If you look at other figures, the shift is much sharper.

21:35

If you take currency, plus demand deposits,

21:37

plus commercial bank time deposits,

21:40

but exclude the large CDs, so as to eliminate

21:42

the bookkeeping affects from the shifting of CDs

21:45

from the U.S. to Euro dollar market,

21:47

you'll have that the rate of rise

21:50

in the December to April period was 4.3%

21:52

and April to July 0.7%, so you'll have

21:56

just about as large a shift as you had before.

21:59

If you look at the monetary base, member bank reserves,

22:02

unborrowed reserves, whatever other figure you look at

22:04

they all show a very distinct retardation

22:07

in the period from April to July

22:11

compared to the earlier period.

22:13

So my own conclusion is that in fact,

22:14

the Fed has appreciably tightened

22:18

the screws in the last few months.

22:21

Now, whether they will continue that tightness

22:22

is another question and on that I am much less certain.

22:24

Interviewer

We have a number

22:30

of questions from subscribers.

22:31

Let's take them up one at a time.

22:33

In an earlier tape, you mentioned that banks

22:36

were persuading customers who had CDs

22:40

to transfer these sums to deposits

22:42

in their foreign branches.

22:45

Can an American investor place his money

22:47

in foreign branches of domestic banks

22:49

and thus receive the current Euro dollar

22:52

rate of interest on those deposits?

22:54

Milton

Yes, he can.

22:56

But before you all rush to put envelopes in the mail,

22:57

let me point out a couple of features

23:01

that may make it less accessible than it might seem.

23:03

In the first place, the Euro dollar

23:06

CD market is a wholesale market.

23:09

The typical unit of transaction is a million dollars

23:11

and if you're thinking of sending a mere $50,000 or $100,000

23:16

over to get the benefit of the Euro dollar rates,

23:19

it's very dubious that anybody will do business with you.

23:21

You'll be too small a fish.

23:24

So, it is a wholesale market in which the transactions

23:26

are on very, very large sums.

23:29

In the second place, if you're an American corporation

23:32

subject to the limitations on foreign investment

23:36

which were first introduced by President Johnson

23:40

on New Year's Day of 1968, in which unfortunately,

23:44

have been eased but not eliminated

23:48

by the Nixon administration,

23:49

why then your deposit into a Euro dollar bank

23:52

will be counted as a transfer of funds

23:55

out of the country and into a foreign investment

23:57

and therefore, will come under those requirements.

24:02

Now subject to those two conditions,

24:05

to the best of my knowledge, there is nothing whatsoever

24:10

to prevent any American citizen from transferring funds

24:12

from a New York or from a U.S. bank.

24:17

I keep saying New York because of course, most of the banks

24:20

involved in this business are in New York,

24:23

but there's nothing to prevent any American citizen

24:25

from transferring his funds from a U.S. bank

24:27

to a branch of the same bank

24:30

in London, or Paris, or some other country.

24:32

Interviewer

Second question.

24:36

For the purpose of determining changes in the money supply

24:37

which figures should one observe?

24:41

Seasonally adjusted or not seasonally adjusted?

24:43

Milton

Now that's a very, very pertinent

24:46

and very good question, and it's much harder to answer

24:48

than it might seem first place.

24:52

And let me see if I can give a simple answer first

24:56

and then elaborate on it a little.

25:00

As things now stand, you should look

25:02

at the seasonally adjusted figures.

25:04

In an ideal world, in my opinion,

25:05

what the Feds should control is not the seasonally adjusted

25:08

figures, but the seasonally unadjusted figures.

25:11

Now, the reason I say this is because a seasonal

25:14

in the money supply figures is a rather funny thing.

25:18

The money supply figures are whatever

25:21

the Fed decide they should be

25:24

and therefore, the seasonal in the money supply figures,

25:26

seasonal movement, is not like, let us say

25:29

a seasonal in crop production.

25:32

A seasonal in crop production, the amount

25:34

of wheat produced in different months of the year,

25:35

reflects a real physical frank, namely the fact

25:37

that temperatures, rainfall, and so on are different

25:40

at different parts of the year.

25:42

It's not something dominated by man's own actions.

25:43

But the seasonal in the money supply is very different.

25:48

It is dominated by what the Fed does.

25:50

It wouldn't be there if the Fed weren't doing it.

25:53

Now, how does the Fed put a seasonal

25:56

into the money supply figures?

25:58

Well, in the main it doesn't, not directly,

26:00

it doesn't calculate the seasonal

26:02

it wants to put in the money supply figures,

26:04

but because it has always emphasized orderly movements

26:06

and interest rates, the seasonal in the money supply figure

26:11

is an indirect consequence of the Feds trying

26:15

to lower the seasonal interest rates.

26:18

When Anna Schwartz and I wrote our book

26:22

on "Monetary History of the United States,"

26:24

we compared the seasonal in money on the one hand

26:26

and in the interest rates on the other

26:28

before the Federal Reserve System was established in 1914

26:30

and in that heyday of the Fed, during the 1920's.

26:34

And the results were very fascinating.

26:38

Before 1914, there was a very small

26:41

seasonal in the money supply.

26:43

At that time it was produced by the seasonal movements

26:44

in gold from abroad as a result of crop movement season.

26:47

There was a very wide seasonal

26:50

in interest rates over the course of the year.

26:52

I say very wide, I don't mean very wide,

26:54

a noticeable appreciable one.

26:56

In the 1920's the seasonal in interest rates

26:58

was very much smaller, almost eliminated.

27:01

The seasonal in the money supply was correspondingly wider.

27:03

With the result that you had substituted

27:06

the one seasonal for the other.

27:09

Now, given that the Fed is doing this,

27:11

why then the markets are all adjusted to the fact

27:14

that the Fed is introducing this season in the money supply

27:16

and therefore, a move which is regarded and interpreted,

27:20

and handled as seasonal, not explicitly, but implicitly

27:26

has no affect, and that is why under present circumstances,

27:29

with present practices, one should look at seasonally

27:32

adjusted figures for forecasting the course of events.

27:36

On the other hand, in an ideal world,

27:39

if the Fed stopped worrying about interest rates,

27:41

if it turned its attention only to the money supply,

27:44

its task would be much easier,

27:47

there would be less of an arbitrary and erratic element

27:49

if the Fed controlled and guided itself

27:52

by the seasonally unadjusted money supply.

27:55

Interviewer

Thank you very much, Professor Friedman.

27:58

Remember subscribers, if you have any questions or comments

28:00

for topics you would like to hear discussed in this series,

28:04

please send them to Instructional Dynamics Incorporated

28:07

166 East Superior Street, Chicago, Illinois 60611.

28:10

Dr Friedman will be visiting with you again in two weeks.

28:17

Tape 33 - Nixon Welfare Proposal, Revision of Money Supply Figures Subscribers' Questions

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