Tape 81 - The President's New Economic Policy / Paul A. Samuelson papers, 1933-2010 and undated / Duke Digital Repository

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Hello.

0:01

Instructional Dynamics Incorporated welcomes you

0:02

to the series of commentaries on the current economic scene.

0:05

Reporting to you will be one of the nation's

0:08

leading Economists, Professor Milton Friedman

0:10

of the University of Chicago.

0:13

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We are taping this interview on Wednesday, August 25th.

0:15

The obvious subject for discussion this week

0:20

is the president's message of a week ago,

0:23

announcing a new economic policy.

0:25

In your opinion, was there a need

0:27

for such a New Economic Policy?

0:29

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That certainly is the obvious subject,

0:31

but I must say the amount of talk

0:33

that there has been about it is such

0:35

that I would think most of the subscribers

0:37

were sick to death of hearing about it,

0:39

and I'm almost sick to death talking about it.

0:41

But it certainly was a major change.

0:44

It has titillated everybody throughout the world.

0:47

It still has to work itself out.

0:52

So let's start with a question you raised

0:54

of whether there was a need for a new economic policy.

0:56

In my opinion, there was no need for a new economic policy

0:59

from a domestic point of view.

1:03

There was certainly a need to do something internationally.

1:07

And I think it is by now widely believed,

1:10

that what triggered the talk on that Sunday night,

1:14

what caused this policy to be announced at this time

1:17

rather than later, was in fact,

1:21

the international speculation in money markets,

1:23

and the resulting demand for gold from the United States.

1:27

Ever since the two-tier system was established in 1968,

1:32

there's been a, or was it '67, I always get that date mixed,

1:36

but it was either '67 or '68,

1:40

ever since the two-tier system was established

1:43

there's been a sort of a gentleman's agreement

1:45

among the central banks of the world,

1:47

that while they retained the technical right

1:49

to get gold from the United States in return for dollars,

1:54

they would not, in fact, exercise that right.

1:58

But of course, in any such gentleman's agreement,

2:01

there's always nibbling at the edges,

2:04

and over the years there has been some

2:06

nibbling at the edges, and as a result

2:08

the American Gold stock is gradually been declining.

2:11

When it got below the mythical level of 10 billion dollars,

2:14

which was widely agreed is the minimum

2:17

that would be tolerable to the U.S.,

2:20

many of the European countries apparently thought that the

2:22

final day was near, and that if they were gonna

2:26

nibble anymore, they better nipple right away,

2:28

and apparently, to judge by the outcome,

2:31

there must have been a great deal of nibbling.

2:33

As a result, the Treasury and the President felt

2:36

that they had to do something to stop the drain of gold.

2:38

It's understandable that the President

2:42

didn't wanna do that all by himself.

2:44

He didn't want to be in a position of announcing

2:46

another negative program of closing the window on gold.

2:49

Instead, he made it part of a whole package,

2:53

and that was necessary from an international point of view.

2:57

But looking at the domestic situation,

3:01

it's interesting to note that we've just had a new batch

3:03

of statistics come out since the talk,

3:05

all of which looks very favorable

3:08

from the point of view of the prior economic policy.

3:12

As my subscribers know, I have been arguing all along,

3:15

that we were in a healthy expansion,

3:19

that it was going to accelerate and get better,

3:21

that the rate of inflation had been tapering off somewhat,

3:26

but was now being threatened

3:30

by the extraordinarily rapid rate of monetary expansion

3:32

during the past six months.

3:35

Well if you look at the new batch of figures

3:37

that have just come out,

3:39

they fit in very well in that picture.

3:40

The rise in the cost of living of consumer prices

3:42

was relatively low, just about 2/10 of 1%.

3:47

What's more important is if you look at the consumer price

3:52

increased over the first seven months of this year

3:56

and compare it with earlier years,

3:59

it gives you a striking result.

4:00

The simple percentage increase in prices,

4:02

this is not an annual rate, but how much of the percent

4:06

by which prices increased over those seven months,

4:09

was 2.3% in 1971, 3.3% in 1970, 3.4 % in 1969,

4:12

3.7% in 1968, and 1.6% in 1967.

4:22

So you'll have to go all the way back to 1967,

4:29

which was in part a year of a mini recession,

4:33

in order to get a price performance

4:38

as good as that of the past seven months in consumer prices.

4:40

Similarly there has just been announced a revision

4:45

of the GNP figures for the second quarter.

4:48

As most such revisions have been,

4:52

surprisingly for a long time,

4:54

this revision was an upward revision.

4:57

Not a very large one, but nonetheless

4:59

sufficient to raise the rate of real growth

5:02

in the second quarter from 3.6% per year to 4%,

5:06

an annual rate of 4%, and to lower slightly,

5:12

the rate of rise of the implicit price deflator

5:16

from 4.2% to 4.1%.

5:19

Now that rate of rise in the implicit price deflator

5:23

is lower than in any quarter in the last,

5:26

for about two years.

5:29

So once again, you have an excellent price performance.

5:31

On the real side, one of the interesting things

5:35

about the revision is that the domestic economy

5:37

is even stronger than those figures suggested.

5:41

The revision raised the increase in GNP in current dollars

5:44

from 19.7 billion to 20.5 billion,

5:49

$800 million, which is not very much.

5:52

But the interesting thing about it was

5:55

that there was something like an over $3 billion rise

5:57

in the domestic components of that growth,

6:02

matched by a over $2 billion shift in net exports

6:05

from the earlier estimate of an annual rate of

6:13

minus $4 billion to an annual rate of minus $6.4 billion.

6:16

That is quite clearly,

6:21

the international uncertainty and problems

6:22

had served to make the domestic expansion

6:24

look less rapid than it otherwise would have looked.

6:28

Now if you look at those figures,

6:31

there is nothing to sneeze at,

6:33

and nothing to be ashamed at in those figures.

6:34

They show a rate of growth of GNP for three quarters,

6:37

because I do think the forth quarter and the first quarter

6:43

are very misleading because of the strike

6:46

in the fourth quarter and the make-up in the first quarter.

6:48

If you take a three quarter period

6:51

from the third quarter of 1970 to

6:52

the second quarter of 1971,

6:54

you'll have a very, very healthy increase of

6:58

close to $60 billion over that three quarters.

7:01

These are very large and a very sizable increase.

7:06

Moreover, we've had this extraordinarily rapid

7:09

monetary growth in the past six or seven months,

7:11

which has not yet shown up fully in the figures.

7:14

Thus without any new economic policy,

7:17

there was every reason to expect

7:20

that the economy was going to speed up,

7:22

that the rate of real growth,

7:25

which had come up to 4% already in the second quarter,

7:26

would go still higher than that

7:32

in the third and fourth quarter

7:33

and start really to cut into unemployment.

7:34

In a way this is ironic,

7:37

that just when the old policy's beginning

7:39

to show it's effect, the public clamor

7:41

and the politically motivated downgrading of the economy

7:44

whereby the public was persuaded that the economy

7:50

was somewhere near or where it had been in 1932,

7:56

to listen to the way people was talking,

7:59

all this has lead to a substitution of what in many ways,

8:01

in my opinion as I shall point out later on,

8:05

is a much less satisfactory policy

8:08

for a policy that was beginning to show very real affects.

8:13

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What is your general reaction to the program?

8:18

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Well in general, I would like

8:21

to distinguish among the three parts of the program.

8:23

As I've already mentioned, on the international side,

8:27

I strongly approve of cutting the link to gold,

8:29

of ending the fiction that the dollar is,

8:33

in any meaningful sense, convertible into gold.

8:37

Now this is a very interesting case,

8:39

because what Mr. Nixon did the other night

8:41

was the final stage in a drama that started in March 1933,

8:44

when Franklin D. Roosevelt ended the internal

8:49

convertibility of the dollar into gold.

8:52

That is, he ended the process whereby

8:53

the private citizen in the United States was

8:56

always able to take paper money or coins

8:59

to the Federal Reserve or the Treasury

9:04

and get gold in return and conversely

9:06

to bring gold to the Mint and have it minted.

9:08

He ended that.

9:13

Franklin Roosevelt made it illegal for private individuals

9:14

to own gold, to buy and sell gold.

9:18

He then in January 1934, raised the price of gold

9:20

to $35 an ounce, as part of a program

9:25

to raise domestic prices as a program for inflation,

9:29

in order to help out, particularly,

9:32

what he regarded and correctly,

9:34

as a depressed farmers and primary producers.

9:36

That started a process which has gone on

9:42

step by step until Mr. Nixon put its final seal.

9:46

At first, because the gold was grossly overvalued

9:50

at $35 an ounce, a flood of gold came into the United States

9:53

and the gold stock something like tripled

9:57

in physical volume over the next seven or eight years.

9:59

Then as inflation set in worldwide,

10:03

as prices in terms of dollars of commodities rose,

10:07

what had been an extraordinarily high price of gold,

10:11

became an extraordinarily low price of gold,

10:14

and we started to lose gold.

10:16

That is to say, I say lose gold, that's always a euphemism.

10:18

Nobody ever lost an ounce of gold.

10:23

Every ounce was perfectly well taken, accounted for.

10:24

But we started to have balance of payments deficits

10:28

and foreigners started to take,

10:31

instead of taking payment in dollars,

10:33

they took payment in gold as they were entitled to,

10:35

so long as we were committed to pegging

10:38

the international market at $35 an ounce for gold.

10:39

This lead to a whole series of developments at home.

10:43

The first of these was the ending of

10:45

a gold reserve requirement by the Fed on against deposits.

10:48

Then the gold reserve requirement against notes was reduced.

10:53

Then the gold reserve requirement against notes

10:56

was completely abandoned.

10:58

The two-tier system was the next stage

11:00

and now this final severing of the link was the final stage.

11:03

I was in favor of severing that link 20 years ago.

11:08

I was in favor of it 10 years ago, five years ago,

11:11

I think it's fine to have it done now.

11:13

But what about the 10% import surcharge?

11:15

As a free trader, I regret very much that surcharge,

11:19

and I would regret it, particularly, if it became permanent.

11:23

But nonetheless, I have some sympathy for it.

11:26

As I pointed out at length in my last tape,

11:32

there is no technical way in which the U.S.

11:37

can unilaterally devalue the dollar.

11:41

It takes two to make such a bargain.

11:44

Incidentally, a day or so after I had sent off that tape,

11:47

I made a note to myself that in the next tape

11:53

I was going to explain an indirect way

11:57

in which the U.S. could devalue the dollar.

11:58

I was going to explain that if the U.S.

12:01

were to impose a 10% tariff on all imports,

12:04

and use the proceeds to give a 10% subsidy to all exports,

12:11

that would be the mathematical equivalent

12:16

to a 10% devaluation of the dollar,

12:18

and that it was a device that in principle

12:20

we could do unilaterally.

12:23

Of course, other countries could react to it,

12:26

either by changing their exchange rates or in other ways,

12:28

and so other countries would be in a position

12:31

to make that ineffective

12:34

from the point of view of our balance of payments.

12:35

But it is in principle,

12:37

a way in which we could effectively devalue the dollar,

12:39

that I neglected to point it out last time.

12:41

What Mr. Nixon has done is half of that.

12:43

He's imposed the import surcharge, not fully,

12:46

because to be the equivalent of a devaluation,

12:50

the import tariff should be imposed on all imports,

12:54

whereas Mr. Nixon imposed it only on dutiable imports

12:59

and left out the kinds of things that come in duty-free,

13:03

mostly raw materials and the like.

13:07

But he's gone a long way toward imposing

13:09

the first half of that.

13:11

He did not impose a subsidy on exports, or propose one,

13:13

primarily I understand, because that is ruled out

13:17

by the rules of the IMF, as well as of GATT.

13:21

It's clearly a unfair trade practice.

13:24

But now when you impose the one half,

13:27

the affect of that is to reduce imports

13:31

without offering any tendency for exports to expand.

13:34

The combined effect of tariff plus a subsidy would be,

13:38

both to reduce imports, but also to expand exports,

13:44

and then thus that way

13:48

to keep the volume of foreign trade up.

13:49

A tariff alone, reduces the volume of trade.

13:52

That's the difference between it

13:55

and a devaluation or a change in exchange rates.

13:56

However, my main point is a different one.

13:59

Given that there is no technical way

14:01

in which the U.S. can unilaterally devalue,

14:03

given however that the widespread feeling

14:06

with considerable justice, that the dollar is undervalued

14:11

with respect to some leading currencies

14:15

and particularly the Japanese Yen,

14:17

and given therefore a great desire on the part

14:21

of Washington to have a rearrangement of exchange rates,

14:24

the question was,

14:27

how could Mr. Nixon get any bargaining power to do so?

14:28

Up to this point, the U.S. has tried

14:32

and asked for such changes in exchange rates

14:35

but with absolutely no effect whatsoever,

14:38

because we had no bargaining power.

14:40

There wasn't a thing we could do.

14:42

This tariff did give Mr. Nixon bargaining power.

14:44

As he said in his talk, he proposed it

14:47

as a temporary measure to be eliminated as soon as

14:51

other countries properly readjusted in a satisfactory way

14:55

their exchange rates.

14:59

Now Mr. Nixon has a bargaining power

15:01

that he did not have before.

15:03

And this is the reason why I say

15:06

I feel a certain sympathy for it.

15:08

If it's used for this purpose.

15:10

If we can manage to get out of the Japanese,

15:11

a substantial revaluation,

15:14

and some minor readjustments of other exchange rates.

15:17

If then Mr. Nixon drops it,

15:20

well then it will have been a bargaining tactic

15:22

that it will have been worth while, even though it

15:24

temporarily represented a deviation from purity.

15:26

Free trade.

15:31

Well that's so much for the international measure.

15:32

On the whole as it's clear from what I've said,

15:34

I strongly approve of it.

15:37

The first part of his proposal involved a reductions

15:39

in taxes and a reduction in government spending.

15:43

Insofar as you get a simultaneous reduction in both,

15:47

I think that's a very good thing,

15:52

and I'm all in favor of it.

15:53

Because as I have stressed many times on these tapes,

15:55

I believe our present government is much too large.

16:00

That too large a fraction of our income is going to pay

16:02

for government expenses and anything which cuts

16:04

the size of the government down is a good thing.

16:07

From the short-run cyclical point of view,

16:10

I do not believe that bunch of measures

16:13

will have much of an expansionary effect.

16:15

As I have stressed before,

16:18

I believe the major source of general expansion

16:21

has to come from monetary policy, not from fiscal policy.

16:24

That if you do not have a monetary expansion

16:28

when you have a cut in government taxes,

16:32

the affect of that is primarily on interest rates.

16:37

In any event, as many, many people have pointed out,

16:40

if you take the President literally at his face,

16:42

the cut in taxes is matched by an equal cut of spending.

16:46

So even from the point of view of fiscalists,

16:49

there is not much net incentive.

16:52

But since I don't believe there was any more

16:54

net incentive required, since I believe we had

16:56

more than enough steam in boiler before,

16:58

that's not a bad thing.

17:01

My one complaint about that, is that I believe

17:03

the cuts in taxes will be more real

17:07

than the cuts in spending,

17:10

that some of the cuts in spending,

17:11

intended to match the cuts in taxes are simply postponements

17:13

of programs that were not going to be enacted anyway

17:17

and so are papered cuts.

17:19

So it may lead to a larger deficit.

17:21

But on the whole, again,

17:22

I have very little quarrel with that point.

17:23

The part which I really do quarrel with of course,

17:25

is the wage price freeze.

17:29

The wage price freeze,

17:31

which Mr. Nixon avoided nobly and gallantly for so long,

17:33

and I honor him for having stuck to his guns

17:37

against enormous pressure, the wage price freeze,

17:40

in my opinion, is a purely cosmetic measure

17:45

that will have no therapeutic effect whatsoever.

17:48

It's a silly kind of a weapon for the purpose.

17:53

You've got millions of separate individual prices,

17:56

some going up, some going down,

17:59

in order to prevent their average from rising

18:01

by something like one percentage point in 90 days.

18:03

You freeze each and every one of them.

18:07

And of course that's why you've been having

18:11

such a storm of protests around it.

18:14

I do not believe it serves any function

18:17

except to give comfort to people who look

18:21

for simple answers for complex phenomena.

18:26

The euphoria which greeted it

18:32

is not justified on an economic basis.

18:35

It is not justified by any analysis

18:38

of what its affects can be.

18:40

It's only justified on the simple-minded notion

18:42

that if you have a fever

18:45

and you don't wanna show a temperature,

18:46

the way to fix things up, is to break the thermometer

18:48

so it doesn't register anymore.

18:51

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How do you interpret the immediate reaction

18:54

of the markets?

18:57

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Well the immediate reaction of the markets,

18:59

particularly the stock market was certainly euphoric.

19:01

But I interpret that as simply another example

19:04

of the extraordinarily short time perspective of the market.

19:09

The markets, in the weeks before,

19:13

had fallen in the pattern of undue pessimism.

19:16

The week before Mr. Nixon spoke,

19:19

I would have said that the markets were lower

19:22

than they deserved to be, the stock markets,

19:25

because participants in the market were unduly pessimistic

19:29

about the possible expansion in the economy.

19:33

People in the market like to have something done.

19:36

The for God's sake do something clique

19:39

is very large and very widespread.

19:42

And I interpret the reaction of the market as simply

19:45

a wholly emotional, illogical reaction.

19:48

Which was just as much overdone on the one side

19:53

as the pessimism had been overdone on the other.

19:56

What will happen over the longer pull, remains to be seen.

20:01

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What if any affect should it have on interest rates?

20:06

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Well that is one aspect of the market reaction

20:09

that I think is particularly interesting.

20:11

Because in the first euphoria,

20:14

the first week of the market,

20:15

interest rates declined.

20:18

That is the prices of bonds rose

20:21

and short-term interest rates as well

20:23

seemed to have gone down.

20:25

As I look at the President's package,

20:28

it seems to me, I can not see any affect in it

20:31

on interest rates except an upward pressure.

20:35

Let's look at the various items in it.

20:38

So far as the investment tax credit is concerned,

20:40

that's sold as a means of stimulating

20:45

an expanding investment,

20:47

but it really can not do so,

20:49

unless somehow or other somebody saves some more.

20:53

From the point of view of one individual enterprise,

20:56

it can invest more, but in order to do so,

20:59

it has to raise money,

21:01

it has to get them away from somebody else.

21:02

And so long as savings don't go up,

21:04

the main affect of the investment tax credit

21:07

will simply be to increase the demand for loanable funds

21:10

and this will tend, surely, to raise the interest rate.

21:13

In the second place, so far as the import surcharge

21:18

encourages some industries,

21:26

protects and helps some industries

21:30

like the textile industries, the automobile industries

21:32

and so on, to expand,

21:35

that will increase their demand for funds.

21:41

In the third place, insofar as the reduction of excise taxes

21:44

and in other governmental taxes,

21:49

more than matches the reduction in spending,

21:52

you will have an increase in the government deficit,

21:56

and that will increase the governments demand for funds.

21:58

So here we have three sources of an increase demand

22:01

for lendable funds on the part of the government,

22:04

the corporations trying to engage in investment,

22:07

and the import competing industries.

22:10

I do not see any counterbalance to that.

22:13

The only conceivable counterbalance to that,

22:15

which might provide a large supply of funds at given rates,

22:18

is the if indeed people were persuaded that the affect

22:21

of the package was less inflation and therefore,

22:25

they were inclined to reduce the inflation premium

22:29

that they demand in interest rates.

22:32

But that seems to me very unlikely.

22:34

People may talk about the affect being to reduce inflation,

22:38

but my guess is that they will wait and see

22:42

before it will actually effect substantially

22:45

interest rates and the markets.

22:47

So the conclusion I drew immediately after

22:49

the President spoke, was that

22:51

the logic of the situation called for

22:53

interest rates to rise.

22:55

I must confess that I was very much surprised

22:56

when in the euphoric pattern of the next week,

23:00

bond prices rose instead of fell.

23:04

However, in the second week after the President's talk,

23:07

common sense seems to have reasserted itself,

23:12

and I note that there has been a sharp reaction

23:14

in the markets and much of the gain in bond prices

23:17

has disappeared by now.

23:21

Of course, when I say that there's upward pressure

23:22

on interest rates, that doesn't mean

23:25

that interest rates will necessarily rise.

23:27

Here we have to distinguish between short and long.

23:30

The short rates were rising and were going to rise anyway.

23:32

This will tend to intensify the rise.

23:36

The long rates are more complicated

23:38

because there were forces working in both directions on them

23:40

and one can't be sure that the net effect will be a rise.

23:43

All you can say is that as a result of this policy,

23:46

the chance of a rise is greater than it was before.

23:49

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What do you think follow the freeze?

23:54

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I think the freeze will not simply be allowed

23:57

to expire and that something will follow it.

23:59

The problem is that the freeze conceals inflation,

24:02

it represses it.

24:05

The actual rate of rise in prices may be just

24:07

exactly the same under the freeze as it was before.

24:10

After all, there are many, many ways

24:13

in which you can get around the freeze.

24:14

If an employer wants to give his employee more pay

24:18

and he can't raise his stated wage, he can promote him,

24:20

he can give him perquisites, he can have him work overtime.

24:23

Similarly in the case of products for sale, after all,

24:26

in World War II, 60,000 full-time employees of OPA,

24:30

plus 300,000 volunteers, plus widespread public patriotism

24:35

was not able to achieve compliance

24:39

with the wage and price controls.

24:42

Again, I don't wanna overstate this.

24:44

Given the general attitude in the time which it takes people

24:46

to catch on to ways of evading it.

24:49

The freeze will have some affect in the first month or two.

24:52

But it's affect will be much more on

24:56

the statistics than on reality.

24:58

Whatever happens to actual prices,

25:00

the odds are that the index numbers of prices

25:02

will show a dramatic improvement

25:06

because the stated prices will not be changed.

25:07

That leaves the administration

25:10

with the dilemma at the end of 90 days,

25:13

because if you simply drop the freeze,

25:14

this would show up in the price indexes.

25:18

What was concealed would come out into the open,

25:22

and things would look very bad.

25:25

That is why I am, myself, am convinced that it will be

25:26

impossible for the administration to drop the freeze.

25:29

What will come after?

25:32

My conjecture is that they will construct

25:34

some kind of a wage price review board,

25:36

patterned after the model that has been being used

25:40

in the construction industry,

25:43

in which enterprises above a certain minimum size,

25:45

presumably only the large enterprises,

25:48

will be required to report projected rises in prices

25:51

and rises in wages, in which to board

25:56

will take under advisement to either approve or disapprove.

25:59

Very likely there will be no formal extensive sanctions

26:03

for adopting disapproved wage or price increases,

26:08

but there will be informal sanctions

26:12

and maybe there will be a waiting period, a delay period.

26:14

They will have to wait 60 days or so to put it into affect.

26:17

I don't know.

26:20

I'm conjecturing on all this.

26:21

All I feel certain about is that some other way

26:22

of concealing and repressing the inflation

26:26

will have to follow the freeze.

26:29

Now needless to say, that can't last forever.

26:32

Every past attempt of this kind has always broken down.

26:36

This will break down too.

26:39

If nothing else,

26:41

the trade unions will finally bring it down.

26:42

I am not a great defender of trade unions in many respects,

26:44

but in this area, I almost feel like saying,

26:48

"Thank God for the trade unions."

26:51

They will end the wage price freeze

26:53

or wage price controls, sooner or later.

26:55

-

What will happen on the international front?

26:58

-

That much harder it seems to me to predict.

27:01

My guess is, and it's no more than a guess,

27:05

that some kind of a deal will be worked out

27:09

for revaluation of various countries.

27:12

It should be emphasized, and this is again

27:14

very relevant to the markets,

27:18

the papers were surprised that the dollar

27:19

was so strong when markets opened up on Monday.

27:22

But this should have been expected.

27:25

Whatever was the situation of the dollar before,

27:27

the fundamental underlying forces were stronger

27:31

with respect to the dollar

27:34

after Mr. Nixon spoke than before.

27:36

The closing of the gold window had no real affect,

27:39

it just brought out into the open the fact

27:42

that the world was on a dollar standard

27:44

and not a gold standard.

27:45

But the 10% import surcharge

27:47

certainly had a very real affect.

27:49

It meant that the equilibrium exchange rate

27:51

between the dollar and all other currencies was higher,

27:53

that is to say that the dollar was worth more,

27:58

relative to other currency, after he spoke than before.

28:01

If countries were pegging the dollar

28:06

at the official parody before,

28:08

it should be easier for them to continue to do it now.

28:10

So what I really believe will happen is

28:15

that most countries will continue

28:18

to peg their currencies to the dollar.

28:20

They may take the opportunity offered

28:22

by the unsettled situation to widen the margins

28:24

within which they peg it,

28:28

to have a little bit of an area afloat.

28:29

A few countries may join Germany, the Netherlands,

28:32

and Canada in floating their currencies.

28:35

But then I think what will really be important

28:38

will be that a small number of currencies

28:41

will revalue, notably the Yen.

28:43

I think sometime within the next few months

28:47

you will have a substantial upvaluation of the Yen.

28:49

To make this political palatable to the Japanese,

28:52

it will have to be accompanied by

28:57

upvaluations of some European currencies.

29:01

These may well just be nominal in one sense,

29:04

but they will have to look good.

29:10

You may get something like three or five percent upvaluation

29:12

of the pound sterling, maybe a little bit with the Lira,

29:15

maybe a little bit with the French.

29:20

In some of these cases,

29:23

one of the devices that I think is possible is

29:25

that the parody will be upvalued,

29:27

but at the same time the margins around parody will brought,

29:29

in such a way, that afterwards,

29:33

the central banks can peg the currencies

29:36

at the same price that they are pegging it now,

29:39

even though they seem to have upvalued.

29:41

At any rate, some such untidy collection of changes

29:43

seems to be the most likely case.

29:49

I do not believe, one thing I do not believe you will have,

29:51

will be a new international monetary system

29:55

constructed from scratch.

29:57

I am sorry that the commenting on these new developments

30:00

took up all our time because I have accumulated

30:02

quite a number of subscriber's questions

30:04

that I would've liked to have had time to answer.

30:07

-

Thank you, sir.

30:11

If you have questions, or comments, or suggestions

30:12

for topics you would like discussed in this series,

30:15

please send them to:

30:17

Instructional Dynamics Incorporated,

30:18

166 East Superior Street, Chicago, 60611.

30:21

Tape 81 - The President's New Economic Policy

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