Tape 196 - Monetary Targets, Natural Gas Prices, Monetarism in Britain

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-	Hello, this is Rose Friedman inviting you	0:02
	on behalf of Instructional Dynamics	0:05
	to another conversation with Milton Friedman,	0:07
	professor of Economics at the University of Chicago.	0:09
	We are taping this conversation at the end of July.	0:12
	Chairman Burns has just given his regular testimony	0:19
	before the House Banking Committee	0:23
	and indicated that the money supply growth targets	0:25
	were reduced somewhat for the fourth time	0:29
	in as many quarters by the Board.	0:31
	The goals for the two key measures M2 and M3	0:34
	have been cut to check inflation he said.	0:37
	For technical reasons,	0:40
	a narrower M1 measures target was left unchanged.	0:41
	Before discussing Chairman Burns' testimony however,	0:45
	let's talk a little bit about what's been happening	0:49
	to the monetary aggregates.	0:52
-	Well, the monetary aggregates have continued	0:54
	on the slower path that we've outlined	0:57
	in the last couple of tapes.	1:00
	Indeed, if you take just the past two months,	1:03
	that is to say the average of the four weeks ending	1:06
	July 14th the latest figures available,	1:09
	M1 has actually declined at an annual rate of	1:13
	a minuscule two tenths of 1%.	1:17
	And M2 has risen at only 6.8%.	1:20
	For the past three months,	1:25
	those numbers are 4.9 and 9.3.	1:28
	In general, we seem to be in another one of those swings	1:31
	that we have become so accustomed to	1:37
	in which the rate of growth of the money aggregates	1:39
	swings first too high then too low then too high.	1:41
	Since these swings have been averaging something between	1:45
	three and six months recently,	1:49
	and since this particular swing,	1:52
	with respect to M1 at least,	1:55
	got under way in April.	1:57
	With respect to M2,	1:58
	perhaps a little later than that.	2:00
	We ought to be past the mid point of this downward swing	2:02
	and it ought to be sometime in a month or two months	2:06
	we ought to be starting up on another swing the other way.	2:10
	I hate to engage in that kind of chart reading,	2:14
	but yet there's very little other way,	2:17
	very little of any other way to read the tea leaves.	2:20
	Now to go to Chairman Burns' testimony	2:23
	with that as a background.	2:25
	The interesting thing about it is,	2:28
	the continuation of the policy of,	2:29
	giving the targets,	2:34
	in terms of growth rates,	2:36
	rather than in terms of target levels of the money supply.	2:38
	The effect of this is that whereas,	2:44
	he shaved by a minuscule amount	2:48
	of the growth rates for M2 and M3 in the upper range	2:53
	making it for M2	2:56
	let's forget about M3 for the moment,	2:57
	for M2 making it 7.5 to 9.5%	2:59
	instead of 7.5 to 10%.	3:02
	In fact by comparison with his testimony	3:05
	a quarter ago,	3:08
	he has raised the projected target levels	3:10
	of the money supply both at the top and the low end.	3:14
	The reason for that is that, the Fed has adopted	3:17
	the practice of shifting the base to which it applies	3:22
	these target rates of growth	3:26
	from one quarter to the next	3:28
	to the average actually achieved during the quarter.	3:29
	Now when he testified three months ago,	3:33
	you could calculate that the target level	3:38
	of the M1 for the second quarter of 1976,	3:41
	the quarter just past,	3:46
	the April, May, June quarter,	3:47
	the target levels for M1	3:50
	were 299.8 to 301.6.	3:53
	The actual average M1 was 302.7 or a little over	3:56
	a billion dollars above the top of the range.	4:00
	For M2,	4:03
	the target levels were 689.8	4:05
	and 693.7	4:08
	and the actual was 696.4 or about three billion dollars	4:10
	above the top of the range.	4:15
	Now if you apply the 7.5% bottom M2 target	4:19
	to this level and say, extend it	4:24
	to the first quarter of 1977,	4:26
	which was, that is three quarters ahead,	4:28
	which was what the projected targets	4:33
	which the Chairman gave three months ago	4:36
	were supposed to apply to.	4:40
	You would then get a number higher than his projected target	4:42
	at that time and therefore,	4:45
	it would be a little bit more accurate to say	4:47
	that the Fed has raised its money growth targets	4:50
	as it would to say it is lowered.	4:53
	But let me go on a bit there.	4:55
	I don't mean for this to be a criticism	4:58
	of the failure to hit those very, very narrow ranges	5:00
	precisely in the first quarter.	5:03
	It is intended to be a commentary instead	5:07
	on what I regard as an undesirable way of stating targets.	5:11
	Of adjusting them each quarter,	5:15
	so in fact the actual money supply growth	5:17
	becomes a random walk,	5:20
	instead of, stating the targets in terms of	5:22
	numerical totals like 693, 689,	5:25
	and then keeping them that way.	5:31
	If you go out of the range, explicitly saying that	5:33
	you're gonna move the range,	5:37
	or explicitly saying that you're gonna come back into it.	5:38
	To stress that this is not really intended	5:41
	as a criticism of excessively inflationary policies	5:44
	over a long period, let me note,	5:48
	that if I do the same kind of analysis	5:51
	that I've just done going back to the very beginning,	5:53
	as was done, in a very interesting little piece	5:55
	on the Federal Reserve money growth targets	5:58
	put out by the Pittsburgh National Bank in June,	6:00
	that's almost surely done by Jerry Jordan	6:04
	who used to be at the Federal Reserve Bank of St. Louis	6:06
	and is now at the Pittsburgh National Bank,	6:08
	what you will discover, is that,	6:11
	the actual targets	6:15
	for the second quarter of 1976,	6:18
	as stated three months ago, were decidedly lower	6:21
	than those that would have been implied by the growth rates	6:26
	specified in the second quarter of '75	6:30
	or the third quarter of '75 or the fourth quarter of '75.	6:32
	Indeed, if you go to the M2 cases	6:36
	which we've just been talking about,	6:40
	if you take the second quarter of '75	6:45
	when the first targets were specified,	6:48
	when this whole process got underway,	6:51
	and extend them for the whole year	6:54
	to the second quarter of '76,	6:56
	they called for a range of 788 to 700,	6:58
	and the actual range was 796 or fell within it	7:00
	so for the year as a whole, the Fed hit its target.	7:04
	But it's this shifting target levels	7:07
	from quarter to quarter,	7:09
	that makes the whole operation a very misleading one.	7:10
	Let me also add, that I agree very strongly	7:15
	with the announced intention of the Fed	7:18
	of cutting the rate of growth gradually over time.	7:22
	Mr. Burns has said, quite correctly,	7:26
	that in order to get to a non-inflationary posture	7:29
	it'll be necessary to get M1 down	7:31
	to a 1 or 2% per year rate of growth.	7:33
	He has said that the Fed does not intend	7:36
	to do that immediately, but it intends to do it	7:38
	over the next three or four years,	7:40
	two or three years, I think he said in his testimony,	7:42
	the other day.	7:45
	If that's the case, if they succeed in doing that	7:46
	I think it will be an enormous achievement.	7:50
	I remain somewhat skeptical,	7:52
	about whether they will achieve that result,	7:55
	not because I question in any way their intentions,	7:59
	but because it has seldom been the case	8:03
	that you could infer their behavior,	8:06
	strictly from their intentions.	8:08
-	There is another piece in The Wall Street Journal	8:12
	this morning, which I think is interesting.	8:14
	About gas producers and the price that	8:17
	they are going to be permitted to charge,	8:21
	pipelines for gas newly discovered or newly sold interstate	8:24
	after January 1st 1975.	8:28
	One of the most interesting features of this piece	8:31
	is the estimate that the FPC makes of the cost to consumers	8:33
	of 1.5 billion dollars for this increase in, price.	8:38
-	These reports always send me up the wall	8:43
	because they involve such terribly bad economics.	8:46
	As you know, the situation is,	8:50
	that the price of natural gas has been subject to control	8:52
	for a very long time.	8:55
	Something over 10 years.	8:56
	As a result a large fraction of the natural gas	8:58
	now has to be sold at something like 29 cents,	9:02
	whatever it is, a thousand or a million cubic feet	9:06
	I always forget the unit, but whatever the unit is.	9:08
	At the same time that we are simultaneously buying	9:11
	liquified natural gas from abroad, for some purposes	9:14
	at $2, the same unit.	9:18
	Now, the Federal Power Commission	9:22
	has gradually been trying to work itself out of this,	9:24
	part of the reason and incentive for doing this	9:27
	is it has had control only over interstate prices	9:29
	that is gas that moves between states.	9:33
	Intrastate gas has been free to respond to the market,	9:35
	and as a result intrastate gas has been selling at prices	9:38
	somewhere between a dollar, dollar and a half,	9:42
	somewhere around there.	9:44
	Some time, quite a time back,	9:45
	the FPC raised the minimum price	9:48
	to just roughly 50 cents,	9:52
	I guess it was really 52 cents per thousand cubic feet,	9:56
	and, now now what it has done,	10:01
	is to make it possible,	10:04
	for, newly discovered gas,	10:07
	or gas newly sold into the interstate market,	10:10
	that is gas that heretofore has been sold	10:13
	in intrastate but is now going to be sold in interstate,	10:15
	to be sold at as much a $1.42 per thousand cubic feet.	10:19
	Now, these are certainly desirable measures,	10:27
	they still leave the price system in a shambles	10:31
	it is just insane that some gas should simultaneously	10:34
	be required by law	10:37
	to be sold at 29.5 cents, others be permitted at 52,	10:39
	others $1, others at $1.42.	10:43
	It's an absurd structure,	10:46
	but it certainly is a move in the right direction	10:47
	to freeing it.	10:49
	What really sends me up the wall,	10:50
	is the statement by the Federal Power Commission itself,	10:54
	repeated on every news program, TV news program,	10:57
	no doubt repeated over again in every news weekly,	11:03
	in The Wall Street Journal and The New York Times and so on,	11:07
	that the effect of the action by the FPC will be	11:10
	to cost consumers 1.5 billion dollars.	11:15
	Why does that send me up the wall?	11:19
	Because, in my opinion, a true economic analysis	11:21
	would show that the effect will be to reduce the expense	11:24
	that consumers pay, not for gas,	11:28
	but for heating their houses.	11:31
	A lot of good it does to be able to buy gas	11:34
	at 52 cents a thousand cubic feet	11:36
	if there is no gas available to be purchased.	11:38
	If companies which have been importing,	11:42
	if gas companies, to provide their customers with gas	11:44
	which have been importing gas from abroad,	11:47
	liquified natural gas at $2 a thousand cubic feet,	11:49
	are now able to buy it,	11:53
	at the price of $1.42 a thousand cubic feet,	11:55
	that lowers the cost to consumers.	11:59
	If the effect of the higher price of gas	12:01
	is to encourage the production of more gas,	12:04
	then that enables people to substitute gas,	12:06
	for more expensive petroleum,	12:09
	or for, perhaps cheaper but less attractive,	12:11
	less valuable coal,	12:15
	why then, surely the effect is to save consumers' money	12:18
	not to raise it.	12:20
	Yet it is hard to see how you can get	12:23
	sensible economic policies adopted,	12:25
	when the very agencies such as the Federal Power Commission	12:28
	which are supposed to represent knowledge on this,	12:31
	proceed to, utter such complete nonsense,	12:34
	which misrepresents completely, the situation.	12:40
	If this is really going to cost the consumers $1.5 billion,	12:44
	then if it's an easy thing in the world	12:48
	to save consumers money simply by holding down the price	12:50
	why doesn't the FPC in good logic lower the price	12:53
	instead of raising it?	12:55
	In fact, if they made it zero,	12:57
	just think of how much money they would save the consumers.	12:59
-	Turning abroad, for a moment,	13:04
	The Times of London has been paying	13:06
	a great deal of attention recently,	13:08
	to monetarism and the money supply.	13:10
	I think your subscribers would be very much interested	13:13
	in these stories.	13:15
-	I received in the mail the other day,	13:17
	from Mr. William Rees, I don't know how you pronounce it,	13:19
	Mogg or Mowg, it's M-O-G-G, it's R-E-E-S hyphen Mogg,	13:23
	M-O-G-G, who is the editor of the London Times	13:28
	and a gentleman who wrote a book a while back	13:32
	coming out in favor of a gold standard.	13:34
	He sent me a clipping from his paper	13:38
	of Tuesday July 13th,	13:41
	containing a long article he had written	13:44
	which has a fascinating title.	13:47
	The title of the article is "How a 9.4% excess money supply	13:49
	"gave Britain 9.4% inflation."	13:55
	And what he does, is to present essentially,	14:00
	the straightforward monetarist argument	14:02
	about the relationship between money supply	14:04
	and prices, he has an interesting table.	14:06
	In which he, quite rightly, allows for the change in output.	14:10
	We have always stressed that what will affect prices,	14:16
	is what happens to the money supply per unit of output	14:19
	not simply what happens to the money supply.	14:22
	Thus, with, very rapid,	14:25
	output increases, as in Japan,	14:29
	a higher rate of monetary supply growth	14:31
	will be less inflationary,	14:34
	than in a country which has a low rate of output.	14:37
	And for each of the 11 years from 1965 to 1975	14:41
	he has a little table.	14:45
	Showing the increase in the money supply,	14:46
	the increase in domestic product or in output,	14:49
	and the difference between these two,	14:52
	which he has labeled excess money supply.	14:54
	He then compares those, with the increase in prices	14:57
	and taking into account the kind of work	15:01
	I and others have done, he allows for a two year lag,	15:03
	between the change in the money supply	15:08
	and the change in prices, so he compares,	15:09
	the increase in the money supply,	15:13
	the excess money supply, in 1965, for example,	15:14
	when it was 4.7 percentage points per year,	15:18
	to the increase in prices in 1967 when it was 2.5%.	15:22
	On this kind of a year to year basis,	15:26
	there is a great deal of variation.	15:28
	For example, in 1969 the excess money supply was 1.3,	15:31
	and two years later the price rise was 9.4.	15:38
	While in, by contrast,	15:42
	in 1972 the excess money supply	15:45
	was 23.4 while the increase in prices in 1974	15:47
	was 16.1 or less.	15:51
	Now this is the phenomenon we have often observed	15:54
	and noted, that there's a great deal of noise,	15:57
	a great deal of random perturbation and variation	16:00
	in these year to year figures,	16:03
	the lag is not exactly two years	16:04
	it's sometimes one year, sometimes three years.	16:06
	Other forces contemporarily disturb it	16:09
	as, in the United States occurred	16:11
	with the price controls in '71 to '73 and so on.	16:13
	But what Rees-Mogg does next,	16:18
	is to take an average over the eight years	16:20
	from 1965 to '73, for the excess money supply,	16:23
	and over the eight years from 1967 to 1975	16:28
	that is two years later,	16:32
	over the price rise, and lo and behold,	16:34
	the average is 9.4% for the excess money supply	16:37
	and 9.4% for the average price raise.	16:40
	Now of course, this close agreement is an accident.	16:43
	It would be a mistake to make very much out of it.	16:47
	I made similar calculations for many periods	16:52
	and it will sometimes be like this,	16:55
	sometimes there will be a difference.	16:57
	It will depend a great deal	16:59
	on which money supply total you use.	17:00
	He used M3 he would get a slightly different,	17:02
	that's a British concept that really has,	17:05
	does not have quite an identical counterpart	17:09
	in the United States, it's not the United States M3,	17:12
	and it's not the United States M2,	17:15
	my impression is it's broader than our M2	17:17
	and narrower than our M3.	17:19
	And you might get a somewhat different result	17:22
	if you'd used M1 in the United States,	17:24
	you'd certainly get a different result if you'd used M1,	17:27
	if you used M1 over the period in question,	17:29
	the price rise would've been decidedly larger,	17:34
	than the M1 excess money supply.	17:38
	If you had used M2 on the other hand,	17:40
	the price rise would in the United States,	17:42
	as in Britain, have been almost identical,	17:44
	to the excess money supply as he defines it.	17:48
	I have made similar calculations for other countries,	17:50
	for South Africa, for Australia, for Japan,	17:53
	for Canada and so on.	17:56
	And,	17:57
	as I say you'll get roughly comparable results	18:01
	though very seldom do you get a precise identity	18:05
	to a single decimal place.	18:08
	The fact that it is identical, of course,	18:13
	enabled him to make his article rather dramatic.	18:15
	What's more interesting in some ways,	18:18
	is the analysis which he provides in the article	18:21
	and I think it's an extremely good analysis.	18:25
	But let me refer to a couple of points in it	18:28
	that I think are rather interesting.	18:31
	One of them is and Mr. Rees-Mogg says, quote,	18:34
	"These figures have changed further	18:37
	"my own attitude to incomes policy.	18:39
	"If the excess money supply determines the rate of inflation	18:42
	"equally closely in years subject to incomes policy	18:45
	"and in years without,	18:48
	"there seems to be no evidence left	18:50
	"that incomes policy has any significant influence	18:51
	"on inflation." Now let me add that what he means	18:54
	by incomes policy is of course what we mean	18:57
	by wage and price controls, mostly wage controls.	18:59
	"Nor did incomes policy help in these years	19:05
	"to keep down the increases in money supplies	19:07
	"which are actually highest in incomes policy years."	19:09
	Now the fact that they were highest	19:13
	in incomes policy years is not an accident.	19:14
	I think it's a point which I've stressed	19:17
	on these tapes many many times.	19:19
	A government engages in incomes policy	19:21
	when it wants to inflate.	19:23
	When governments understand perfectly well	19:25
	that wage and price controls don't do any good	19:28
	in holding down inflation, why do they do it?	19:30
	Because they want to give the impression	19:33
	of doing something about holding down inflation	19:36
	and perhaps have a temporary effect,	19:38
	while at the same time they proceed to inflate,	19:40
	in order to offset unemployment	19:46
	or whatever other difficulty there many be at the moment.	19:47
	And thus it's quite understandable,	19:50
	that incomes policy years are years	19:52
	of very rapid money supply growth.	19:55
	But nonetheless, the main point	20:03
	which Mr. Rees-Mogg is making is a very important	20:05
	and vital one.	20:09
	The most in his country, or in any country that I know of,	20:10
	that incomes policies or wage and price controls	20:14
	have done is to change the timing,	20:17
	not necessarily of the inflation,	20:19
	but of the record of the inflation	20:22
	in the statistically computed index numbers.	20:24
	In the United States, the recorded rate of inflation	20:27
	in 1971 to '73 is surely lower	20:29
	than the true rate of inflation.	20:32
	In 1973 to '75 it's higher than the true rate of inflation	20:34
	because you're unveiling the price increases	20:38
	that were concealed or diverted during the inflation,	20:41
	during the period of price and wage control.	20:45
	This point is one that has been made often,	20:49
	as I say, and so is the next point	20:51
	that I wanna call your attention to,	20:53
	but I think the second one	20:55
	is not so fully recognized even now.	20:56
	And that is when he says, quote,	21:00
	"The evidence also suggests	21:01
	"that a high excess money supply is bad	21:03
	"rather than good for employment.	21:05
	"A leading article recently discussed the reasons	21:08
	"for supposing that inflation naturally produces	21:11
	"higher levels of unemployment	21:13
	"than would result from price stability.	21:15
	"During this period the excess money supply tended to rise	21:19
	"and unemployment tended to rise with it.	21:22
	"Sharp reductions in money supply	21:26
	"can also increase unemployment,	21:28
	"and a stable but low rate of increase	21:30
	"would seem to be best both for employment and for prices."	21:32
	And then he goes on to make comparisons among countries,	21:36
	and points out that	21:40
	if you take the six major industrial nations,	21:41
	the order of the rate of increase	21:43
	of the excess money supply is US lowest,	21:44
	Germany, France, Japan, The United Kingdom	21:47
	and Italy highest.	21:50
	These are the rankings for the period	21:52
	1969 to '73, they are also the rankings	21:57
	for the standard of living of the nations concerned.	22:00
	This article by Rees-Mogg is interesting in its own right	22:05
	but also, for what is obviously,	22:09
	a change that is going on in the pattern of opinion	22:12
	within Great Britain.	22:17
	The Times in some ways is spearheading it.	22:18
	In addition to the editor,	22:22
	its financial correspondent Peter Jay,	22:24
	who incidentally, comes from a Labour family	22:28
	and is the son-in-law, as I understand it,	22:32
	of the present chancellor, James Callaghan.	22:35
	Peter Jay, who ten years ago, was writing	22:40
	leading financial articles poo-pooing	22:43
	the monetarist position and,	22:46
	was an unreconstructed Keynesian,	22:49
	has come full turnaround and has been writing	22:50
	a whole series of articles in The Times,	22:53
	making essentially the same points Mr. Rees-Mogg makes,	22:57
	but in addition he has also been proposing,	23:01
	a very specific proposal.	23:06
	He argues that the most important thing to do	23:08
	in Britain is to give the public at large confidence	23:11
	that a firm money supply policy will be followed.	23:14
	That in the present political environment	23:17
	this cannot be done by leaving it in the hands	23:19
	of the government or the Bank of England,	23:21
	the Bank of England, of course, in Britain,	23:22
	is a nationalized bank owned by the government,	23:24
	has no fundamental independence	23:27
	in a legal sense, though obviously	23:29
	it has a good deal of independence influence	23:31
	in a bureaucratic sense.	23:33
	He therefore proposed the establishment	23:35
	of a currency commission.	23:37
	Made up of, people who are outside the government,	23:39
	who would be given exclusive power,	23:42
	over the,	23:45
	money supply, over the high powered money, the currency,	23:48
	and who would be given very specific instructions	23:51
	by parliamentary order that within x years,	23:54
	I don't remember the details of it	23:57
	and it doesn't matter, what matters is the principle,	23:58
	but within a few transitional years,	24:01
	It was to bring the rate of increase in the money supply	24:03
	down to a specified and announced total	24:06
	and keep it there.	24:09
	Another sign of the times,	24:11
	along a sign of the same kind of thing,	24:13
	is that the Bank of England,	24:18
	the head of the Bank of England,	24:19
	in a recent, I don't remember	24:21
	whether it was an annual report or a speech,	24:24
	directed himself explicitly to the proposal	24:28
	that, there be an announced growth rate.	24:32
	We were talking about the announced growth rates	24:36
	by the Federal Reserve bank here	24:39
	by Chairman Burns recently,	24:41
	this same policy of announcing growth rates	24:44
	has now been adopted,	24:47
	by Germany, by Switzerland, and by Canada.	24:49
	And in his speech, the chairman of the Bank of England	24:54
	pointed out, that three out of those four countries	24:59
	have the best inflation experience	25:02
	of any of the countries involved.	25:04
	Now, he was, essentially coming out against	25:06
	the announcement of the growth rate.	25:10
	But what he was doing, and felt forced to do	25:12
	because of the amount of discussion of this,	25:14
	was to indicate what the arguments were for a growth rate,	25:17
	what the arguments were against it,	25:20
	and indeed, his analysis was hardly,	25:22
	an unequivocal, rejection of the idea of a growth rate.	25:27
	Now what Peter Jay is proposing would be essentially	25:32
	an announced growth rate but not turned over	25:36
	to the the Bank of England to enforce,	25:38
	but turned over to the independent currency commission.	25:40
	Both Rees-Mogg's article	25:45
	and Peter Jay's articles along this subject have,	25:47
	produced an absolutely incredible flood	25:52
	of correspondence.	25:55
	A friend of mine in Britain sent me clippings from The Times	25:58
	of letters to the editors on this subject,	26:03
	from the 13th to the 20, I think the last one	26:06
	I have here is about the 22nd.	26:10
	That is for something like a 10 day period	26:12
	and there are over 25 articles, 25 letters,	26:14
	in reaction to it on all sides of it.	26:17
	From a whole variety of people	26:20
	including people like Reginald Maudling,	26:22
	who is a former Chancellor of the Exchequer.	26:25
	Numbers of members of parliament,	26:27
	batches of economists of all kinds,	26:31
	and of course the letters are on all sides of the issue.	26:35
	Many of them take the usual position	26:39
	that after all, this is just correlation without causation	26:42
	how do we know this is really so?	26:45
	The usual immediate knee-jerk defense.	26:49
	Others of them are much more sophisticated,	26:54
	accept the fact that the correlation is a valid one,	26:56
	that it does, but insist that money growth,	26:59
	while it's a necessary condition for price increase,	27:03
	is not a-- well, let me put it differently.	27:10
	'Cause I'm, I should state that view backward,	27:13
	they would agree, that a, rapid money supply increase	27:15
	on its own is both necessary	27:19
	and sufficient for a price increase.	27:21
	But the position they usually take is	27:23
	that holding down the rate of money increase	27:25
	is a necessary but not a sufficient condition	27:28
	to end the inflation.	27:30
	That in order to end the inflation	27:32
	in addition to holding down the money supply increase	27:33
	you have to do something about the trade unions	27:35
	or about the other forces that are at work.	27:38
	At any rate, my point is not to provide	27:41
	a discussion of the contents of those 25 letters,	27:45
	but simply to cite them as an example	27:48
	of how active and widespread is the discussion	27:50
	on this issue, in Britain.	27:52
	The Chancellor of the Exchequer, has been Mr. Healey,	27:55
	in Britain,	27:59
	has in various of his recent speeches,	28:00
	done what was unprecedented	28:05
	for British Chancellors of the Exchequer,	28:07
	talked about, the money supply growth rates	28:09
	that were implied in his forecasts	28:12
	and what was relevant to 'em.	28:15
	Now, all of this is talk.	28:17
	And by no means is there any indication	28:19
	that it is really going to be very effective.	28:21
	The fundamental fact remains so far as Britain is concerned,	28:24
	that government spending is enormously high,	28:27
	Mr. Healey has just just announced a program	28:31
	for a reduction of government spending by $1.8 billion,	28:33
	but, that's not really a reduction in spending	28:37
	that's a reduction in the increase in spending.	28:41
	And moreover it's really for the next fiscal year	28:44
	so it doesn't really start to take effect 'til next summer.	28:47
	In the meantime, the borrowing requirement	28:51
	is extremely high,	28:53
	and it's very dubious whether,	28:55
	the British will in fact be able to succeed	28:58
	in holding down the rate of monetary growth	29:01
	to levels that would halt the inflation.	29:03
-	Whether they will or not,	29:07
	we've come to the end of our time.	29:08
	So remember subscribers, if you have any questions	29:10
	or comments, please send them	29:13
	to Instructional Dynamics Incorporated,	29:14
	450 East Ohio Street, Chicago, Illinois,	29:17
	60611, we shall be visiting again with you again	29:21
	in about two weeks.	29:25

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Title:

Tape 196 - Monetary Targets, Natural Gas Prices, Monetarism in Britain

Contributor:

Friedman, Milton, 1912-2006

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Paul A. Samuelson papers, 1933-2010 and undated

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Paul A. Samuelson papers, 1933-2010

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Economics Cassette Series: Milton Friedman

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Tape 196 - Monetary Targets, Natural Gas Prices, Monetarism in Britain

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