Tape 45 - untitled
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- | This series is produced and recorded | 0:02 |
by Instructional Dynamics Incorporated. | 0:03 | |
On this program, Professor Samuelson | 0:07 | |
looks at the recession outlook | 0:09 | |
and investment and interest rates. | 0:11 | |
- | As I talk in, | 0:13 |
the first part of March, | 0:15 | |
it looks to me as if 1970 | 0:18 | |
will be a year of recession | 0:22 | |
if we use as our measure of recession | 0:26 | |
at least two consecutive quarters | 0:28 | |
of decline in the real growth national product. | 0:31 | |
We have of course behind us, | 0:37 | |
the last quarter of 1969, | 0:39 | |
which showed a slight decline | 0:43 | |
in the real rate of growth, | 0:45 | |
of the growth national product | 0:48 | |
and so all we need for there to be, | 0:50 | |
deem to be a recession by this definition | 0:54 | |
is that in the current quarter in which I'm speaking | 0:56 | |
and which is almost over, | 0:59 | |
that the rate of growth of real national outputs | 1:01 | |
also show a decline. | 1:04 | |
It's too early even to have preliminary official estimates | 1:08 | |
of what has been happening in the first quarter. | 1:12 | |
But, impressionistically, | 1:15 | |
I would bet on the view | 1:18 | |
that the real output | 1:22 | |
has probably also shown a slow decline. | 1:25 | |
This means that the money GNP | 1:30 | |
will probably have grown | 1:33 | |
not much more than the nine and a half | 1:36 | |
odd-billion dollars of the fourth quarter. | 1:39 | |
That may sound like a lot of money | 1:44 | |
but of course these are annual rates | 1:46 | |
and all of that would presumably be | 1:48 | |
price increase if we assume that the current rate | 1:52 | |
of price inflation is still at least | 1:56 | |
4% and something above 4%. | 2:01 | |
So on the, this definition, | 2:04 | |
I think we're likely to have a recession. | 2:07 | |
This is a reversal of my betting odds of an earlier time, | 2:10 | |
even on this definition. | 2:15 | |
In the last recording I mentioned the reasons for | 2:17 | |
the change in odds | 2:22 | |
and it moves us on to the next question. | 2:23 | |
That next question is, | 2:28 | |
what kind of a so-called recession will this be | 2:30 | |
if it is to be a recession? | 2:35 | |
Now, I should make a couple qualifications. | 2:37 | |
First, I am not sure whether the authorities | 2:42 | |
at the National Bureau of Economic Research | 2:46 | |
will agree to use this criterion | 2:49 | |
in determining whether there | 2:53 | |
was a recession | 2:55 | |
in 1969 and 1970. | 2:56 | |
This is congenial to their general thinking | 3:01 | |
that I can't recall that Dr. Geoffrey Moore, | 3:04 | |
before he went to the Bureau of Labor Statistics | 3:08 | |
in the Nixon Administration, | 3:11 | |
never quite committed himself | 3:13 | |
to the definition that I've been discussing. | 3:15 | |
So I can't predict with the same degree of odds | 3:20 | |
that the National Bureau of Economic Research | 3:25 | |
will consider this to be a recession. | 3:28 | |
If however, the National Bureau does deem this | 3:31 | |
to be a recession. | 3:34 | |
The recession cannot be called simply | 3:36 | |
the Recession of 1970 because the turning point | 3:39 | |
which marked its beginning, | 3:44 | |
one supposes must have been sometime between | 3:46 | |
the middle of 1969 and the end of 1969. | 3:50 | |
Now, in the absence of the crystal ball of great accuracy, | 3:57 | |
I can't tell you what should be the final date | 4:01 | |
of this recession. | 4:06 | |
Will it be the recession of 1969, | 4:08 | |
1971, with a dash between because the recession | 4:12 | |
would have lasted for more than the calendar year 1970 | 4:17 | |
or as I think, more likely, is a recession of 1969, 70? | 4:21 | |
My own guess is, | 4:30 | |
and I'll try to provide the basis for that guess | 4:31 | |
in a minute or two. | 4:35 | |
Is that by the middle of the year, | 4:38 | |
real growth in the GMP | 4:43 | |
will have in all probability resumed. | 4:46 | |
It's even possible that the current quarter | 4:50 | |
in which we are now talking, | 4:54 | |
we'll register the low in the level of attained real growth | 4:58 | |
and that already by the second quarter of 1970 | 5:03 | |
the quote recession of 1969, 1970, will be over. | 5:09 | |
However, don't run up any flags too quickly | 5:16 | |
because the recession by that test that I've just described | 5:21 | |
is only one possible definition | 5:28 | |
and by almost anybody's guess, | 5:32 | |
the year of 1970 throughout the year | 5:35 | |
and up to the very end of the year | 5:40 | |
is going to be a tough year for many, many businesses. | 5:42 | |
It's going to be a year of continued slowdown. | 5:47 | |
It's going to be a year of flabby tone. | 5:51 | |
Now I would like today to speculate with you | 5:56 | |
on the crucial element which will determine | 6:01 | |
whether 1970 is a year of considerable recession | 6:05 | |
or whether it's just one of these years of bear recession. | 6:12 | |
More, let us be clear than a mini recession, | 6:16 | |
that is no recession at all, | 6:20 | |
but less than the typical recession of the past. | 6:22 | |
I suppose the question could be given point | 6:29 | |
by saying, is this a recession rather like | 6:32 | |
that of 1960, 61. | 6:37 | |
Or is it going to be a recession of the 1957, 1958 caliber | 6:40 | |
which was considerably a more virulent | 6:49 | |
and shows up very strongly as a dirty up. | 6:53 | |
I'd like to make clear that I think | 6:57 | |
the probabilities are nil, | 6:58 | |
that it will be a good old fashioned recession like say, | 7:01 | |
the recession of 1937, 1938. | 7:05 | |
It's very dangerous ever to forecast that the business cycle | 7:11 | |
is dead and I certainly am not of the belief that it is. | 7:15 | |
But I do think that the recessions which within a single | 7:20 | |
year see the Federal Reserve Board Index of Production | 7:25 | |
plummet down to the tune of a whole 25%, | 7:29 | |
down to three quarters of it's previous level. | 7:34 | |
I think that the set processions | 7:37 | |
in our modern mixed economy | 7:39 | |
are going to be very rare indeed | 7:41 | |
and I don't know anyone, | 7:43 | |
even those who are much, much more bearish | 7:45 | |
than I in my forecast, | 7:50 | |
who really have an estimate for 1970 or 1971. | 7:52 | |
Comparable to that which happened before World War Two | 7:57 | |
as in 1937 and 1938. | 8:03 | |
Now, whether the, | 8:06 | |
this is a bear recession or something deeper | 8:10 | |
will depend, I think, in a very crucial way | 8:13 | |
upon the behavior of investments | 8:16 | |
of private business investments. | 8:18 | |
That is, it will depend upon what happens, | 8:21 | |
one, to inventories. | 8:24 | |
What happens, two, to business, | 8:27 | |
plant, and equipment expenditures. | 8:29 | |
And what happens, three, to the housing industry, | 8:32 | |
to construction. | 8:36 | |
These are the, possibly big swingers in the scenarios. | 8:38 | |
I've taken for granted that the broad outlines | 8:43 | |
of President Nixon's budget are indicative | 8:47 | |
of what's in store for us. | 8:51 | |
I don't suppose that the President can be held | 8:55 | |
to every last half billion in the estimates. | 8:57 | |
And there are a couple places where I think his estimates | 9:02 | |
are probably low but still I think he is in the Ball Park | 9:06 | |
of what we're likely to record in the history books | 9:10 | |
for this period. | 9:13 | |
Specifically, to me this means that defense expenditure | 9:15 | |
is going to be under a very, very tight reign. | 9:19 | |
Now we've heard that story before | 9:22 | |
and it's often turned out to be false | 9:25 | |
but sometimes a story becomes true | 9:27 | |
and I think there will be a very great effort | 9:31 | |
to keep defense expenditures down. | 9:33 | |
All bets of course will be off if in Laos | 9:38 | |
and some other place we find ourselves with intervention | 9:41 | |
of a qualitatively different sort. | 9:44 | |
But as a mere Economist, | 9:47 | |
I certainly have no basis for projecting | 9:50 | |
any such possibility into the future. | 9:53 | |
Nonetheless, I suppose that some of his items | 9:57 | |
are a little bit optimistic in terms of the budget. | 10:02 | |
For example, I think that the Pay Raise Bill | 10:05 | |
which the President has asked to be deferred beyond 1970. | 10:11 | |
I think the many political observers more astute than I, | 10:14 | |
more knowledgeable than I, | 10:18 | |
will be rather surprised if that pay increase | 10:19 | |
doesn't come fully or in part in 1970 itself | 10:24 | |
and so that would shade up some of his budget figures. | 10:29 | |
But I'm accepting the budget figures by large. | 10:31 | |
The difference between, say, two GMP models on a computer. | 10:36 | |
One of which is about in the range | 10:42 | |
of the President's economic report, | 10:46 | |
let's say, this is the report that was issued | 10:49 | |
on February first and I suppose we could say | 10:52 | |
is the official view of the United States Government. | 10:54 | |
That the growth national product will be 985 billion | 10:58 | |
for the year. | 11:05 | |
The difference between that model and a model | 11:06 | |
like that, say, of Professor Lawrence Klein | 11:10 | |
at the Wharton School which, | 11:13 | |
and I now speak from imperfect memory, | 11:15 | |
says at least in one of its variants | 11:18 | |
that the growth national product | 11:20 | |
will be about 975 billion. | 11:22 | |
Well one of the main differences to account for that | 11:25 | |
would be the difference in the behavior of inventory. | 11:28 | |
Will positive inventory accumulation, | 11:32 | |
which has been dropping in the last quarter or so, | 11:35 | |
will that actually continue to drop? | 11:39 | |
Will it go negative | 11:42 | |
giving us a sizeable swing? | 11:44 | |
The Wharton School Model depends upon a considerable | 11:46 | |
volatility of induced inventory. | 11:51 | |
Whereas a model that more closely duplicates | 11:54 | |
the official forecast of the U.S. Government | 11:58 | |
and more closely duplicates the forecast | 12:01 | |
which I privately made in December. | 12:06 | |
That assumes greater sluggishness | 12:10 | |
with respect to inventory investment. | 12:14 | |
This already warns us that we can not be dogmatic | 12:17 | |
in this area. | 12:20 | |
I would be a very rash analyst | 12:22 | |
if I thought that I could find any equation | 12:25 | |
or regression | 12:29 | |
or even heuristic model | 12:30 | |
that enables me to pinpoint the behavior | 12:34 | |
of something so volatile as inventory accumulation. | 12:38 | |
And since I sense this incapacity of any economist | 12:41 | |
to pin inventories down, | 12:49 | |
the rate of accumulation, | 12:51 | |
let's say in the second quarter of the year. | 12:52 | |
Between minus five billion and plus seven billion. | 12:57 | |
Therefore anyone would be rather rash to beat his chest | 13:05 | |
and say with considerable confidence he gives the following | 13:08 | |
point estimate of GMP. | 13:12 | |
But let me go through the different elements of investments | 13:18 | |
which it seems to me are uncertain. | 13:21 | |
Inventory at the beginning, | 13:24 | |
we have seen is very hard to predict. | 13:26 | |
The third factor I mentioned which is housing construction, | 13:31 | |
it seems to me the broad outlines are fairly clear. | 13:34 | |
Housing has been under pressure because of shortage | 13:39 | |
of credit for all of the year of 1969 | 13:44 | |
and that continues right up to the present time. | 13:48 | |
I may have to modify my remarks on this subject | 13:52 | |
a little bit towards the end of this recording | 13:54 | |
when I come to the discussion of the outlooks | 13:57 | |
for interest rates but still it would seem a pretty good bet | 14:00 | |
that during the first part of the year, | 14:05 | |
even if the economy eases more than I think it will ease, | 14:08 | |
it will take time and there will be lags before | 14:12 | |
this is felt in an enhanced supply of credit for housing. | 14:16 | |
Certainly the textbook relations which go back 30 years, | 14:24 | |
which go back 130 years. | 14:29 | |
That the high interest rates, | 14:32 | |
that tight credit, | 14:35 | |
tight money, | 14:38 | |
slow rate of growth for the money supply, | 14:39 | |
is hard on residential construction. | 14:42 | |
That has been vindicated by the past figures | 14:44 | |
and one would expect housing to continue | 14:49 | |
in the doldrums for some time. | 14:53 | |
Now that doesn't mean that I'm forecasting | 14:56 | |
that housing starts which I suppose are about 1.2 million | 14:58 | |
starts now down from say 1.7 or 1.8 are going to plunge | 15:02 | |
down to 800,000 housing starts as they did | 15:07 | |
in the money crunch of 1966. | 15:11 | |
But one would be surprised, | 15:15 | |
I think, to find as the early | 15:21 | |
spring months past that housing has leaped back above | 15:25 | |
one and a half million starts. | 15:33 | |
Of course, each house becomes more expensive, | 15:36 | |
that is each house is the same type, | 15:40 | |
however, there has been a shift towards the mobile, | 15:42 | |
a lower cost homes and towards multiple apartment dwellings | 15:47 | |
and that is a downward shift in the cost per start | 15:53 | |
which has to be reckoned against the steady upward mark | 15:59 | |
of costs for any building. | 16:04 | |
Anyone who's owned a building knows | 16:06 | |
that remorselessly almost, | 16:08 | |
it would seem independently of the state of tightness | 16:10 | |
of the housing market, | 16:14 | |
you have a mark on, a markup, a write-up, | 16:16 | |
a so called improvement factor for labor | 16:20 | |
in that industry and so the dollar figures | 16:26 | |
can continue to be stable and even to rise | 16:31 | |
even though the real figures are still under | 16:34 | |
considerable pressure. | 16:37 | |
This leads me of course to the middle category. | 16:39 | |
This is the category of businessman's investment | 16:44 | |
in plant equipment. | 16:49 | |
So-called fixed investment. | 16:51 | |
Now, what is going to happen to that? | 16:53 | |
One would expect that business investment should be weak. | 16:59 | |
There are half a dozen reasons, | 17:04 | |
probably that I could give you for this. | 17:07 | |
For one thing, | 17:11 | |
the general pace of business is off. | 17:13 | |
We're having a real slow down. | 17:16 | |
One of the most ancient theories in economics. | 17:21 | |
It goes back now a good half a century and more, | 17:25 | |
is the so-called Principle of Acceleration. | 17:29 | |
That principle in simplest terms says, | 17:33 | |
that it is the rate of growth of sales | 17:36 | |
which causes you to want to have a high level of investment. | 17:41 | |
And if the rate of growth of sales declines | 17:47 | |
even though the level of sales has not declined | 17:50 | |
and indeed it's still more slowly growing, | 17:55 | |
still the level of investment will already start to plummet. | 17:58 | |
And so by using that kind of reasoning, | 18:04 | |
you would expect investment to be weak. | 18:08 | |
Reinforcing this and actually duplicating the first reason, | 18:12 | |
because I'm going to give you another way of looking | 18:17 | |
at the same problem, | 18:19 | |
is the fact that the degree of capacity utilization | 18:21 | |
is declining and has been declining now | 18:26 | |
for many, many months. | 18:29 | |
I think the Federal Reserve figure | 18:31 | |
is down to about 80% of capacity. | 18:34 | |
Now it's very hard to measure | 18:37 | |
capacity utilization accurately. | 18:39 | |
But it's the changes in these estimates | 18:42 | |
that I invite your attention to. | 18:44 | |
And by any of the measures of capacity | 18:46 | |
utilization known to me, | 18:50 | |
the degree of capacity utilization is down. | 18:52 | |
Why, therefore, should businessmen be hungry | 18:56 | |
for new capital accretions and additions | 19:00 | |
when they're utilizing their existing plant equipment | 19:05 | |
a little bit less intensively? | 19:08 | |
And so this second version of the Acceleration Principle | 19:11 | |
suggests that investments should be down. | 19:15 | |
Indeed, a Fortune magazine in it's roundup | 19:18 | |
has for many, many months been saying that investment | 19:23 | |
would fall and would fall very appreciatively. | 19:28 | |
And even Casandra has to be right some time | 19:31 | |
if she says the same thing and the world | 19:39 | |
is wobbling up and down. | 19:43 | |
I may say that in the very latest issue of Fortune Magazine, | 19:44 | |
we have a reprise of the familiar theme. | 19:50 | |
There's a chart on page 15 showing the cutback in capital | 19:54 | |
programs and a discussion of why that can be expected | 20:00 | |
to continue in the future. | 20:06 | |
I need to remind you however that for many, | 20:11 | |
many months last year, | 20:14 | |
Fortune was wrong. | 20:16 | |
Anyone who had read Fortune and had accepted literally | 20:20 | |
the roundup interpretation would have been surprised | 20:23 | |
by the Rinfret survey | 20:26 | |
last, late last summer, | 20:31 | |
early fall. | 20:33 | |
By the Lionel Edie survey and would have been surprised | 20:35 | |
by the official SEC survey of last November | 20:38 | |
and last December. | 20:43 | |
But let me continue with the reasons | 20:46 | |
why one would expect investment to be weak. | 20:47 | |
The variability of capital has still been poor. | 20:53 | |
Business firms have been increasingly a liquid. | 21:00 | |
This is the other side of the coin | 21:04 | |
of what the Federal Reserve System has been doing | 21:06 | |
to the rate of growth to the money supply | 21:09 | |
during much of 1969. | 21:11 | |
If the money supply was virtually flat | 21:14 | |
from May of 1969 until December, | 21:16 | |
that had it's repercussions in a growing ill-liquidity | 21:21 | |
of funds on the part of would be investors | 21:28 | |
in plant and equipment. | 21:34 | |
After the terrible money crunch of 1966, | 21:37 | |
there had been a rebuilding of liquidity | 21:42 | |
by many, many organizations. | 21:44 | |
But nevertheless, | 21:46 | |
a good deal of time has gone by since 1967 | 21:50 | |
and a lot of that liquidity of course had dissipated. | 21:52 | |
And that's why when we come to discuss interest rates, | 21:56 | |
we'll have to consider what the likely situation is, | 21:59 | |
with respect to capital flotations in the bond market | 22:04 | |
and in the equity markets. | 22:08 | |
But the availability of funds for plant equipment investment | 22:11 | |
must be considered to be an unfavorable factor. | 22:17 | |
Let me move on. | 22:23 | |
I've been talking about internal funds, | 22:24 | |
I mean external funds of corporation. | 22:26 | |
Borrowing from the credit markets. | 22:28 | |
What about the cash flow generated | 22:32 | |
by the corporations themselves? | 22:36 | |
Well it is no secret that the profits have ceased to grow | 22:38 | |
and that actually our profits are now in decline. | 22:43 | |
So you are getting a pinch from inside the corporation | 22:47 | |
itself since very much of plant equipment expenditure | 22:52 | |
has been in the past self financed. | 22:56 | |
There is a less copious flow of profits | 22:59 | |
and depreciation allowances. | 23:03 | |
I don't mean that the total depreciation of allowances | 23:06 | |
has gone down. | 23:08 | |
Well let me move on a little bit more quickly. | 23:08 | |
The investment tax credit is gone. | 23:11 | |
And then finally, and again, this is duplicative | 23:15 | |
of some of the points that were made earlier, | 23:19 | |
don't forget that we've had a plant equipment boom | 23:21 | |
going on now really for some years. | 23:25 | |
And this plant equipment boom | 23:27 | |
has been in excess of what many people | 23:29 | |
had expected to take place. | 23:34 | |
Let's say as judged by one digression equation or another. | 23:36 | |
So you have this accumulated integral of... | 23:40 | |
I can't quite call it unnecessary investment, | 23:46 | |
but unpredicted investment and that should be depressing | 23:49 | |
the profitability of new investment | 23:54 | |
and depressing the motivation of new investment. | 23:58 | |
Of course, when I mentioned the excess capacity, | 24:01 | |
this is another side of that particular coin. | 24:05 | |
Given all of these things, | 24:11 | |
one would certainly be inclined to agree | 24:15 | |
with the March Fortune that the outlook for some, | 24:19 | |
for capital in the future, | 24:24 | |
is for a considerable reduction in growth. | 24:26 | |
However, I must report the facts and the facts are that we | 24:29 | |
are already again getting some new surveys. | 24:35 | |
We have again a new Rinfret survey and we have again | 24:38 | |
a Lionel Edie survey and unfortunately it won't be until | 24:42 | |
next week that we will know the results of the official | 24:47 | |
SEC Survey for the rest of the year. | 24:52 | |
The Edie survey and the Rinfret survey are still calling | 24:57 | |
for considerable money increase in fixed investments | 25:01 | |
in 1970 over the year 1969. | 25:06 | |
And one should not disregard evidence. | 25:14 | |
F1's peril last year did people follow your | 25:18 | |
a priori reasoning and say that fixed investment | 25:24 | |
should have been down in the last part of last year. | 25:27 | |
When actually it turned out to be up. | 25:30 | |
And the surveys had warned us. | 25:34 | |
Nevertheless it sat all in one direction | 25:37 | |
even on the part of the surveys. | 25:39 | |
The National Industrial Conference Board | 25:40 | |
has reported, finally, that a drop in the capital | 25:42 | |
appropriations of business took place in the fourth quarter | 25:47 | |
of 69 and that can be expected to be followed | 25:50 | |
by a lag of two, three, four quarters | 25:54 | |
in a possible drop in actual expenditures. | 25:57 | |
Moreover, even if the SEC survey does come out next week | 26:02 | |
with a bullish number for plant equipment, | 26:08 | |
for all the year 1970. | 26:13 | |
Let's say 10% above 1969, which would be very little | 26:15 | |
different from the previous forecast. | 26:20 | |
There is a reason to wonder | 26:25 | |
whether in a business environment | 26:28 | |
like the present one where the profits are under pressure, | 26:30 | |
there will not be a slippage between the reported figures | 26:33 | |
by a business in the survey | 26:37 | |
and what will actually take place. | 26:39 | |
That kind of slippage has certainly happened in the past | 26:41 | |
and probably has, | 26:45 | |
is to be expected as part of the game. | 26:47 | |
As far as fixed investments is concerned, | 26:50 | |
therefore, I think that we should have a very wide | 26:52 | |
confidence band of the possibilities | 26:56 | |
and it's a theorem of, | 27:01 | |
a game theory that one peak is worth two finesses. | 27:06 | |
I think it's worth waiting a week or so | 27:11 | |
for the official figures rather than trying to make | 27:13 | |
a cathedral out of a soap bubble of a priori speculation. | 27:18 | |
It's possible that the survey may put us out of our misery | 27:24 | |
and show reality to agreeing more with the expectations. | 27:31 | |
Let me mention though, | 27:37 | |
that increasingly important as the quarters go on ahead | 27:39 | |
would be what happens to the availability of credit | 27:45 | |
to the, would be plant and equipment investor? | 27:50 | |
And this takes us to the whole problem | 27:55 | |
of Federal Reserve policy. | 27:57 | |
What's been happening down at the Federal Reserve | 27:59 | |
for the last few weeks since Chairman Arthur Burns | 28:02 | |
has taken office. | 28:06 | |
And what's likely to happen? | 28:08 | |
Now, you remember the big guessing game of 1969 was, | 28:10 | |
has the turn in interest rates yet come? | 28:15 | |
And anyone that called that turn at all early in the year | 28:19 | |
or indeed within a great vehemence within the year itself | 28:23 | |
turned out to be wrong. | 28:28 | |
Although I've been dragging my heels in this matter, | 28:31 | |
it seems to me that that turn has taken place. | 28:33 | |
That the peak is probably behind us. | 28:38 | |
I don't expect that it'll be a single unimodal peak. | 28:41 | |
But sometime in January and February | 28:45 | |
the most volatile short term rates begin to decline. | 28:50 | |
Prior to my recording here today, | 28:56 | |
the Bank of England has announced a reduction | 28:58 | |
in its discount rates, | 29:01 | |
sometimes called the prime rate in the press, | 29:03 | |
but that's a misnomer. | 29:05 | |
However, the discount rate in England | 29:07 | |
is more important than our discount rate | 29:09 | |
and it has some of the functions of the prime rate. | 29:11 | |
Most of that decline is due, | 29:15 | |
I suspect to things that are peculiarly British. | 29:17 | |
But nevertheless it is a straw in the wind | 29:20 | |
which suggests that the Federal Reserve, | 29:24 | |
if it wishes to, | 29:26 | |
will be in a position to do some easing | 29:27 | |
in the interest rate structure and in the credit commission. | 29:30 | |
However, in order to bring this to bear | 29:36 | |
on what's going to happen to plant and equipment, | 29:41 | |
you'd have to have a fairly massive, | 29:43 | |
unilateral behavior, I think, by the Federal Reserve | 29:45 | |
to change that situation very much. | 29:48 | |
Why can't the market be counted on to loosen itself | 29:53 | |
and cause the needed reduction interest rates | 29:57 | |
to make fixed investment hold up or become strong? | 30:00 | |
I think the main reason is because people are so illiquid, | 30:06 | |
that every time the interest rates drop a little bit | 30:10 | |
they'll come a new supply of bonds and stocks | 30:13 | |
to the market and that will moderate the decline | 30:16 | |
so this time I don't think you can look forward to a really | 30:19 | |
rapid decline in interest rates as in past recessions. | 30:22 | |
- | Thank you, Professor Samuelson. | 30:25 |
If you have questions or comments, | 30:27 | |
send them to Instructional Dynamics, | 30:29 | |
166 East Superior Street, | 30:31 | |
Chicago, Illinois, 60611. | 30:33 |
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