Tape 147 - Monetary Policy, Burns Talk, Leading Indicators, Wage Price Controls / Paul A. Samuelson papers, 1933-2010 and undated / Duke Digital Repository

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Hello, this is Rose Friedman

0:02

inviting you on behalf of Instructional Dynamics

0:04

to another of our conversations with Milton Friedman,

0:07

Professor of Economics at the University of Chicago.

0:10

We are taping this conversation

0:13

on Wednesday, May 30th 1974.

0:15

In commenting on a sharp drop

0:23

in the stock market yesterday,

0:25

The Wall Street Journal wrote today

0:27

Broker cited the weekend statement

0:29

of Federal Reserve Board Chairman Arthur Burns

0:31

that soaring interest rates and shakiness

0:34

in the banking system won't deter the Fed

0:36

from its tight monetary policy.

0:39

Is Fed monetary policy really tight?

0:41

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It's very hard to see it in the figures.

0:45

I mentioned in an earlier tape that so far as I could see

0:50

the best way to describe Federal Reserve monetary policy

0:54

was as having been producing a very steady rate

0:58

of increase in both the narrow money supply

1:00

and the broader money supply

1:03

for at least the past three years.

1:05

I have just taken the excellent graphs in the weekly reports

1:07

of the Federal Reserve Bank of St. Louis

1:14

and drawn on them the trend which I had earlier computed

1:16

covering the period from 1971 to early 1974.

1:19

For both M1 that is a narrow money stock

1:26

currency and demand deposits and M2 the broader money stock

1:29

including commercial buying time deposits.

1:33

For both of these the current level is just exactly

1:36

on the same trend that has prevailed

1:43

for the past four years really.

1:45

If you look at the year to year change for M1, for example.

1:50

The figures for the four weeks ending May 15th, 1974

1:58

compared to the four weeks ending May 16th, 1973

2:04

the rate of growth is 6.6%.

2:09

The average rate of growth over the four years

2:12

1970 to '74 was about 6.7%.

2:16

So essentially, it's precisely on target.

2:21

Of course the rate fluctuates over short periods of time.

2:24

If you look at the last two months alone,

2:27

the rate of growth is only 5%

2:29

but if you look at the last three months it's 11%.

2:31

If you look at the last four months, it's 7.6%

2:34

and so it goes.

2:40

As of now, the best description therefore

2:43

still seems to be for M1 an average rate of growth

2:46

of somewhere in the neighborhood

2:50

between six and a half and 7% per year

2:51

with erratic fluctuations from month to month

2:55

and week to week.

2:58

If we look at the broader concept M2.

3:00

Here again the actual figures are precisely on the trend.

3:05

From 1971, that trend is at a rate of almost 10%

3:09

not quite about 9.7 or 9.8% per year.

3:16

Again if you take it over the last year

3:21

the recent figures are 9.2% above what they were a year ago.

3:24

If you take it over the last two months,

3:28

it's a 6% rate of growth.

3:30

Over that last three months a 9.5%

3:32

and once again the best description

3:35

is that we are continuing on the pattern

3:37

which has prevailed over the past three or four years.

3:43

The talk of tight money does not reflect a change

3:50

in the actual rate of growth of the quantity of money.

3:53

What it does reflect is the very high short-term

3:56

interest rates recently.

4:00

But those high short-term interest rates recently

4:02

cannot be attributed in any meaningful way

4:04

to a slow down in the rate of monetary growth

4:07

as engineered by the Fed.

4:10

It cannot be attributed to Federal Reserve policy.

4:11

It has to be attributed fundamentally

4:13

to a very rapid increase in the demand for short-term funds.

4:16

That increase in the demand for short-term funds

4:22

in part reflects inflationary expectations,

4:25

in part it reflects a great uneasiness and uncertainty

4:29

about the character of the system.

4:33

In part it reflects the financial uncertainties

4:34

that have been associated with Franklin National Bank

4:38

and similar events.

4:41

The one place this picture is reflected

4:49

in the monetary statistics and the statistics

4:54

of monetary aggregates is in terms of the large

4:58

certificates of deposits, the so-called CDs.

5:03

Those CDs have been growing

5:06

at an extraordinarily high rate.

5:08

They are currently up in the neighborhood

5:11

of nearly $80 billion, having risen from a level

5:13

of 66 billion as recently as March

5:23

and from a level of about 56 billion a year ago.

5:26

In this area you have had a very sharp rise

5:30

reflecting the turning by business enterprises

5:34

to banks for accommodation and the banks in turn

5:40

turning to the market to get short-term funds

5:44

on which they have been paying very high rates.

5:48

This is I know a problem that is very much concerning

5:52

the Federal Reserve System.

5:54

I mentioned earlier the problems that are likely

5:56

to be raised by disintermediation in savings and loan

5:59

associations, mutual saving banks and so on

6:02

as a result of the high market rates that are obtainable.

6:05

I haven't mentioned in the past

6:10

the problem raised by CDs but here again

6:11

you have a potential problem of disintermediation.

6:14

You have a problem of a runoff of these CDs very rapidly.

6:18

However the banks that are involved in this

6:24

are the large banks, the large sophisticated banks,

6:27

multinational banks in New York and around the world

6:31

and although I know that the Fed is much concerned

6:34

about possible disturbances in the money market

6:37

arising out of a rundown of CDs

6:40

I find it something not very much to be concerned about

6:42

since if you have a rundown of CDs it will simply be

6:46

because commercial enterprises once again

6:51

turn to the money market in general

6:55

rather than the banks for accommodations.

6:57

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What interpretation do you place on Burns' talk?

7:01

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It's simply par for the course

7:06

for Federal Reserve chairmans and all chairmen in general

7:08

and also for Arthur Burns in particular.

7:12

Make no mistake about it Chairman Burns

7:16

is absolutely sincere when he expresses dismay

7:19

at the rates of inflation that we have achieved.

7:23

He has been sincere all along in his assertions

7:25

that he did not want to become the architect

7:28

of a new inflation.

7:31

The distressing thing is and has been

7:33

the discrepancy between the sincere wishes,

7:39

intentions, and desires of the Federal Reserve in general

7:42

and of Arthur Burns in particular

7:45

and their actual performance.

7:48

Consistently the Fed and Arthur Burns have been asserting

7:50

that they are anxious to avoid inflation

7:56

and are going to follow monetary policies

8:00

which will avoid inflation.

8:02

Yet in fact they have followed a monetary policy

8:03

which undergirds and underlines our present inflation.

8:07

Unfortunately the Fed by being in Washington

8:10

being subject to the hysterical atmosphere there

8:16

falls prey to the great disease of legislators

8:20

and current journalistic commentators

8:25

namely a lack of perspective, a tendency

8:27

to judge things in terms of the past six months,

8:30

and to look forward to the next six months,

8:34

and not take a longer view.

8:36

Thus the most recent manifestation of this

8:38

has been the emphasis on double-digit inflation

8:42

to which Arthur Burns reverted

8:47

in his commencement talk last Sunday.

8:49

Now the fact is that the statistics

8:54

are showing double-digit inflation.

8:56

Cost-of-living index number is showing a rate of rise

8:59

of something like 12 to 14% for the first quarter

9:01

but the reality is not double-digit inflation

9:05

as I have emphasized in earlier tapes.

9:08

What we are really experiencing is a catch up

9:12

in the published statistics to the distortions

9:15

introduced by price and wage controls.

9:18

Over the three year period as a whole from the end of 1970

9:20

to end of 1973 the average rate of rise of prices

9:26

has been exactly what you would have expected

9:29

from prior monetary change.

9:31

But the recorded rate of rise in prices,

9:33

the rate of rise recorded in the Consumer Price Index

9:37

was much less than that in the first two years

9:40

much higher than that in the third year.

9:42

Again that catch up is still continuing.

9:44

What you are having is an unveiling of previously

9:46

repressed price increases not true inflation.

9:49

In my opinion the true underlying inflation

9:52

is at the rate of something like 6%.

9:55

That is the rate of inflation which as I've indicated

9:57

before is called for by past monetary growth.

10:00

M2 growing at 10%, M2 velocity being roughly constant.

10:05

Real output potential growth of about four, 4.5%

10:11

means that Federal Reserve policy has in fact

10:16

been directed, not consciously not intentionally

10:19

but in its execution at producing a long-term

10:23

inflation rate of something like five and a half to 6%.

10:26

I expect that we shall revert to that level

10:31

by the end of 1974 probably and when we do

10:33

there will be a sigh of relief on all parts

10:37

and everybody will say oh my isn't this wonderful

10:39

as already President Nixon in his address over the weekend

10:41

Herbert Stein in his report on the midyear report

10:45

of the Council of Economic Advisors,

10:50

both of these stressed the good news

10:52

that inflation is tapering off

10:55

but that good news is very mixed.

10:59

All it means is that the index numbers

11:00

will start telling the truth instead of being distorted

11:03

by our disastrous experiment with wage and price control.

11:06

The real problem with the kind of attitude

11:11

that Arthur Burns is taking with the kind of overemphasis

11:15

on the current situation on double-digit inflation

11:18

as the problem will be that when inflation comes down

11:22

to an only and I put that only in quotes 6%

11:25

by the end of the year people will relax

11:29

and believe that the worst is over

11:32

and that we don't have to worry

11:35

when in fact if I may take you back several years

11:36

inflation was proceeding at a rate of only 4.5%

11:43

in mid-1971 when great concern about inflation

11:46

allegedly forced President Nixon to engage

11:50

in price and wage controls.

11:55

So the 6% rate of inflation that we'll be back to

11:57

at the end of the year is much too high,

11:59

calls for continued restraint on the part

12:02

not continued I'm falling into the same trap.

12:05

Calls for restraint which has not so far been present

12:09

on the part of the Fed, calls for reducing

12:14

the rate of monetary growth below the rates

12:16

that have been prevailing for the past three or four years.

12:19

Once again the Fed has indicated that it intends to do so

12:24

but whether in fact it will or will not do so

12:28

that's an open question.

12:32

Incidentally you will be interested

12:37

in a sort of a historical footnote.

12:39

I noted in my last tape that the escalation proposal

12:42

the proposal for indexing all sorts of long-term contracts

12:50

is a very old one, over a century and a half old

12:54

named the Tabular Standard.

12:59

In the course of investigating the literature

13:02

on that subject I came across another item

13:05

that fascinates me.

13:09

In a paper originally published in April 1863

13:15

W. Stanley Jevons calculated index numbers of prices

13:21

for a roughly not quite a 20 year period from 1845 to 1862.

13:32

The aim of the paper was really to determine

13:37

what the effect of the gold discoveries in Australia

13:40

and in California had been on the price level.

13:44

In the course of it he gives a table showing changes

13:49

in one component of the quantity of money

13:55

at that time a much more important component

13:58

than it is now namely currency

14:00

the currency issued by the Bank of England

14:03

and his own index of prices

14:06

and in comparing the two he makes the following remark

14:08

and I quote an expansion of the currency

14:11

occurs one or two years prior to a rise of prices unquote.

14:14

You will recall that I have repeatedly emphasized

14:20

that under current circumstances there is a lag

14:23

of about two years between a change in money

14:26

and a change in prices.

14:28

Apparently that lag is not a recent or a modern phenomenon

14:29

but existed over a century ago

14:37

and has not altered its duration in that period.

14:41

I may say that just for my own amusement

14:44

I took the tables which Jevons gave

14:46

and calculated correlation coefficients from them.

14:50

Let me note that the correlation coefficient

14:52

had not been invented at the time Jevons wrote.

14:55

It was not invented until the end

14:57

of the 19th century by Galton.

14:59

And so Jevons' conclusion was based

15:02

on his eyeball analysis of the statistics

15:04

but I for fun calculated the correlation

15:10

between his price index and the circulation

15:13

that is the quantity of money

15:16

contemporaneously for the same year

15:18

with money a year earlier, with money two years earlier,

15:21

with money three years earlier.

15:24

And the correlations completely confirmed what Jevons said.

15:26

For contemporaneous price in money it was very low

15:31

0.104 which explains why it is so hard

15:34

for people to recognize the relation

15:38

between money and prices.

15:40

With money leading by one year a year earlier

15:42

the correlation rises to 0.48.

15:46

With money two years earlier, it rises to 0.57.

15:48

For three years it drops back to 0.47.

15:53

Now this pattern of correlations is almost exactly,

15:56

is exactly the same pattern that we observe today

15:59

calculated from current figures

16:03

or from figures from the last 20 years.

16:04

The only difference is that today's correlations

16:07

are all higher in absolute terms

16:10

particularly the ones for a lead of two years.

16:12

The reason for that I think is not necessarily

16:15

a change in phenomena but the fact that our data today

16:17

are far more accurate than the data with which Jevons dealt.

16:20

While I'm on the subject of historical footnotes

16:25

I have in front of me a fascinating little item

16:32

that was sent to me by one of our subscribers

16:35

Alan Rudolph who's with Merrill Lynch

16:37

in St. Petersburg, Florida.

16:39

What it is a Xerox copy of an advertisement

16:42

in Businessweek by Dresser Industries

16:46

which reads in part and I quote

16:48

our nations coal supply may last only another 3,000 years.

16:51

Our nation's oil supply may last only ah there's the debate.

16:55

Some say 30 years, some 50.

16:59

Whatever is being done to beget oil from coal

17:02

contributes to the long life of the oil industry.

17:04

And Dresser goes on explaining

17:08

its own activities in this connection.

17:09

Well the real shocker to this is that

17:12

when you look at the date it turns out

17:17

that this advertisement which you might think

17:18

would have been in last week's Businessweek

17:20

really comes from the Businessweek of July 1948

17:22

so that here again it's only our perceptions

17:27

that are new and changed, not the problems.

17:31

It's again another illustration

17:33

of our extraordinary lack of perspective.

17:35

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We might do well I guess to look a little further

17:40

and spend a little more time reading history

17:43

rather than what's coming out currently.

17:47

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Well that would be very educational and valuable

17:50

but you know I must say it is also depressing.

17:53

What really depresses me whenever I go back and read

17:55

the great classics is how little we have really learned.

17:57

You can do about as well as reading David Hume's

18:01

essay on money as you can on reading the latest volume

18:03

fresh off the press by the leading figure

18:07

in the monetary area on current research.

18:10

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Let's turn to another aspect of the economy.

18:14

Is the drop in leading indicators for April

18:17

a signal that the recession is going to deepen?

18:19

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It's very hard to put very much weight

18:23

on that drop and the leading indicators.

18:25

The leading indicators bounce around from month to month.

18:27

The main thing you can say about them

18:31

as they have been published is that

18:33

they sometimes continue to rise

18:35

over the past seven or eight months

18:38

but at a much lower rate than they had risen prior to that.

18:42

The recent change is rather amusing

18:48

from another point of view.

18:50

In the first place every month the leading indicators

18:52

are published on the basis of a partial list.

18:58

A month later they are always revised substantially

19:01

when additional items become available

19:04

and so it was that the March index

19:07

was substantially raised.

19:12

Indeed if the April index is raised as much

19:14

as the March index what is now recorded as a decline

19:17

will be recorded as a constant level or maybe even a rise.

19:20

Moreover if you look at the eight indicators

19:24

that were available and that were combined

19:28

into the leading indicator number

19:29

five improved and only three declined.

19:34

What were the three that declined?

19:38

One was the length of the average work week.

19:41

Now that really is a real indicator

19:45

of current economic conditions.

19:48

It's always been a very reliable indicator.

19:50

It's a physical volume indicator.

19:52

But a second was stock prices which were down 5.1%

19:54

and building permits so that what this mild decline

19:59

in the leading indicators really reflects

20:06

is a continuation of the housing problem

20:08

which we are all aware of and which arises

20:10

out of the problem of high interest rates

20:13

and difficulty of raising funds for building

20:17

and the fact that the stock market

20:19

is in the doldrums and declining.

20:21

Now the amusing part of this is that undoubtedly

20:22

not undoubtedly in the future last night over TV

20:27

the sharp drop in the stock market yesterday

20:32

was attributed to the decline in the leading indicators

20:34

but then that's kind of a self-fulfilling prophecy.

20:37

If the stock market enters into the leading indicators

20:39

when it declines the leading indicators decline

20:42

and when the leading indicators decline,

20:45

the stock market declines.

20:46

You've really got a cat chasing its tail.

20:47

But there's another item about the leading indicators

20:52

that is perhaps more important.

20:54

The leading indicators were developed at a time

20:57

when inflation was nothing like the kind of problem

20:59

that it is now and they are now obsolete

21:01

because in considerable measure the leading indicators

21:04

are biased upward by inflation.

21:07

The Federal Reserve Bank of Boston and more recently

21:12

National Bureau of Economic Research with Geoff Moore

21:15

one of the people who did most of the work

21:18

on the earlier indicators involved in the project

21:20

have been trying to reexamine the issue

21:25

and see if they can develop a set of leading indicators

21:29

which will be largely free of this inflation bias

21:32

but for the moment what this implies is that during

21:37

a period of inflation of the kind we've been having

21:40

we should interpret the leading indicators differently.

21:43

We should look more at a slow down in their rate of growth

21:45

and look less at an absolute decline

21:49

as foreshadowing economic difficulties.

21:51

And from this point of view they have continued

21:55

to be highly reliable because if you look at them

21:57

you will find that the rate of growth slowed down

21:59

about the middle of last year and we have clearly

22:02

been having a very sharp slow down in the economy.

22:06

We have been having what probably will turn out

22:08

and be classified later as a recession

22:11

so the leading indicators continue to be useful

22:13

provided you don't put too much attention

22:16

on the month to month erratic movements

22:19

and provided you adjust them for the bias

22:22

which inflation has introduced.

22:25

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We have a letter an answer to which is long overdue

22:30

from Mister McMillan of the National Bank of Commerce

22:35

of Seattle.

22:38

He comments on Walter Heller's article

22:40

in The Wall Street Journal on the 15th of April

22:43

and his reference to your proposals for escalators

22:46

as an economic version of streaking.

22:49

Mister McMillan goes on to say and I quote

22:51

Walter appears on stage as the Don Quixote

22:55

of the economic profession riding boldly out

22:58

to slay the twin dragons of big business and big labor

23:01

with the broken lance of wage price controls.

23:04

I find it almost incredible that he would still

23:07

be clinging to the thoroughly discredited controls program

23:11

in any form or substance after the experience

23:15

of the past two and a half years.

23:17

Would you like to comment on this letter?

23:19

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The question is what else can he cling to?

23:24

If you put yourself in his position

23:27

as someone who along with many others

23:30

is fundamentally committed to the view

23:35

that the economy is not self-regulating,

23:38

that government is necessary to control it,

23:41

that if inflation is to be controlled

23:44

it must be controlled by government.

23:47

If you also add to that the belief

23:50

in direct administrative intervention into the economy

23:54

and not in the use of such general policies

23:57

as general monitoring policies

24:01

what alternative is available to people

24:03

with that set of views?

24:05

It should not occasion surprise it seems to me

24:08

that the failure of the venture does not lead

24:12

to its being given up by people

24:16

who were strongly in favor of it before.

24:18

After all this is not the first episode

24:20

with wage and price controls.

24:22

If people were going to be persuaded

24:24

by the course of history why do you need

24:26

this latest experiment of two and a half years

24:28

when we have had dozens and dozens of experiments

24:31

over 2,000 years all of which have been equally decisive

24:34

in demonstrating that wage and price controls are

24:38

in the expressive term Mister McMillan uses a broken lance.

24:42

There is always another excuse.

24:49

Wage and prices controls this time failed

24:51

it will be said by Walter and his colleagues

24:53

because they were administered by people

24:57

who didn't believe him.

24:59

As if whether aspirin cures your headache or not

25:00

depends on whether you believe

25:04

that it will cure your headache.

25:05

Maybe it does, there is a psychosomatic element

25:07

in things like that but I doubt very much

25:09

that there is in wage and price controls

25:11

and in any event wage and price controls in the past

25:13

have not worked when they were conducted

25:16

by people who believed in them thoroughly.

25:19

They didn't work in Britain when they were conducted

25:21

by the Labor Party in Britain.

25:22

They didn't work in Canada when they were conducted

25:24

by people in Canada who believed in them and so on.

25:26

And consequently the one thing

25:30

if we learn anything from history somebody once said

25:35

we learn we do not learn from history

25:39

and this seems to be another example of that.

25:41

I really don't know how else to comment on it.

25:45

I may comment however on Walter's discussion of my movement

25:51

to escalators as an economic version of streaking.

25:56

He made the interpretation which other have made

26:00

and which I have been trying to surmount and overcome

26:04

that my being in favor of escalation indicated

26:08

that I'd given up on the fight against inflation

26:12

and was prepared simply to live with it.

26:15

As I've emphasized on these tapes before

26:19

that is not the case at all.

26:22

I believe it is urgent that we end inflation

26:24

but I believe that a major difficulty in ending it now

26:28

are the distortions which are produced

26:31

by attempts to end it, temporary unemployment,

26:33

the temporary difficulties and certainly the pressure

26:37

by people like Walter Heller and the others

26:41

for tax reductions, for increased expansionary action

26:43

is a further reminder of what those pressures are.

26:48

As a result I favor escalation

26:52

not primarily as a way to live with inflation

26:55

but primarily as a way to reduce the adverse side effects

26:59

of measures taken to stop inflation

27:03

and thus to make it politically feasible

27:06

for us to stop the inflation.

27:08

On this question of political feasibility

27:13

to stop the inflation, some questions that I was asked

27:15

a couple of weeks ago when I made a presentation

27:18

in New York made clear to me that there is a great

27:20

misunderstanding about what these political pressures are.

27:24

I was asked about whether the Federal Reserve

27:29

would not be affected by the upcoming congressional

27:36

elections and try to expand the money supply

27:39

in order to promote election prospects.

27:44

This is of a piece with the notion that the Fed

27:48

became very expansive in 1971 and '72

27:50

in order to promote the reelection of Mister Nixon.

27:53

Now that's a very obvious interpretation but I believe

27:56

it's a fundamentally erroneous interpretation.

28:00

The men who run the Federal Reserve

28:03

are not anything like such narrow-minded politicians

28:05

as that alone might suggest.

28:08

On the contrary they are dedicated

28:10

public-spirited individuals.

28:13

The kinds of political pressures to which they are

28:15

subject are very different.

28:17

They are in the first place the pressure from Congress.

28:19

That Mister Patman has in a way

28:22

had more influence on the Fed than has the desire

28:24

to win a particular election.

28:28

The situation is whenever interest rates go up

28:30

Mister Patman and his fellows start yelling

28:34

very loudly and the Fed is very sensitive

28:36

to congressional attitudes because it is afraid

28:40

that its vaunted independence will be taken away.

28:48

Now this is something paradoxical.

28:50

It doesn't use its independence because it's afraid

28:52

that if it does use its independence it will lose it.

28:54

It's paradoxical but extremely human and natural.

28:58

It's afraid that the Congress will pass laws

29:01

which will impose restraints on it

29:06

which will bring it under direct control of the Congress

29:10

which will give Congress authority over its budget

29:12

and so on.

29:15

I personally happen to believe many of those

29:16

would be a good idea but at least I'm just trying

29:17

to explain what are the political pressures.

29:19

In the second place, consider the situation right now

29:21

where interest rates are very high.

29:25

The Fed is being deluged with a stream of pressure

29:28

from financial groups, from bankers,

29:32

from savings and loan people, from others

29:36

to do something about bringing the interest rates down.

29:38

It is that kind of political pressure

29:41

from its constituency, from the people

29:43

who on the one hand will proclaim very loudly

29:46

that they are in favor of measures

29:49

to stop inflation but on the other hand

29:51

want the Fed to bail just them out.

29:54

It's they plus the Congress that really brings

29:57

the political pressure on the Fed

29:59

that accounts for the difference between

30:02

their sincerely held objectives on the one hand

30:06

and their actual performance on the other.

30:12

Now while on this area of political pressure,

30:15

I might mention one other item in the news

30:17

and that is the defeat of Senator Fulbright

30:19

and one of the indirect results of that defeat

30:23

is likely to be the elevation of Senator Proxmire

30:28

of Wisconsin to Chairman of the Senate Banking Committee.

30:33

The leading bankers of the country have been

30:37

very much disturbed about this prospect

30:40

and indeed it is said that they contributed

30:43

large sums of money to Senator Fulbright's campaign

30:45

for this purpose without any interest

30:48

whatsoever in what happened in Arkansas

30:50

or even in the Foreign Relations Committee.

30:51

I may say that the same reasons which lead them

30:54

to be unhappy about Proxmire's elevation

30:57

to the Chairmanship of the Banking Committee

31:04

leads me to be delighted about it.

31:06

Proxmier is a maverick who has done many things

31:09

that I disagree with but also is a person

31:14

of very great intellectual ability

31:18

and of a real understanding of money

31:22

and banking developments.

31:24

The things he has objected to in the banking

31:28

industry are on the whole the right things to object to.

31:30

His attitudes toward the Federal Reserve Board

31:35

have been on the whole very good.

31:38

For example he opposed the naming of John Sheehan

31:41

as a businessman to the Federal Reserve Board

31:48

and Mister Bucher who is a banker.

31:51

Now both had been members of the board for some time

31:55

and it is possible to appraise their performance.

31:59

Sheehan has been an unmitigated disaster.

32:01

Mister Bucher has been much better.

32:04

His background as a banker apparently fitted him more

32:08

for the role but Mister Sheehan has been

32:11

a bull in a china shop.

32:15

In addition Senator Proxmier has consistently

32:18

put great stress on control of the money supply,

32:23

has been one of the groups that joined

32:27

in the Joint Economic Committee's recommendations

32:29

to the Federal Reserve that it follow a policy

32:32

of keeping the growth narrowly to find money supply

32:35

between 2% and 6% per year in each quarter.

32:38

So that on the whole I think it'll be a breath of fresh air

32:43

in the banking committee and is likely to accomplish

32:46

some good to have Senator Proxmier in charge

32:49

rather than to have Senator Sparkman

32:53

who has so far been the Chairman of the Committee.

32:57

-

I see we're running out of time.

33:00

Thank you very much.

33:02

Remember subscribers if you have any questions or comments,

33:03

please send them to Instructional Dynamics.

33:07

450 Ohio Street Chicago Illinois 60611.

33:09

We shall be visiting with you again in two weeks.

33:15

Tape 147 - Monetary Policy, Burns Talk, Leading Indicators, Wage Price Controls

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