Tape 21 - Review of first quarter 1969
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- | It's time now for this week's discussion on economics | 0:02 |
with Dr. Paul Samuelson, professor of economics | 0:04 | |
at the Massachusetts Institute of Technology. | 0:07 | |
This weekly series is produced | 0:10 | |
and recorded by Instructional Dynamics Incorporated. | 0:12 | |
Professor Samuelson, the first quarter of the year is over. | 0:15 | |
How would you report what has happened | 0:18 | |
during the first quarter, and how do we stand now? | 0:20 | |
- | Now that the first quarter is over, | 0:22 |
we still do not have the solid statistics | 0:25 | |
which tell us what has happened. | 0:28 | |
For example, the Department of Commerce | 0:31 | |
has not yet given us their first estimate | 0:33 | |
of the gross national product for this period | 0:36 | |
and the breakdown of that gross national product. | 0:38 | |
However, I have opinions on the subject, | 0:41 | |
and let me talk about them. | 0:43 | |
First, I believe that the first quarter | 0:48 | |
of the year has been very strong. | 0:51 | |
When we see the statistics, this will be verified. | 0:53 | |
As a matter of fact, that long-awaited slowdown | 0:57 | |
has not yet, in my judgment, occurred. | 1:01 | |
Just to give a rough guess, I will estimate | 1:05 | |
that the first quarter this year | 1:09 | |
in comparison with the fourth quarter of last year | 1:12 | |
represents about a $16.5 billion increment in money GNP. | 1:15 | |
That's essentially exactly the same | 1:23 | |
as the $16.5 billion increment from the third | 1:26 | |
to the fourth quarter of the year. | 1:31 | |
And so although this is a little bit slower | 1:32 | |
than the rate of growth of the economy year ago, | 1:36 | |
the difference is trivial and negligible. | 1:40 | |
So I conclude the slowdown has not yet come to us. | 1:44 | |
Worse than that, if we look at the composition | 1:52 | |
of the demand in the first quarter, | 1:55 | |
I believe that it will turn out | 1:59 | |
not to be strength based upon strong inventory accumulation. | 2:06 | |
On the contrary, the only solid figures we have | 2:12 | |
on inventory accumulation are for January, | 2:15 | |
and perhaps a little bit of February. | 2:18 | |
And these showed a remarkable moderation | 2:20 | |
in inventory accumulation. | 2:24 | |
These show an actual drop in the rate | 2:26 | |
of inventory stock building | 2:28 | |
in comparison with the end of last year. | 2:31 | |
And so my first casual estimate is that it is final demand | 2:33 | |
which represents the strength of the growth in GNP. | 2:41 | |
And by final demand, economists mean the components | 2:47 | |
of the gross national product | 2:52 | |
after you purify out the influence of inventory changes. | 2:53 | |
So we're going through a snake-like movement. | 2:59 | |
In the third quarter of last year, | 3:01 | |
final demand was extremely strong, in the 20 billions. | 3:03 | |
And inventory growth was rather moderate. | 3:08 | |
Then came the fourth quarter of the year. | 3:12 | |
If you looked at the total rate of growth, | 3:15 | |
it was not much different from the third quarter, | 3:17 | |
but its composition had changed. | 3:19 | |
Its composition had moved away from final demand. | 3:21 | |
Final demand dropped into the low teens | 3:25 | |
and toward inventory demand. | 3:29 | |
Well, now the snake is unwinding itself once again, | 3:33 | |
and we're back to the third quarter pattern, in my judgment. | 3:36 | |
And it is final demand which is in the 20s, low 20s, | 3:39 | |
in this particular quarter. | 3:45 | |
Now what's the difference? | 3:47 | |
A dollar is a dollar is a dollar. | 3:48 | |
Well, a dollar isn't the same thing as another dollar | 3:50 | |
if we're trying to look ahead, | 3:53 | |
because I think that the strength | 3:55 | |
in the final demand in the first quarter | 3:57 | |
indicates greater strength in the next quarter, | 4:00 | |
the second quarter of the year, | 4:04 | |
then would the same increment of dollars | 4:06 | |
if it had consisted of heavy inventory accumulation. | 4:09 | |
Now why is that? | 4:13 | |
It's simply because if we had had a 16 1/2 billion increase | 4:14 | |
in the first quarter this year | 4:20 | |
based upon a very rapid inventory accumulation rate, | 4:22 | |
let's say inventory is being accumulated | 4:26 | |
at an annual rate of $10 billion or more, | 4:29 | |
then in the quarter to come, | 4:31 | |
we might pay for this rapid inventory accumulation | 4:34 | |
by decumulation. | 4:37 | |
It's exactly the kind of compensating error | 4:39 | |
that we all get as automobile drivers | 4:42 | |
when we fill up our tank, | 4:45 | |
and reckon what our gasoline mileage was, | 4:48 | |
and we find that the last time, | 4:50 | |
we got terrific gasoline mileage. | 4:52 | |
Well, that's probably because the man | 4:54 | |
didn't fill up the tank equally. | 4:57 | |
And the next time, we'll pay for this | 4:59 | |
in having extraordinarily low gasoline mileage. | 5:01 | |
Well, it's not inventory, in my judgment. | 5:07 | |
And so the economy is very strong. | 5:11 | |
Now that's the wrap-up of the general picture. | 5:16 | |
What does it mean in terms of our various social problems, | 5:20 | |
and in terms of various components of the GNP? | 5:24 | |
A, unemployment still remains very low. | 5:30 | |
At the last recorded measurement, it was 3.3%. | 5:33 | |
The labor force is growing, I almost said magnificently. | 5:38 | |
Employment then is still up very much. | 5:43 | |
The growth in physical output continues, | 5:47 | |
but it's not commensurate, I would guess, | 5:52 | |
with the increase and input. | 5:55 | |
So I believe that I'm discerning a slight retardation | 5:57 | |
in the rate of growth of productivity. | 6:03 | |
Now you might think that this slowdown | 6:06 | |
in productivity would be bad for profits, | 6:08 | |
and by itself, it would be. | 6:12 | |
However, remember, volume is still increasing, | 6:15 | |
so that the total profits can go up | 6:18 | |
even if the profit per unit of output does not improve. | 6:20 | |
And total product and sales are still going up. | 6:30 | |
So I think that that does make for good profits. | 6:34 | |
But more than that, prices are rising. | 6:37 | |
We have not solved our inflation problem. | 6:40 | |
We have not moved from a slightly more | 6:43 | |
than 4% annual rate of inflation | 6:47 | |
to a slightly more than 3% rate of inflation | 6:50 | |
as probably the new Nixon administration has hoped | 6:54 | |
that we would begin to do. | 7:01 | |
On the contrary, as I read the numbers, | 7:03 | |
we continue at the previous rate of inflation. | 7:06 | |
Indeed, I'm not sure | 7:10 | |
that there has not been a perceptible quickening | 7:11 | |
of the rate of inflation since Inauguration Day. | 7:14 | |
This shows itself in monthly increases | 7:18 | |
in the so-called cost of living, the Consumer's Index, | 7:24 | |
of 4/10 of 1%, which is about 5% per year. | 7:27 | |
And the latest one figure that I saw | 7:34 | |
did not even have any soaring food prices in it. | 7:36 | |
It had some moderation in food prices. | 7:39 | |
So if we begin again to get food prices going up | 7:41 | |
added to the very substantial increase | 7:46 | |
in clothing prices that all our wives have been noticing, | 7:49 | |
and add it to the immutable, irrevocable increases | 7:52 | |
in the cost of medical care, | 7:58 | |
and the steady increases in the cost of services, | 8:00 | |
and adding a new element, the rather significant quickening | 8:04 | |
in the cost each month of housing | 8:11 | |
as the higher interest rates that the Federal Reserve | 8:16 | |
is helping to engineer begin to show themselves | 8:19 | |
in our monthly mortgage payments, | 8:23 | |
adding all these things together, | 8:27 | |
you would be a great optimist to see | 8:28 | |
in the months immediately ahead any significant diminution | 8:31 | |
in the rate of price increase. | 8:37 | |
This is a shame, | 8:40 | |
but I'm afraid that's the way the picture looks. | 8:41 | |
Well, it's an ill wind that blows nobody any good. | 8:47 | |
And these increases in prices, | 8:50 | |
which are so uncomfortable to us as family men | 8:52 | |
and as consumers, do help to explain, in my opinion, | 8:56 | |
why the profit situation is boiling along | 9:01 | |
at a pretty fast clip. | 9:05 | |
Now that we have the fourth quarter profit figures, | 9:08 | |
it turns out that the fourth quarter was very good | 9:11 | |
in terms of profits. | 9:16 | |
I don't know whether Wall Street has taken note of this, | 9:18 | |
but the actual year-end figures as they came in | 9:20 | |
have exceeded almost all of the estimates. | 9:24 | |
I believe the same thing has been going on | 9:27 | |
in the first quarter of the year. | 9:30 | |
We've seen these rash of announcements | 9:32 | |
of higher administrated prices, | 9:36 | |
and a lot of those higher prices have stuck. | 9:39 | |
In one of my previous tapes, | 9:44 | |
I attributed part of the timing of this | 9:46 | |
to the fact that corporate executives are less fearful, | 9:50 | |
that frowns will be emanating from the White House | 9:55 | |
and from the Council of Economic Advisers | 9:59 | |
if they do raise their prices, | 10:02 | |
and they have been raising their prices. | 10:04 | |
Since this is a time for a report card, | 10:10 | |
this is a time to grade little Johnny | 10:14 | |
on his reading, and on his English, | 10:16 | |
and how he is mastering conversational French, | 10:18 | |
and the new math, I must go on and give my comments | 10:21 | |
as an academic observer and teacher, so to speak, | 10:27 | |
to give grades to the new team of the Nixon administration | 10:31 | |
at the end of the first quarter of the year | 10:36 | |
on how they're doing as managers. | 10:38 | |
You know the word economics comes originally | 10:43 | |
from management, management of the household. | 10:45 | |
Well, we don't pretend to be home economists, | 10:49 | |
but as political economists, | 10:52 | |
we purport to prescribe to the nation, | 10:54 | |
how have Paul McCracken, and Herbert Stein, | 10:59 | |
and Hendrik Houthakker done as members | 11:03 | |
of the Council of Economic Advisers? | 11:06 | |
How has Arthur Burns as economic counselor | 11:09 | |
with cabinet rank to the president been doing? | 11:13 | |
Finally, the big question is, | 11:18 | |
how has Mr. Nixon been doing | 11:21 | |
in the economic sphere as a president? | 11:25 | |
Of course, it's very early in the game. | 11:30 | |
And the primary thing which must be said | 11:33 | |
upon the report card is evidence is still incomplete. | 11:36 | |
Scotch verdict is called for, | 11:40 | |
not proven one way or the other, and this is very natural. | 11:44 | |
But going beyond that, and recognizing that the new team | 11:50 | |
has actually been in office less than a quarter, | 11:54 | |
even though 1/4 of the year is gone, | 11:56 | |
let's see what indications there seem to be | 11:59 | |
for the future and for future report cards. | 12:05 | |
I would say that the new administration | 12:10 | |
has been going very slow in all of its actions. | 12:13 | |
It disbelieves in fine tuning. | 12:17 | |
If you identify fine tuning with activism, | 12:20 | |
which seems to me to be one possible | 12:24 | |
operationally meaningful definition of fine tuning, | 12:27 | |
then the new Nixon team | 12:32 | |
is claiming to go in for gross tuning, and not fine tuning. | 12:37 | |
They're moving very slowly in their actions. | 12:44 | |
Are they getting somewhere below the surface? | 12:51 | |
Again, an outsider is not able to judge. | 12:55 | |
But we live in a very open society, | 12:58 | |
and there's nothing more open than the society there | 13:01 | |
on the banks of the Potomac. | 13:05 | |
And if really big things were in the offing | 13:07 | |
for handling the inflation, | 13:12 | |
I'm sure that in the Kiplinger newsletters, | 13:14 | |
in the gossip at the Cosmos Club, | 13:17 | |
I would've picked up signs of it. | 13:20 | |
And my report is that there's very little | 13:23 | |
actually brewing on the scene to handle this inflation. | 13:27 | |
Indeed, some of the new men | 13:32 | |
in Washington must feel very frustrated, | 13:35 | |
and let me go over the problem as it must appear to them. | 13:38 | |
First, they | 13:45 | |
have found they really cannot cut the Johnson budget. | 13:49 | |
On the contrary, to tell the truth and shame the devil, | 13:54 | |
and when all the statistics come in, | 13:58 | |
it's going to turn out that the new team cannot stay | 14:01 | |
within the totals of the Johnson budget. | 14:04 | |
This is true in the military sphere. | 14:08 | |
We were promised casually, | 14:11 | |
and one shouldn't hold anyone to this kind of promise, | 14:14 | |
from the highest circles that there would be | 14:18 | |
about a $3 billion cut in the Defense Department. | 14:23 | |
We have now been told by Secretary Laird | 14:27 | |
that it's more like 500, | 14:31 | |
sorry, three billion. | 14:36 | |
If I said million, I meant billion. | 14:37 | |
It's more like 1/2 a billion, or 500 million, | 14:40 | |
that's gonna be saved. | 14:43 | |
Now as far as I can tell, I'm not an expert in this, | 14:44 | |
but all the experts and insiders | 14:47 | |
reading Mr. Laird's speech carefully realized | 14:51 | |
that that 1/2 a billion figure is not a genuine figure. | 14:55 | |
And for the fiscal year, counting in the supplementaries, | 14:58 | |
which Laird's programs are gonna call for, | 15:03 | |
we are going to have an increase in the military budget, | 15:06 | |
not a saving of 1/2 a billion dollars, | 15:10 | |
and the betting has only to do | 15:13 | |
with how big that increase is. | 15:17 | |
So we do not have savings on the defense budget in view. | 15:20 | |
What about the wasteful spending | 15:28 | |
that's been going on through all these Democratic years | 15:31 | |
in the non-defense part of the budget, | 15:36 | |
the civilian part of the budget? | 15:39 | |
Surely, great cuts are possible there. | 15:40 | |
Well, if great cuts are possible there, | 15:43 | |
the new team has not been able to discover them, | 15:45 | |
at least, has not been able to discover any | 15:50 | |
that are politically palatable. | 15:52 | |
And many of the uncontrollable items in the budget | 15:54 | |
such as, for example, interest on the public debt, | 15:58 | |
are soaring upward beyond earlier estimates. | 16:02 | |
The uncontrollable items are going up, | 16:06 | |
and the controllable items turn out, in fact, | 16:10 | |
in terms of political palatability, not to be controllable. | 16:13 | |
And those items are not going down, | 16:18 | |
but instead, are also staying level or going up. | 16:21 | |
So on the side of fiscal policy, | 16:26 | |
the public expenditure side, | 16:30 | |
one could pity the new team for their frustration | 16:36 | |
in not being able to get public expenditure down. | 16:41 | |
So let's just jot down no substantial reductions | 16:44 | |
in government expenditure | 16:50 | |
on the fiscal policy spending side. | 16:53 | |
Now what about taxation? | 16:57 | |
If you were an activist, that is, a fine-tuner, | 17:01 | |
and you saw prices rising as much as they have been rising, | 17:04 | |
and unemployment staying as low, | 17:08 | |
the balance of payments deteriorating, | 17:10 | |
it would leap to your mind to use an increase in tax rates. | 17:13 | |
The new team has painfully decided | 17:19 | |
that it will recommend that the 10% surcharge be extended. | 17:25 | |
I predicted in these tapes that that would be the case. | 17:33 | |
I predicted in these tapes that that would be the case | 17:37 | |
in the last words of President Johnson. | 17:40 | |
And I predicted that Mr. Nixon would go along | 17:44 | |
with that in his preliminary words. | 17:47 | |
And I predicted that after he used all the time | 17:48 | |
and breathing space left to him, | 17:52 | |
that he would find himself reluctantly recommending | 17:56 | |
that the surcharge be continued, and that has now happened. | 18:01 | |
But the point of my present discussion is, | 18:06 | |
will anyone have the guts, anyone have the will, | 18:10 | |
to recommend a still greater increase in tax rates? | 18:16 | |
And my confident prediction to that is no. | 18:21 | |
This is too bitter an ideological pill | 18:27 | |
for the new team to swallow, | 18:30 | |
and they will not recommend an increase in the surcharge | 18:32 | |
over and above the continuation of the 10% surcharge. | 18:39 | |
Even though, in my judgment, a strong economic case | 18:44 | |
can be made for such an additional surcharge. | 18:49 | |
Well, where does that leave us? | 18:55 | |
We know that plant and equipment spending, | 18:57 | |
according to the intentional's official survey | 19:00 | |
of the SEC and the Department of Business Economics, | 19:03 | |
Office of Business Economics, | 19:07 | |
shows a soaring 13.9 or 14% increase. | 19:09 | |
This is more than our capital goods industries | 19:14 | |
are capable of producing. | 19:17 | |
The intention will be falsified | 19:20 | |
by the reality of deliveries. | 19:24 | |
But the intention, the attempt to get deliveries will add | 19:27 | |
to the backlogs, will add to the length of the queues, | 19:32 | |
will add to the inflationary pressure, | 19:36 | |
will add to the rate of markups due to exuberant demand | 19:39 | |
in our capital goods industries. | 19:45 | |
And so it might be thought that if this is one | 19:48 | |
of the overly strong sectors of the economy, | 19:52 | |
we might use a specific tax | 19:57 | |
to reduce the rate of inflation in this sector. | 20:01 | |
And actually, that is what I proposed | 20:06 | |
in a recent Newsweek column, | 20:11 | |
namely that the 7% investment tax credit be suspended. | 20:13 | |
The high officials in the new administration, | 20:18 | |
Secretary David Kennedy of Treasury, for example, | 20:23 | |
have said that they were against this, | 20:29 | |
but now under pressure, they are beginning | 20:33 | |
to take a little more seriously this possibility. | 20:37 | |
I believe that I made a prediction | 20:41 | |
on these tapes some time ago | 20:43 | |
that after they took a hard look at this, | 20:46 | |
they would not, for a variety of reasons, | 20:48 | |
including ideological reasons, | 20:51 | |
find themselves able to make such a recommendation. | 20:54 | |
In my judgment, but I won't go into that | 21:01 | |
during this report card period, | 21:05 | |
it makes good sense when plant | 21:08 | |
and equipment spending is excessive, | 21:11 | |
to hit plant and equipment spending directly | 21:13 | |
by a suspension of the investment tax credit, | 21:18 | |
even though it involves a great number | 21:22 | |
of very serious administrative headaches. | 21:26 | |
However, it looks to me as if the new team | 21:30 | |
will not make that recommendation, | 21:33 | |
and I still stand by that prediction. | 21:36 | |
I may say that I never have any hesitation | 21:39 | |
in throwing overboard some past prediction or viewpoint. | 21:42 | |
I believe in the doctrine of cutting one's losses. | 21:48 | |
And so if I change my mind on that, | 21:51 | |
the listeners of this tape will be among the first | 21:53 | |
to learn of that momentous fact. | 21:58 | |
What then does this leave with the new administration | 22:04 | |
in terms of controlling the inflation, | 22:10 | |
in terms of moderating the inflation down | 22:14 | |
towards a 3 1/3% or even a 3 1/2% rate of price increase. | 22:18 | |
By and large, since fiscal policy turns out | 22:25 | |
to be unavailable or they're unwilling | 22:29 | |
to use activist fiscal policy, | 22:33 | |
it leaves them with a dependence upon the Federal Reserve. | 22:36 | |
It leaves them with a hope | 22:41 | |
that the Federal Reserve will do the right thing. | 22:44 | |
Now I don't know what different people think | 22:47 | |
is the right way to run the railroad | 22:53 | |
of American macro stabilization policy | 22:55 | |
between the central bank, the Federal Reserve, | 22:59 | |
and the executive branch of the government. | 23:03 | |
In my judgment, the only sensible long-run way | 23:07 | |
to run this railroad is to have unified policy | 23:12 | |
between the Treasury and the Federal Reserve. | 23:16 | |
And this means that in the longest run, | 23:19 | |
the Federal Reserve should be in the last analysis | 23:22 | |
responsible to the executive branch of the government. | 23:28 | |
This, of course, with the concurrence of Congress. | 23:33 | |
Now that's not the way our system is now running. | 23:38 | |
Since 1952, increasingly, the Federal Reserve | 23:45 | |
has proclaimed its independence | 23:51 | |
from the executive branch of the government, | 23:54 | |
and its responsibility ultimately only to Congress. | 23:58 | |
Hence, while the new team would like the Federal Reserve | 24:05 | |
to do what they deem to be the right thing, | 24:09 | |
namely to do all the controlling, | 24:14 | |
the inflation that we're gonna see, | 24:16 | |
it is not at all the case | 24:19 | |
that they can command Chairman Martin | 24:21 | |
and his six colleagues to do their bidding. | 24:24 | |
However, I don't think there's a real serious problem here, | 24:28 | |
because in my judgment, the Federal Reserve | 24:35 | |
is likely in the next months to itself | 24:38 | |
be wanting to do as much tightness | 24:43 | |
as most of the members of the new administration team | 24:47 | |
of economists would want them to do. | 24:55 | |
I suspect that the rate of growth of the money supply, | 24:58 | |
just to take one of the many factors | 25:04 | |
that I would consider to be important, | 25:08 | |
that the rate of growth of the money supply | 25:11 | |
will be held down by the Federal Reserve | 25:13 | |
in the months to come | 25:18 | |
to below the say 4% rate, | 25:22 | |
which the monetarists believe is the constant rate | 25:28 | |
that should be maintained. | 25:35 | |
And so as far as those monetarists | 25:37 | |
in the new administration are concerned, | 25:41 | |
I can't see that they'll want the Federal Reserve | 25:43 | |
to be going tighter than the Federal Reserve | 25:46 | |
will already be going. | 25:50 | |
Indeed, I expect to hear some criticism | 25:52 | |
of Federal Reserve for overdoing it. | 25:54 | |
I mean criticism on the part not of Wright-Patt them, | 25:57 | |
but on the part of monetarists. | 26:00 | |
Because the typical monetarist prescription now | 26:02 | |
is that the previous excess over 4% | 26:05 | |
should be brought down gradually to 4% | 26:09 | |
rather than as I think. | 26:12 | |
But I warn you, I'm not a gross-tuner, and I am an activist. | 26:15 | |
I believe that monetary growth | 26:22 | |
should be brought down below 4% | 26:26 | |
to compensate for the excess which took place earlier. | 26:28 | |
And so the Federal Reserve cannot be blamed, in my judgment, | 26:35 | |
by the new administration economists for doing too little. | 26:40 | |
If anything, they were likely | 26:44 | |
to be blamed for doing too much. | 26:46 | |
Now will this control the inflation? | 26:48 | |
Well, nobody expects a monetary policy | 26:53 | |
to have its effects within a month or two. | 26:57 | |
So we have to ask ourself, | 27:00 | |
what is implied for next Labor Day? | 27:02 | |
What is implied for next Thanksgiving | 27:05 | |
by what seems to be the indicated Federal Reserve tightness? | 27:08 | |
I spoke to one of the most prominent bank monetarists | 27:15 | |
on the telephone just a couple of days ago. | 27:18 | |
And as usual, those fellows are very big swingers. | 27:22 | |
And he gave me predictions of a 10 billion increase | 27:27 | |
in GNP in the third quarter of the year, | 27:31 | |
and a 10 billion increase in GNP | 27:36 | |
in the fourth quarter of the year, | 27:38 | |
which brings down the rate of growth of the GNP | 27:40 | |
from what I've told you I think has happened | 27:43 | |
in the first quarter of the year | 27:46 | |
down to just 2/3 of that level, | 27:49 | |
and which would be certainly a step toward controlling | 27:51 | |
and moderating the rate of inflation. | 27:58 | |
I doubt, in fact, I will make book, | 28:03 | |
let's say I'll bet a great, big dime, | 28:08 | |
against a great, big dime, | 28:12 | |
that the third quarter of the year will be stronger | 28:14 | |
than is indicated by this monetarist's view. | 28:18 | |
To make a long story short, | 28:25 | |
it seems to me that the new administration | 28:28 | |
is not being active enough to using its own value judgments | 28:32 | |
about the trade-off between unemployment, | 28:39 | |
and price stability, and balance payments equilibrium, | 28:41 | |
not using my value judgments. | 28:44 | |
Maybe in a way, I welcome the profligate nature | 28:46 | |
of the new administration. | 28:51 | |
Maybe in a way, we're getting what I talked about | 28:54 | |
in my London Financial Times piece on New Year's Day | 28:58 | |
that the Nixon administration, | 29:04 | |
which is, by and large, a business man's administration, | 29:08 | |
would come in and do pretty much | 29:11 | |
what the Kennedy-Johnson populist administration had done. | 29:14 | |
And it's like a license to sin. | 29:19 | |
You have respectable people sinning. | 29:22 | |
They're respectable in the eyes of the business community. | 29:24 | |
And this would make for a great exuberance in the economy. | 29:27 | |
Well, maybe we're getting that. | 29:31 | |
But to complete the report card, | 29:34 | |
they've been too little active in the fiscal policy area. | 29:37 | |
They are depending upon the Federal Reserve. | 29:41 | |
And although I think the Federal Reserve will tighten, | 29:43 | |
I don't think that we've seen the end of tight money | 29:47 | |
or the peak of interest rates. | 29:50 | |
I do not believe that that operation will be sufficient | 29:52 | |
to give us a really significant slowdown | 29:58 | |
such as to $10 billion by the third quarter of the year. | 30:03 | |
That doesn't mean that as we move into the fourth quarter | 30:07 | |
and into the first quarter of next year | 30:10 | |
that you finally won't get the results | 30:11 | |
of the monetary tightening. | 30:14 | |
But in my judgment, this is likely | 30:18 | |
to fall exceptionally heavily on housing, | 30:22 | |
and I think that's bad social policy. | 30:26 | |
However, our time is just about up. | 30:30 | |
And there'll be plenty of time on future occasions | 30:34 | |
to talk about the particular incidents | 30:36 | |
of tight money on the construction industry. | 30:39 | |
- | That concludes this week's commentary | 30:42 |
on the current economic scene | 30:45 | |
with Professor Paul Samuelson of MIT. | 30:46 | |
If you have questions or comments, | 30:49 | |
write Instructional Dynamics Incorporated, | 30:51 | |
166 E. Superior Street, Chicago, 60611. | 30:54 |
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