Tape 39 - Comments on some 1970 forecasts
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Narrator | Hello again and welcome | 0:02 |
to another in a series of discussions, | 0:03 | |
on the current economic scene | 0:05 | |
with Professor Paul Samuelson of MIT. | 0:06 | |
This is a bi-weekly service produced | 0:10 | |
and recorded by Instructional Dynamics of Chicago. | 0:12 | |
Professor Samuelson. | 0:15 | |
- | I am recording early in November | 0:17 |
and this is really a very exciting time | 0:18 | |
to be commenting on the economic scene. | 0:21 | |
Because so much seems to be happening. | 0:24 | |
This is the time of the year, | 0:28 | |
when the annual forecasts begin to gel. | 0:29 | |
And almost always at this time of the year, | 0:33 | |
there begins to form a standard fashionable forecast. | 0:36 | |
I've been spending the last couple of weeks talking | 0:42 | |
to business groups and collecting different forecasts, | 0:44 | |
both from Washington, from the Universities | 0:48 | |
and from private individuals, and I now have the task of | 0:51 | |
boiling these down together and to try to discern, if I can, | 0:56 | |
what the standard forecast is for the coming year, 1970. | 1:01 | |
Let me share with you my thought processes | 1:06 | |
and the raw material that I'm using, | 1:08 | |
informing my judgements in these mattes. | 1:10 | |
First, there is a clear cut group, | 1:14 | |
the monetarists, who say that next year will be a year of | 1:19 | |
recession as measured by the | 1:25 | |
National Bureau of Economic Research. | 1:26 | |
And as a matter of fact, most of them, | 1:28 | |
and I will report on this, | 1:32 | |
say that this will not be a borderline case, | 1:33 | |
that this will be a rather serious recess, | 1:36 | |
as we've come to measure post war recessions. | 1:40 | |
Not serious perhaps in terms | 1:43 | |
of the broad sweep of American history, | 1:45 | |
going back to the Civil War, but many people had thought | 1:48 | |
that the business cycle was part of the growing pains | 1:52 | |
of capitalism and that we have moved, | 1:55 | |
into a less valiant stage of the business cycles. | 1:58 | |
In which, there still will be ups and downs, | 2:01 | |
there will be pauses, there will be retardation's, | 2:04 | |
there will be recessions, | 2:06 | |
but there will no longer be great depressions | 2:07 | |
and the years of the recession will be fewer than earlier, | 2:09 | |
unless we change our definitions | 2:14 | |
as to what constitutes a recession. | 2:17 | |
And they would be less in amplitude than earlier. | 2:20 | |
Now, let me review what I perceive | 2:25 | |
to be the growing monetarist position. | 2:28 | |
As with every school, | 2:33 | |
there are differences of opinion within it, | 2:34 | |
but let me sight particular instances of evidence. | 2:37 | |
Professor Milton Friedman in the companion service | 2:44 | |
to this tape of the IBI. | 2:49 | |
I believe it was on October 10th, | 2:53 | |
recorded the view that already, | 2:57 | |
because of the lags that are involved in the effect | 3:00 | |
of monetary change upon the economy. | 3:05 | |
The Fed has been so tight since April, or May of this year, | 3:10 | |
involving the money supply constant | 3:15 | |
that we cannot avoid a pause of the 1967 variety. | 3:17 | |
Indeed, it has gone beyond that. | 3:23 | |
We can not even look forward to a recession | 3:25 | |
of the 60, 61 variety, which did count | 3:28 | |
as a genuine National Bureau recession. | 3:32 | |
As of that time he thought | 3:35 | |
that even if the Fed mended it's ways | 3:37 | |
and changed it's tight reign on the tight money supply, | 3:39 | |
who're in for something at least as bad as 1958. | 3:43 | |
Last week, that's just about the 1st of November, | 3:51 | |
I had to address a group in New York, | 3:56 | |
these were a group of business cycle analysts, | 4:01 | |
people from banks, from insurance companies, | 4:04 | |
from investment counseling firms, | 4:06 | |
from large brokerage houses, small working group, | 4:09 | |
and I thought in preparation for that, | 4:13 | |
I would gather together some typical forecasts. | 4:15 | |
So, on the monetarists front, | 4:20 | |
I bethought myself, while I was in New York, | 4:22 | |
to phone a very good monetarists, | 4:25 | |
who operates out of he's Chicago bank, | 4:28 | |
nothing that I say is particularly different from | 4:33 | |
what he's been saying to other people, | 4:36 | |
but let me simply, without naming any individuals, | 4:38 | |
say what he told me as October was turning into November. | 4:42 | |
He said first the Fed has been very tight, | 4:48 | |
in he's judgment he could not get discerned, | 4:50 | |
any visible sign in the statistics | 4:54 | |
that the Fed has changed it's posture. | 4:56 | |
However, since he regarded that posture | 4:59 | |
as so idiotic he could not help but believe | 5:02 | |
that the Fed was in the process of changing it's posture, | 5:04 | |
was about to change its' posture, | 5:08 | |
and would move from having the rate of growth, | 5:11 | |
to having the money supply be zero, | 5:13 | |
indeed, perhaps a little negative, | 5:15 | |
since last April, last May, would move towards, | 5:18 | |
say a two or three percent increase in the money supply. | 5:22 | |
He said that move would be in the right direction, | 5:27 | |
it would be less than many prominent monetarists, | 5:30 | |
have called for. | 5:34 | |
On the other hand, it would at this moment satisfy him, | 5:35 | |
I presume that almost anything would satisfy him, | 5:39 | |
was better than what they've been doing. | 5:41 | |
This particular increase, if it took place, | 5:43 | |
and mind you, this is all surmised | 5:46 | |
because there's no evidence yet | 5:48 | |
that it is going to take place, | 5:49 | |
would be consistent with the testimony | 5:52 | |
of another prominent monetarist, | 5:55 | |
Mr David Musselman testified before, | 5:57 | |
I guess it was the Joint Economic Committee in Congress. | 6:00 | |
And he said that now, | 6:03 | |
the Federal Reserve should stop being too tight, | 6:05 | |
stop holding the money supply down to nothing | 6:08 | |
and should let it grow at two or three percent. | 6:11 | |
He's perhaps first choice, | 6:14 | |
personally would be to four or five percent, | 6:16 | |
the standard target figure of most monetarists, | 6:20 | |
but he would settle for two or three percent. | 6:24 | |
So my man from Chicago said, | 6:27 | |
I cannot make a forecast about the far future, | 6:28 | |
without making forecasts about the Fed | 6:31 | |
and I shall assume that in the next three or four months | 6:33 | |
that would mean I presume November, December, | 6:37 | |
January perhaps February, | 6:40 | |
the Fed will let the money supply grow , | 6:42 | |
at two to three percent. | 6:45 | |
On that basis he said, I'm prepared | 6:48 | |
to make a forecast for ya. | 6:49 | |
And I said, well fine, I'll write it down. | 6:50 | |
He said, in the fourth quarter of the year, | 6:53 | |
I think that the GMP will only grow about | 6:55 | |
nine billion Dollars. | 6:58 | |
It had grown 17 and a half billion in the third quarter. | 7:01 | |
He said in the first quarter of the year | 7:05 | |
and in the second quarter of the year, | 7:08 | |
the nominal GMP, by that he means the Dollar GMP, | 7:10 | |
I notice the monetarists always use the word nominal | 7:14 | |
and even my students don't always understand what | 7:17 | |
that means, so I hasten to give you the vulgar equivalent, | 7:19 | |
which is, in current money prices. | 7:23 | |
He said in the first two quarters of the year, | 7:27 | |
according to my crystal ball, | 7:29 | |
we have a zero increase in the money GMP. | 7:32 | |
I sat up straight in my chair, | 7:35 | |
I said, zero in the nominal money GMP. | 7:39 | |
He said yes. | 7:41 | |
And I said, | 7:42 | |
well that course means quite a decrease in the real GMP, | 7:43 | |
because you cannot be thinking | 7:46 | |
that the implicit price deflator, | 7:48 | |
which in the third quarter was running at five and a half, | 7:50 | |
five and a third percent, | 7:55 | |
at least, you can't think that could have dropped below. | 7:57 | |
And here I became far fetched, | 8:02 | |
a two and a half percent per year annual rate. | 8:04 | |
An' he said, no I don't. | 8:07 | |
An' he said, therefore my forecast is for a real increase, | 8:08 | |
which is below two and a half percent per annual rate, | 8:12 | |
for the first half of the year. | 8:20 | |
Now, that's on the assumption | 8:22 | |
that the Federal Reserve mends it's ways. | 8:24 | |
Stops been as brutally sadistic as it has been, | 8:28 | |
and lets the money supply grow at two | 8:32 | |
to three percent per year. | 8:35 | |
That would be a rather considerable recession, | 8:38 | |
by anybody's definition. | 8:44 | |
I said to him, well actually I've just been talking | 8:47 | |
to somebody in Washington | 8:50 | |
and he said he's had a peek at the new run, | 8:51 | |
of the working school model | 8:54 | |
and you're not so far off from what | 8:56 | |
that model is forecasting | 8:59 | |
because in one or another of those quarters, | 9:00 | |
I haven't seen the figures yet, | 9:02 | |
we'll get them in the business week, | 9:04 | |
not too long I dare say, they were speaking | 9:06 | |
of only about a four billion Dollar increase in money GMP, | 9:10 | |
which is within half a percent annual rate | 9:14 | |
of your level money GMP. | 9:17 | |
He said, good humidly, | 9:21 | |
gee I wish you hadn't told me that | 9:23 | |
because those fellows are never right | 9:25 | |
and I hate to be in their company, | 9:28 | |
but nevertheless I stand by my particular numbers. | 9:30 | |
Well, that is the monetarists view. | 9:35 | |
It perhaps is little excessive in my judgment, | 9:39 | |
of what I would guess, if I was a monetarist, | 9:43 | |
but I should really let the beast speak for himself, | 9:45 | |
and I'll make my commentary later. | 9:49 | |
It is not very different from a few | 9:54 | |
of the gross national product large scale models, | 9:58 | |
but it is a bit stronger than any of those models | 10:05 | |
that've come to my attention. | 10:08 | |
I've mentioned that the working school model seems | 10:09 | |
to be adjusting itself downward | 10:12 | |
and is in the same ballpark with that particular view. | 10:15 | |
But I think a more typical view from models runs as follows, | 10:19 | |
now I'll take particular private one | 10:27 | |
that I have before me and I will simply give you | 10:29 | |
what happened in the third quarter, | 10:33 | |
that's a 17 and a half billion increase in the GMP. | 10:35 | |
This particular private model, | 10:39 | |
didn't guess that it would be quite as large as that, | 10:42 | |
it was done in advance, it was off by at least a billion, | 10:43 | |
but that's still pretty good, I guess. | 10:46 | |
And it thinks that the drop will go down to eight | 10:49 | |
and a half billion in the fourth quarter. | 10:54 | |
Then to nine and a half billion in the first quarter | 10:56 | |
of the year and then because, | 11:00 | |
it's something that I don't really understand, | 11:01 | |
there's a jump to about 13 billion. | 11:05 | |
That's a fairly optimistic private forecast. | 11:10 | |
Let me contrast with it, | 11:16 | |
a more pessimistic machine forecast, | 11:19 | |
this is a computer forecast, | 11:23 | |
based upon regression equations, | 11:24 | |
little bit of judgment involved, | 11:27 | |
some of the relationships are, | 11:28 | |
as we say are exogenous, like housing. | 11:31 | |
But this particular model builder, | 11:34 | |
has 17 and a half billion for the third quarter. | 11:39 | |
There's only seven and a third billion increase, | 11:43 | |
in money GMP in the fourth quarter of the year, | 11:46 | |
then he has seven and a half billion, | 11:49 | |
then he has eight billion, | 11:50 | |
then he has a big increase in money terms, | 11:52 | |
in the third quarter of the year, | 11:56 | |
because there's gonna be big pay increase again | 11:58 | |
by the Federal Government next July | 12:00 | |
and he definitely has the economy coming back, | 12:04 | |
in the last part of 1970. | 12:08 | |
All of these forecasts that I've been mentioning to you, | 12:13 | |
whether it's my monetarist friend in Chicago, | 12:15 | |
or whether it's a working school model, | 12:17 | |
or whether it's neither of these two global forecasts, | 12:20 | |
call for very little increase in real GMP, | 12:24 | |
in the fourth quarter of the year, | 12:29 | |
because we have to grow almost 10 billion, | 12:31 | |
just in order to keep up with the price changes | 12:34 | |
and anyone who believes in eight, | 12:41 | |
nine and ten billion is showing no increase in real GMP. | 12:43 | |
Let me turn to a investment councilors model | 12:49 | |
that I have in front of me, | 12:53 | |
and as I look at this particular model, | 12:55 | |
it shows for almost 14 billion increase, | 13:00 | |
in the fourth quarter. | 13:05 | |
Which means the real GMP is still increasing somewhat, | 13:07 | |
then going to the first quarter of the year, | 13:11 | |
shows 12 billion in money terms at 11 and a half billion, | 13:13 | |
then 15 billion increase, | 13:16 | |
then by some quirk nine and a half billion, | 13:19 | |
then 15 billion and as a matter of fact, | 13:22 | |
this particular crystal ball is very good one, | 13:25 | |
because it goes all the way into the fourth quarter of 1971, | 13:27 | |
but I won't bore you with those numbers. | 13:31 | |
Now what am I to think about these forecasts. | 13:35 | |
First, it seems to me that they are too pessimistic, | 13:42 | |
too bearish I should say, | 13:49 | |
too low when it comes to the fourth quarter of the year. | 13:52 | |
After all we are well into the fourth quarter. | 13:56 | |
The last quarter increase was 17 and a half billion. | 14:00 | |
I like to quote to student forecasters the Latin phrase, | 14:05 | |
which Alfred Marshall used at the beginning | 14:09 | |
of his famous Principles of Economics, | 14:11 | |
Natura non facit saltus. | 14:14 | |
For those of you who were away from school, | 14:17 | |
the day they taught Latin, | 14:19 | |
let me say that means | 14:21 | |
that nature does not operate discontinuously. | 14:23 | |
Of course, the whole quantum theory | 14:27 | |
of physics is a reputation of that Latin tag, | 14:28 | |
but it's good for near-fight forecasters | 14:32 | |
to use the rule, shade down your changes. | 14:36 | |
Assume that things are gonna change in the direction | 14:41 | |
that you believe, but don't believe | 14:44 | |
that something violent is gonna happen in a single quarter. | 14:46 | |
As I wet my finger and put it to the air, | 14:50 | |
it's something I was taught to do in the boy scouts, | 14:55 | |
to find out which way the wind is blowing. | 14:57 | |
It never worked very well when I was a boy scout | 14:59 | |
because it always seemed to me to be cool on all sides. | 15:01 | |
But as I do that, looking at the October statistics, | 15:03 | |
looking at the September heritage, | 15:08 | |
the beginning of the November statistics, | 15:11 | |
I don't have the impression that the rate of growth | 15:13 | |
of the GMP will have gone from 17 and a half billion, | 15:16 | |
all the way down to seven billion, | 15:19 | |
or to eight billion, or to nine billion. | 15:21 | |
And so I go along with that investment councilors forecast, | 15:24 | |
which perhaps better just | 15:30 | |
because it's a more recently made forecast than some | 15:32 | |
of these others particularly the big machine ones tend | 15:35 | |
to get out of date very fast | 15:37 | |
and it's such a chore to update them | 15:39 | |
and therefore you're left with stale bread, | 15:41 | |
stale cake to eat. | 15:44 | |
I would think that something like, | 15:47 | |
13 or 14 billion increase in GMP, | 15:49 | |
in the fourth quarter would be the more likely number. | 15:53 | |
I say this because I don't think you can have, | 15:58 | |
such a big swing unless you have a big inventory swing | 16:00 | |
and my feeling is, that the next big inventory swing, | 16:03 | |
if we're gonna have it, will be for a little while at least, | 16:07 | |
to accumulate some unwanted inventory. | 16:10 | |
And that process, while it's lasting will put off the day | 16:13 | |
of the downturn in the GMP figures. | 16:17 | |
And I don't sense that that process is very well started, | 16:20 | |
actually, I mean by this, | 16:26 | |
GMP inventory accumulation going on at the rate | 16:28 | |
of 10, 12, 14, 15 billion Dollars. | 16:31 | |
In 1966 the last time we had a test, | 16:35 | |
you remember, just before that mini recession of 1967, | 16:39 | |
we learned that inventory had accumulated | 16:44 | |
to the tune of 20 billion Dollars annual rate, | 16:47 | |
in the fourth quarter of the year. | 16:49 | |
One doesn't yet sense that anything like | 16:51 | |
that has happened and we aren't getting the aftermath | 16:53 | |
of this happening and therefore it seems to me | 16:55 | |
that these particular fashionable forecasts, | 16:58 | |
if you call them fashionable, are little bit premature, | 17:00 | |
they're a little bit too soon to happen. | 17:04 | |
Now, I said I wouldn't second guess | 17:07 | |
that monetarists and I don't really intend to do so. | 17:09 | |
But I would like to point out | 17:12 | |
that the monetarists, by and large, | 17:14 | |
now are accepting the fact that they were misinformed | 17:18 | |
by the Federal Reserves money supply figures, | 17:22 | |
in the first several months of this year, | 17:25 | |
say from January to April. | 17:27 | |
And whereas some of them had thought, | 17:30 | |
the Fed was already committing a very bad crimes, | 17:32 | |
not as bad as the crimes in the middle of the year, | 17:35 | |
when the money supply didn't grow at all, | 17:36 | |
but we're still holding it down to only a couple of percent, | 17:38 | |
which they thought at that time was too little, | 17:41 | |
in terms of their advocated position of gradualism. | 17:44 | |
It now appears that the Fed was just about on nose, | 17:48 | |
four and a half to five percent. | 17:51 | |
Now I recognize that this is a drop from a still higher rate | 17:53 | |
and some monetarists can bring in the rate, | 17:57 | |
of change of the rate of change, | 18:01 | |
of the rate of change and get more delegate forecasts, | 18:02 | |
than I am able to do. | 18:05 | |
But I'm not sure that when all the dust has settled, | 18:06 | |
we look back upon this period, | 18:10 | |
and look back on it with the spectacles of a monetarist | 18:11 | |
that we will be able to say that already in, | 18:14 | |
on November 1st 1969 there was enough restraint | 18:19 | |
that the Fed had already created | 18:26 | |
to justify very low forecasts of GMP. | 18:29 | |
However I want to keep my eye on the main issue, | 18:37 | |
one can be right on a lot of little petty issues | 18:41 | |
and loose the whole ballgame, | 18:45 | |
when the important thing is at stake. | 18:46 | |
The big question we can ask is, | 18:50 | |
will 1970 itself be a recession year. | 18:53 | |
Now, I don't propose to go into a semantic snarl | 18:59 | |
as to how you define a recession, a big recession, | 19:03 | |
a little recession, a itsy-bitsy recession, | 19:06 | |
I think what Los Vegas might take | 19:09 | |
as admissible formulation of a bet, | 19:12 | |
a National Bureau definition, | 19:16 | |
which goes something like the following. | 19:17 | |
If the real GMP declines for two quarters, | 19:19 | |
at least two quarters, then we will speak of a recession. | 19:24 | |
Now we could begin to worry about whether, | 19:28 | |
supposed declines at one tenth of one percent per year, | 19:32 | |
for two quarters, is that a significant decline, | 19:36 | |
is that enough of a decline, | 19:39 | |
is that distinguishable from a zero. | 19:40 | |
But let's not be so refined as that. | 19:43 | |
And then it seems to me, | 19:46 | |
that on the basis of almost all of these forecasts, | 19:47 | |
both those that are at the low side, | 19:51 | |
and even those that quite optimistic, | 19:54 | |
there is a good chance, I would say, | 19:57 | |
better than a 50/50 chance. | 20:01 | |
I would not say as good as 9/1 in my book | 20:03 | |
that 1970 will be a year of recession on that basis. | 20:07 | |
That is a recession at least as bad as, | 20:14 | |
lets say 1960's recession, it may be, | 20:17 | |
it may be worse, but I do not see the evidence for it | 20:19 | |
and I would not even give as much weight | 20:22 | |
as I have given to the side that bets for recession, | 20:25 | |
did I not know that it is government policy | 20:30 | |
to have all this happen. | 20:33 | |
In earlier periods when the government, | 20:35 | |
really did not want a retardation, | 20:36 | |
did not want to slow it down, did not want a recession, | 20:38 | |
I believed that they had lots of cards up their sleeve | 20:41 | |
and they could pull out little trust funds | 20:43 | |
and little expenditures here to, so to speak, | 20:45 | |
steam up the economy. | 20:49 | |
But with the inflation still with us | 20:51 | |
and I must say that the system has paid us very little, | 20:54 | |
in the way of showing some price restraint, | 20:59 | |
up to this moment. | 21:02 | |
I think when history comes to look at this period, | 21:03 | |
we'll finally, we will probably find | 21:05 | |
that there is some let up in the rate | 21:07 | |
of price increase already recorded by the fall of this year. | 21:10 | |
But in the stream of history itself, in real time, | 21:15 | |
while it's happening, you cannot see that. | 21:18 | |
Let me in the remaining time that I have, | 21:22 | |
change the subject very slightly | 21:25 | |
and speak about whether the Federal Reserve, | 21:27 | |
is likely to ease up as measured by engineering | 21:29 | |
or condoning an increase in the rate of growth, | 21:36 | |
the money supply in the next three or four months, | 21:39 | |
which is greater than zero. | 21:42 | |
In my judgment, the answer is yes. | 21:44 | |
I don't think they will stay as tight as they have been. | 21:46 | |
It's not because of something | 21:49 | |
that I already see in the wind, | 21:50 | |
but I just put myself in their position | 21:52 | |
as fairly intelligent man and I think | 21:54 | |
that they do not want to have so tight a posture. | 21:58 | |
This leads to the question | 22:05 | |
that the one of our subscribers has asked me about. | 22:06 | |
He says, I've seen lots of comments, | 22:10 | |
about the Arthur Burns appointment | 22:12 | |
to be the chairman of the Council of Economic advisers | 22:14 | |
and I've heard many viewpoints, | 22:18 | |
what's your particular viewpoint? | 22:20 | |
I will very briefly give a few thoughts on this subject. | 22:22 | |
First I was assured by a financial columnists for one | 22:25 | |
of the important Washington newspapers | 22:30 | |
that Burns would not be given the job, | 22:32 | |
just a little before the announcement came out he said, | 22:35 | |
Burns is too old, Burns is 64, 65, | 22:37 | |
14 year term would make him 79. | 22:42 | |
Secondly, he's doing too an important job, | 22:45 | |
in the White House. | 22:48 | |
And third, he's an economist | 22:49 | |
and there are too many economists on the board already. | 22:50 | |
Well that shows you what the work of inside information is, | 22:53 | |
because Burns was appointed | 22:56 | |
and his appointment was announced in advance. | 22:59 | |
I believe that Burns is a very good business cycle analysis. | 23:03 | |
I think he's a powerful man. | 23:07 | |
I do not think that this appointment, | 23:09 | |
by itself is necessarily a major change in what's going | 23:11 | |
to happen in the Federal Reserve, | 23:15 | |
and let me tell you why I think this. | 23:16 | |
First the chairman has, really, no separate powers. | 23:19 | |
He does vote last, he is the moderator. | 23:23 | |
But he is the first among equals, | 23:26 | |
and it was Mr Martin's force of personality, | 23:28 | |
which gave him any primacy which he had. | 23:31 | |
Actually we shouldn't exaggerate that, | 23:34 | |
because Mr Martin liked to be on the side of the majority | 23:35 | |
and it was as much the majority swinging Mr Martin around | 23:38 | |
as Mr Martin being the pivotal man who swung the majority. | 23:41 | |
That's point number one. | 23:46 | |
Point number two though. | 23:47 | |
Burn's is in a very intimate relationship with the President | 23:48 | |
and this will be important, | 23:50 | |
it will give him some extra statue with respect to policies. | 23:52 | |
So it's a little bit more important that. | 23:57 | |
Third, he is a very forceful fellow, | 24:00 | |
but I think this cuts both ways. | 24:02 | |
Sometimes a forceful fella' gets people angry at him | 24:05 | |
and you can catch more flies with honey | 24:08 | |
than with vinegar sometimes. | 24:11 | |
And Martin was a pretty clever manipulator | 24:13 | |
of divided opinion and it is not impossible | 24:16 | |
that over the years, | 24:20 | |
since Mr Nixon does not have too many new appointments, | 24:22 | |
coming in too soon. | 24:24 | |
I believe 18 and 1972, | 24:26 | |
Mr Maisel's appointment expires and then in 1974, | 24:28 | |
there's still another replacement. | 24:32 | |
I could imagine a case where Mr Burns got a good deal | 24:34 | |
of the board with their back up against him, | 24:39 | |
precisely because he is such a strong personality. | 24:42 | |
Next what are we to expect from Mr Burns at the Fed, | 24:46 | |
in terms of his previous policy. | 24:51 | |
I do not think that Mr Burns is a monetarist, | 24:54 | |
as I've defined the term. | 24:56 | |
I think that he is more of a monetarist than Waller Heller, | 24:59 | |
was a monetarist, or is now a monetarist. | 25:02 | |
But I don't think that Burns has the kinda mind | 25:06 | |
that gives primary importance to any one factor | 25:11 | |
and I think that he is what he is, | 25:15 | |
namely a product of the National Bureau. | 25:19 | |
He is an indicators man, he is a diffusion index man, | 25:21 | |
in that sense he has the most eclectic of minds | 25:25 | |
and I think he'll watch all the straws in the wind. | 25:29 | |
What would a man like Burns be thinking of now? | 25:33 | |
Well, certainly it felt like Burns must give | 25:37 | |
as much probability as I've given | 25:41 | |
to there been a National Bureau recession in 1970. | 25:43 | |
He would be worried, certainly, | 25:49 | |
if I put myself in he's frame of mind about overkill and | 25:51 | |
this itself, I think, | 25:55 | |
would lead to moderation or ideology aside. | 25:56 | |
I think Mr Burns, precisely because of his friendship | 26:00 | |
with Mr Nixon is a politically economist | 26:02 | |
to the tune of thinking that the elections in the fall of | 26:06 | |
next year will be effective by overdoing things, | 26:11 | |
and by overkill. | 26:14 | |
And this will effect his behavior. | 26:15 | |
Against this is a counterforce. | 26:18 | |
Ever since this recovery began, now I correct myself, | 26:21 | |
within two to three months after the recovery began, | 26:25 | |
began February 15th 1961 and by April 27th of 1961, | 26:30 | |
Mr Burns was warning against inflation. | 26:36 | |
He has quite a record of being an anti-inflationist. | 26:38 | |
And this is, I think, | 26:43 | |
where the appointment will be most important, | 26:45 | |
to the degree that he has an influence. | 26:48 | |
I think over the decade he will not be aiming at three | 26:51 | |
and a third percent unemployment | 26:55 | |
as we now measure it on all manpower improvements, | 26:57 | |
in the composition of the labor force aside. | 27:00 | |
I think that he will not be a perfectionist, | 27:03 | |
he will be aiming for less steam in the boiler | 27:05 | |
and therefore Mr Nixon's election does make a difference, | 27:09 | |
some people say it's a good difference, | 27:15 | |
some people are the most concerned about, | 27:17 | |
short run employment, will say it's a bad difference, | 27:19 | |
but I think you're seeing it in an appointment like this | 27:22 | |
and I think that Burns influence will be torn, | 27:24 | |
less expansionism than was typical in the 1960's | 27:29 | |
and I think this has some repercussion | 27:33 | |
and some implications for the best bet to make on how much, | 27:36 | |
at the end of the decade the price index will register, | 27:40 | |
in comparison with what it registers now. | 27:43 | |
Narrator | Thank you Professor Paul Samuelson. | 27:45 |
If you have questions or comments, | 27:47 | |
send them to Instructional Dynamics, | 27:49 | |
166 East Superior Street, Chicago, Illinois | 27:51 |
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