Tape 47 - Japan and Korea, Monetary Developments, Economic Developments / Paul A. Samuelson papers, 1933-2010 and undated / Duke Digital Repository

-

Hello this is William Clark of the Chicago Tribune

0:02

welcoming you again on behalf of Instructional Dynamics

0:04

to another visit with the distinguished economist

0:08

Professor Milton Friedman of the University of Chicago.

0:10

We're recording this interview on Thursday April 2nd.

0:13

And Doctor Friedman, it's been three weeks since

0:17

we've talked because of course you've been touring

0:19

in Japan, in the Orient.

0:22

I wonder if you might start this interview

0:24

by commenting on the economic situation

0:26

generally in Japan.

0:29

-

Well Japan is, I find, is always a fascinating country

0:31

and I enjoyed very much the week I spent there.

0:34

Two of those days I spent touring Expo '70.

0:40

I can strongly, highly recommend to the subscribers

0:43

that that is a touristic experience

0:47

that they will find very worthwhile.

0:49

I cannot say that I was enthusiastic

0:52

about the American Pavilion at Expo.

0:54

The building is nice and some of the exhibits are fine

0:57

but on the whole it's an extremely soft sale.

1:01

In fact we're inclined to say, my wife and I

1:04

were inclined to say a no-sale performance.

1:06

The kids who took us around were fun

1:08

and the building itself is very effective,

1:11

as you may know the building is one in which

1:12

there's a large roof without a pillar

1:15

over the whole thing and it's held up by

1:18

a slight excess of air pressure.

1:20

It seemed to us to make a magnificent enclosure

1:23

and I can well believe that will be widely imitated.

1:26

However I should add that the Japanese whom we talked to

1:29

differed strongly from us.

1:32

They thought the American Pavilion was fine,

1:33

they thought the Japanese people were liking it,

1:35

and in particular the Japanese people

1:37

were very much impressed and favorably impressed

1:39

by the fact that it did not try to engage in any

1:42

kind of selling performance, so since the function of this

1:45

is presumably to attract the Japanese and not the American,

1:49

presumably that's a good thing.

1:53

I may say I heard other Americans

1:54

saying very different things.

1:56

Indeed one general phenomenon of the Expo

1:58

that has impressed me before that I think is relevant,

2:01

is that we were impressed that the private pavilions

2:03

in general were much better than the governmental pavilion.

2:06

-

Is that so?

2:08

-

And those of you who,

or those who remember,

2:10

earlier expositions I wonder whether you don't have

2:12

that same impression that it was in the New York,

2:15

I remember way back in the New York Exposition,

2:17

it was a General Motors Pavilion

2:20

and the Ford Pavilion that were most impressive.

2:21

Here in the Japanese case,

2:24

it was Toshiba and the

2:25

Matsushida Electric Company,

2:28

and the IBM Pavilion.

2:31

They seemed to us to be very much more effective

2:33

than the official governmental pavilion.

2:35

But so far as the economic conditions in Japan

2:38

is concerned, which is what I ought to be talking about.

2:40

Japan continues to have a really booming economy.

2:42

There's real output has been growing at the rate of about

2:47

10% or 11% per year.

2:52

They've just put out another five year projection.

2:54

They call it a plan, but it really isn't a plan.

2:58

The reason they put this one out a little earlier

3:01

than it was intended was because the last one

3:04

that they put out was so far from what actually happened.

3:06

So it's really more nearly a projection

3:10

of what they hope and expect.

3:12

-

Were they overly optimistic

3:13

or not optimistic enough about--

3:15

-

Not optimistic enough.

3:16

-

Oh is that so.

-

They had a more rapid real growth

3:19

than they had anticipated and their new

3:21

projection for the next five years

3:23

projects to continue to something like,

3:26

continue greater growth to something like

3:27

10% per year in real terms.

3:29

Of course such a rate of growth is possible primarily

3:32

because the level is so much lower.

3:34

It's still true that the average income

3:37

per person in the United States in real terms

3:39

is about three times as high

3:42

as the average income in Japan.

3:44

And when you start with that much of a discrepancy

3:45

it is possible to grow very rapidly.

3:48

And it may well be that for another 10 decade or so,

3:50

Japan can grow at the rate of 10% per year.

3:53

With respect to economic policy,

3:57

they are talking about tighten up money a little.

4:00

Because of the fact that the price inflation is

4:04

growing, they're having a good deal of price inflation.

4:09

But the major topic of economic conversation

4:12

was the attempt by the US to get Japan to impose

4:15

restrictions on textile export to the United States.

4:20

-

Oh what kind of comments did you hear on that?

4:23

-

Well every Japanese I talked to,

4:26

in the papers as well,

4:28

and I must say I have an enormous sympathy with them.

4:30

They said to me, now what kind of business is this?

4:33

America preaches free trade, you preached the virtue

4:37

of greater and greater...

4:41

International trade, and the first thing you do

4:43

is you try to pressure us

4:45

to impose restrictions on the textiles

4:47

we export to you.

4:52

Then I would say to them,

4:53

well you know you people talk with a double standard.

4:55

Why don't you come along and suggest

4:58

that you will reduce the barriers on automobiles

4:59

from the United States in return for

5:03

not imposing restrictions on textiles.

5:05

And they say, and with some justice,

5:09

we have been liberalizing very extensively

5:11

these past five years, which they have been.

5:13

And besides, they say,

5:16

and here I share their view.

5:19

Two wrongs don't make a right.

5:21

We ought to liberalize, we're in favor of liberalizing

5:23

but how can we

5:25

keep up momentum for liberalization

5:27

if you come along and produce a momentum

5:29

to un-liberalize depending on restrictions.

5:33

And there is no doubt that whatever may be,

5:36

the domestic political necessities

5:38

which lead the Nixon administration,

5:41

and I know what they are

5:44

to try to get restrictions on textile imports.

5:46

Those political necessities are very strong.

5:51

As I kept telling the Japanese,

5:54

during the presidential campaign last year,

5:56

some of the border states like Tennessee,

5:58

South Carolina and so on were very marginal

6:00

and both parties were very anxious to get them

6:03

and both Hubert Humphrey and Richard Nixon

6:06

promised during the campaign

6:09

to try to get Japan to impose

6:11

restrictions on the exports of textiles

6:14

to the United States,

6:16

so both parties were equally guilty.

6:17

But nonetheless whatever may be

6:20

those internal political necessities,

6:21

I think it is very costly to us

6:23

in terms of our posture internationally in economic policy

6:25

to be following the policy we are with respect to it.

6:29

-

It's very interesting.

6:32

Milton one of your subscribers

6:34

who has written in a question

6:37

apparently anticipated your trip to Japan.

6:39

I don't know that he really knew

6:42

that you were going to go,

6:43

but he posed this question which is very pertinent.

6:44

He refers to an article

6:47

on the economic growth of Japan that he read.

6:48

And he says that it implies to him

6:51

that credit is considerably easier in Japan

6:54

than in the United States.

6:57

Why, therefore, he asks are the inflationary pressures

6:59

less in Japan than in the United States?

7:03

-

Well in the first place,

7:06

the inflationary pressures are not less in Japan.

7:08

Japan for the past five or six years

7:11

has been having a price rise at the rate of about

7:14

something like 6%, 7%, 8% per year

7:17

in terms of internal cost of living.

7:20

What is true is that because of a shift out of

7:22

small-scale industries into large-scale industries,

7:28

into the manufacturing industries,

7:30

there has been a difference between the behavior

7:32

of cost of living prices and wholesale prices.

7:34

Wholesale prices have been much stabler,

7:37

therefore export prices have been much stabler.

7:39

But inflationary pressure in total has been

7:42

stronger in Japan than in the United States.

7:45

Now the second part, another of his question is,

7:48

he refers to the,

7:51

as a sign that credit is easier in Japan

7:53

that the fact that zaibatsu organizations

7:55

have a low equity position and a high debt ratio.

7:57

That really isn't an indication that credit

8:01

in any meaningful sense is easier in Japan.

8:04

That's an indication of the wholly different

8:06

industrial and economic structure of Japan.

8:08

What you have in Japan is that these zaibatsu groups

8:11

are combinations of banks and industrial enterprises

8:14

that sort of form groups together

8:17

and it is a typical practice

8:19

that they finance themselves

8:21

in large measure by debt rather than equity.

8:23

We must be careful not to confuse credit with money.

8:26

This is a sign of a different kind of a credit market,

8:32

and I may say interest rates in Japan are fairly high.

8:34

I was going to say very high,

8:39

they would be very high by what was typical

8:40

in the United States four or five years ago

8:43

but they are not longer very high

8:45

with respect to what's typical right now.

8:47

But the more important thing is,

8:50

that inflation is produced not by easy credit,

8:52

but by the rate of expansion of the quantity of money.

8:55

The debt-equity ratio of the zaibatsu has very little

9:00

or nothing to do with the monetary behavior in Japan.

9:04

-

Milton then, I know that on your way home,

9:11

perhaps not on your way home, but as part of your trip

9:14

you did spend a couple of days in Korea I think

9:17

you said, might be interesting to hear

9:19

what the economic situation in Korea is.

9:21

-

Well that's, needless to say, on the basis of

9:23

about a day and a half in Korea,

9:27

I'm an expert on Korea.

9:30

(laughs)

9:31

-

I see.

-

One of the reasons not to stay any longer

9:32

in that nitty country is you discover

9:34

that if you stay too long,

9:36

you become an un-expert.

9:37

But I was very fascinated by what little I did learn

9:40

from Korea in the course of a day.

9:43

I went over there at the request

9:45

and as the guest of The Bank of Korea

9:47

which is the central bank in Korea.

9:49

Mostly to discuss with them

9:53

various problems of monetary policy.

9:54

But I was fascinated by what little I learned.

9:57

Korea is another momentary success story.

10:00

The rate of real economic growth in the last few years

10:04

has been something like 12% or 13% a year.

10:06

They started at an even very much lower level than Japan,

10:09

they're way way down in terms of absolute levels,

10:12

so they have a long way to go.

10:14

They started back a while with a very rapid inflation.

10:16

They had a monetary reform about five or six years ago

10:20

that's slowed down inflation so only that now,

10:23

according to the statistics,

10:25

it a mere 10% per year.

10:27

It was about 20% or 25% earlier

10:29

and they really ought to be coming down

10:33

to a still lower rate of inflation

10:34

from what little I could gather.

10:36

But what the subscribers might find more interesting

10:37

is the state of the credit markets in Korea.

10:40

There's a legal maximum

10:43

rate at which banks, commercial banks,

10:45

may make loans to borrowers.

10:47

I say commercial bank.

10:51

The commercial banks are half-owned

10:52

by the government and half-privately owned.

10:54

You find in Korea a great mixture of this kind of bank.

10:56

But the good thing to be said about Korea

10:59

is that they are making a very real effort

11:01

to get the government out of banks

11:04

to introduce a greater degree of private enterprise.

11:05

And this is I think a large factor,

11:08

a large part of the explanation for their

11:11

rapid expansion in the last few years.

11:14

But going back to the commercial banks,

11:16

there's a maximum interest rate at which they are

11:18

permitted to make loans to customers.

11:21

That maximum interest rate is 24% per year.

11:24

At that interest rate,

11:28

there are more requests for loans than they can supply.

11:30

As a result you have...

11:34

Banks requiring compensating balances

11:37

for a very different reason

11:40

than they do in this country.

11:41

In order to make the actual rate of interest

11:43

at which the loans were made higher

11:45

than the nominal rate.

11:47

One of the things that's fascinating to me

11:48

is to go to different countries

11:50

and to find the same phenomena arising.

11:52

And each country thinks it's very special to it.

11:55

So the people in Korea started telling me about how,

11:59

you know, we have a very special arrangement

12:01

that doesn't apply anywhere else,

12:03

and they described the compensating balance

12:05

and that sort of stuff.

12:07

The other thing along this line

12:08

that I've always found fascinating

12:10

is the use of post-dated checks as credit instruments.

12:11

In Korea, in Taiwan, in Israel,

12:16

they're a major credit instrument for short-term credit

12:21

outside the banks, not through the banks,

12:24

because as they say, the banks can't provide enough

12:27

at the 24% rate.

12:29

As a result there's a private credit market.

12:31

And in this private credit market

12:34

the interest rates are 60% per year.

12:35

-

In order to clear--

12:39

-

This is for short-term loans

but in this private credit market,

12:42

the most common credit instrument is a post-dated check.

12:44

That is, you write out a check to somebody else

12:47

dated three months from now,

12:50

and he pays you...

12:52

Let's say the face-value of a check is 10 000 won,

12:56

which is their unit of currency,

12:58

and whatever may be the discount rate,

13:00

maybe he gives you 8 000 won,

13:02

and then he holds the check and comes three months from now,

13:04

he presents it at your bank and collects it.

13:07

And this again, this was another thing

13:10

which they told me about as very special to Korea,

13:12

but I had come across it earlier in Taiwan

13:16

and in Israel.

13:18

And it's a very sensible and a convenient

13:20

kind of a credit instrument,

13:22

for part for various reasons.

13:23

One of the reasons is that it doesn't show on the face

13:25

what the interest rate is,

13:27

and therefore unlike a commissary note,

13:29

nobody can ever find you illegal.

13:31

And you know in every one of these countries

13:34

where you have all of these regulations and restrictions,

13:36

one of the major sources of growth

13:38

is the ingenuity that people show

13:41

in getting around the restrictions.

13:42

The post-dated check doesn't show this

13:45

and the second place, in most of these countries is if you

13:46

make a commissary note and don't pay,

13:50

the result of that is

13:53

that you have a civil suit.

13:55

But if you write a check, which isn't honored,

13:57

that's regarded as a criminal offense,

14:00

and therefore it's easier to enforce them.

14:02

So a check is a more useful credit instrument.

14:04

And it's a very flexible kind of thing,

14:08

indeed this is one reason

14:09

why the monetary statistics of a country

14:11

like Taiwan or Korea shows a number

14:13

that we never see in our monetary statistics.

14:16

And this a column entitled 'dishonored deals'.

14:19

And what that refers to are the checks

14:24

which are setback for a lack of friends.

14:27

(laughs)

14:29

Bad checks.

14:31

Well at any rate, as I say,

14:33

you have this fascinating credit market

14:34

with interest rates up to 60% in the short-term

14:37

credit market on an informal basis,

14:40

24% in the formal market.

14:42

These are fabulous rates of interest

14:45

because I mentioned before,

14:47

according to the official statistics

14:49

price inflation is only about 10% a year.

14:51

Those statistics probably understate the degree

14:55

of price inflation but let's say it's 15% or 20% a year.

14:57

Say 15% a year, you still have a real interest rate

15:01

after allowing for inflation it's something like

15:04

9% through the commercial banks.

15:07

Something like...

15:09

45% in the open market.

15:12

What this reflects is the fact

15:15

that you have a country that is extremely short on capital.

15:17

You have a country in which some of the capital they have

15:21

is wasted because the government insists

15:23

on having preferential treatment for some purposes.

15:25

For example for export loans,

15:29

the rate is only 6% which is

15:31

less than nothing given the inflation.

15:33

And so the remaining capital is very,

15:36

driven very high,

15:39

moreover, you had a good deal of inflow of capital

15:40

from abroad but you can't have enough

15:42

because of course you have exchange controls.

15:44

That means that people are very reluctant

15:47

to bring capital in unless they have a guarantee

15:50

of exchange convertibility.

15:53

There is no doubt in my mind

15:56

that there's nothing that would be more healthy

15:57

in the case of a country like Korea

16:00

than getting rid of these silly restrictions

16:02

on interest rates and on loans

16:04

and opening up the capital market

16:06

because they have such a desperate need for capital

16:08

and so much use for it,

16:10

that it's a shame to see it badly wasted.

16:12

-

Is there industry or consequence in Korea,

16:15

you know what is their economy based on primarily?

16:17

-

Well they have been having

16:20

a very rapid industrial development,

16:21

of course they have primarily have been

16:23

an agricultural economy,

16:24

but they are engaged in textile manufacturing

16:26

in particular, and of course like

16:29

every other developed country,

16:30

every other developed country has

16:32

a certain status symbols that it wants.

16:35

And one of those status symbols is a steel mill.

16:37

And one of the absurd things which Korea is doing,

16:41

is they are now planning,

16:44

with the assistance of course of the World Bank,

16:46

to put up a steel mill in Korea

16:49

of a million-ton capacity which is much too small

16:51

to be economically efficient.

16:54

Here they are, sitting on a coastland

16:56

where they can get transportation by water,

16:59

which is very cheap.

17:01

Steel all over the world on a highly competitive basis

17:02

which they can buy from the lowest cost producing.

17:05

But you've gotta have a steel mill

17:10

if you're gonna be in the swim.

17:12

I have discovered in the course of these travels

17:14

three primary status symbols.

17:16

Number one is a steel mill.

17:18

Number two is an automobile assembly plant.

17:20

And needless to say,

17:23

Korea has an automobile assembly plant.

17:24

Number three is an international airline.

17:26

You have to have an international airline

17:30

if you're going to be in the teapot with the,

17:32

whatever is a country-wide equivalent of The Joneses.

17:35

Now it's a sign I think.

17:40

Lemme, I am fine to laugh at this,

17:42

but in a way it's a sign to me

17:45

of how much potential these countries have.

17:48

How enormously productive they could be

17:51

relative to their brazen position,

17:53

If only you let 'em go,

17:55

that they can have this kind of nonsense,

17:57

of unduly costly steel mines,

18:00

unduly costly automobile assembly plants,

18:02

airlines and so on, that they can waste all that

18:06

and still have growth of 10% per year maybe

18:08

when you...

18:11

Look at their real growth.

18:14

The most extreme case of one of these automobile plants

18:16

I ever came across was a friend of mine in Venezuela.

18:19

Made some calculations for their automobile assembly plant

18:22

and we figured out that if you took all of the people

18:25

employed in their assembly plant,

18:28

paid them the wages that they are now receiving,

18:29

send 'em home,

18:32

bought the automobiles in the United States for dollars

18:33

and brought 'em into Venezuela,

18:36

paying the transportation,

18:37

you would end up paying less for your automobile

18:39

than they have paid through their assembly plant.

18:40

I made similar calculations for India years ago

18:44

and the same thing is true there,

18:47

none of these make any sense except

18:48

for the satisfaction of the local pride.

18:50

-

Well Doctor Friedman, now you're back

18:53

in the United States, and I would recall

18:55

that on the last tape we did

18:58

three weeks ago or so I believe you said you

19:00

were detecting some moderate expansion,

19:03

monetary supply, money supply.

19:06

I wonder if you have any reason looking at the figures now

19:09

to alter that statement or has it been confirmed?

19:12

-

Such additional evidences I have seen since then

19:16

seems to me to confirm the picture as it was then.

19:19

We have three more weeks

19:22

of money supply figures.

19:24

They...

19:26

Show a slight decline, a rise and then a slight decline

19:28

but all of them are at a level that is high

19:32

relative to the level that prevailed

19:36

during the latter part of 1969.

19:38

So on the basis of the recorded money figures

19:42

I would say they confirm the view

19:45

that you are having a somewhat easier posture.

19:46

In addition, since my last tape,

19:49

Arthur Burns testified before Congress

19:53

and as you all know,

19:57

as all of the subscribers have read in the papers,

19:59

he came out and essentially said

20:02

that the Fed had changed their policies

20:06

that he himself was of the opinion

20:08

they should change their policy.

20:10

And so you now have an official confirmation

20:12

of a slight difference in stance.

20:14

However none of that evidence is inconsistent

20:16

with the shift having been a very moderate one.

20:20

So far as, I mentioned last time that the rate exchange

20:25

of the money supply narrowly defined

20:28

was about 2.6% from the end of December

20:32

to the end of February taking into account

20:36

the new figures that would be

20:39

of the same order of magnitude, maybe 2.5% to 3%.

20:40

And that's a very moderate shift

20:44

and I expect that you will continue to have

20:47

a moderate shift at that time.

20:49

-

Were you surprised at all when you heard about

20:51

the prime loan rate reduction?

20:53

-

Yes I was a little surprised about

20:55

the prime rate reduction because it did seem to me

20:57

that it was a little early for that

21:00

prime rate to have come down.

21:01

If you look at market interest rate,

21:04

the short-term interest rates

21:06

have been coming down sharply,

21:07

but nonetheless they hadn't come down far enough

21:09

to justify as yet a decline in the prime rate.

21:11

And I had no doubt that the decline in the prime rate

21:15

was partly a political matter and a public relations matter.

21:17

In any event as we all know,

21:21

that prime rate is largely an artificial rate.

21:23

It isn't,

21:26

it's more of a public relations gimmick than anything else.

21:28

It's not a market rate.

21:32

The more important thing it seems to me

21:34

is to look at the market rate.

21:37

For the short-term market rate

21:39

to have continued to come down rather drastically,

21:40

in fact if you look at some of the short-term rates

21:43

and compare them with their peak,

21:46

they are down a percentage quite and a half.

21:48

They've come down, some of these rates,

21:51

have come down from something up in the

21:53

range of about nine,

21:55

down to about seven to eight.

21:58

So they have come down quite a bit,

22:01

but long-term rates have been bobbling around.

22:03

They came down, they went back up again,

22:06

more recently they've been coming down.

22:08

They undoubtedly will fluctuate

22:10

but I think we will continue to see

22:12

a general downward trend.

22:13

-

It might be pertinent to mention here

22:15

that one of your subscribers asks

22:17

when do you believe the Fed

22:20

will decrease the discount rate?

22:21

-

Well I don't believe the Fed will decrease

22:23

the discount rate for quite a long while.

22:26

The reason is if the prime rate is a fake rate,

22:28

the discount rate is a faker rate

22:31

(laughs)

22:33

if such a thing is possible.

The discount rate has been kept at 6%

22:36

since...

22:40

March of 1969 at which point it was raised

22:42

from 5.5% to 6%.

22:46

But during that period when the discount rate

22:51

was kept at 6%, the market rates

22:53

went up to 8% or 9%.

22:55

If the discount rate had been following the market rates

22:57

or had been in tune with the market,

22:59

it unquestionably would've been raised long since.

23:01

And unquestionably the Fed has been hanging on

23:05

to that 6% rate hoping that the market rates

23:07

would come down to make that into

23:10

a reasonable, sensible rate.

23:12

Well the market rates have come down

23:14

but they haven't come down low enough

23:16

to make a 6% rate reasonable,

23:17

so I think it will be some considerable period yet

23:19

before the discount rate will come down to 6%.

23:22

-

Another subscriber says you believe short-term

23:27

interest rates, treasury bills and so forth

23:29

will approach a 5% rate sometime this year.

23:31

-

I think that's very dubious.

23:36

The three month treasury bill yield

23:37

is now a little over 6%,

23:40

and it's come down from 8%.

23:42

That's really a tremendous decline,

23:44

a decline of,

23:46

as you know people in the bond market

23:47

tend to put this in basis points.

23:50

100 basis point is one percentage point.

23:52

And this is almost 200 basis points.

23:55

Now to come down to 5% would be,

23:58

really to come down quite a ways

24:01

because if you go back,

24:03

the treasury bill rate before the big ride up of

24:04

interest rates in 1969 was around the 6% level.

24:08

So I think it's very dubious indeed

24:12

that any time in 1969 we will see

24:15

a 5% treasury bill rate.

24:19

I wouldn't, I said '69, I meant 1970.

24:21

-

Yes.

24:24

-

I wouldn't put that out of the grounds of possibilities

24:26

for '71 let's say, for later on.

24:29

Whether that happens or not depends critically

24:33

on a point I've mentioned before in these tapes.

24:35

What our longer term policy is.

24:39

If we manage to hold on to a moderate monetary policy

24:41

which will keep this inflation coming down,

24:45

which will bring it down hopefully

24:49

to a 1% or 2% per year rate.

24:52

Then we ought to be heading back

24:54

towards 5% treasury bill rates.

24:56

But until the public at large

24:59

is pretty well-persuaded that we're headed

25:01

in that direction, I don't think

25:03

you'll get down to rates of that level.

25:05

-

Well Doctor Friedman, does all of this

25:07

add up to any change in your thinking

25:09

about the economic outlook?

25:12

-

No I continue to be of a solid opinion

25:14

that is to say that we are now in something like

25:17

about the fifth or sixth months perhaps of a recession

25:21

which started sometime in October or November of last year.

25:25

Which will continue,

25:30

which will probably get deeper than it has been so far,

25:31

that will not turn around until sometime

25:34

like the third or the fourth quarter of this year.

25:37

That continues to be, at the moment, to be the prospect.

25:40

We have had, as I said, a moderate shift

25:45

in monetary policy.

25:47

All of the signs indicate that the monetary authorities

25:49

and the governmental authorities in general

25:53

are aware of, very much aware, of the danger

25:56

of not repeating the mistake of 1967

26:00

by overreacting, so everything suggests

26:03

that as of the moment we're getting ahead

26:06

on a moderate course and if we do that,

26:07

then as I've indicated before, I expect

26:10

that the pattern I just described will

26:14

be experienced.

26:18

I was very much interested in

26:19

Professor Samuelson's latest tape

26:21

in which he replied

26:24

to a subscriber's question,

26:27

bearing on the relation between his views

26:29

and those I had expressed earlier

26:31

in an earlier tape and that latest tape I had.

26:33

I mentioned that most forecasters were

26:36

cutting their estimates of GNP,

26:39

in of the course of business sanction.

26:41

More narrowly in-line with the initial estimates

26:43

of the monitor is

26:46

that they were becoming more bearish.

26:48

Professor Samuelson indicated that

26:51

he had become somewhat more bearish,

26:53

indeed he cut his GNP estimate 1/3 of the way

26:55

from its original level,

26:59

to the level that Beryl Sprinkel has been

27:00

holding onto all along.

27:02

And I think that,

27:04

I agree with him that it was very prudent

27:05

and desirable for all of us

27:08

to adjust our views as times change.

27:11

Any forecast is bound to be

27:13

conjectural, we can't know for sure what's going to happen

27:18

and anybody is foolish if he doesn't

27:21

adjust his estimates of the future.

27:23

I think Paul's discussion,

27:26

he had a very detailed and extensive discussion

27:29

based on an article he had contributed

27:31

to the Nihon Keizai Shimbun.

27:33

I think his discussion on the whole is

27:35

very thorough and I found it

27:37

a very instructive and useful discussion.

27:40

And they say in comparison with it,

27:42

my only quarrel with it is

27:45

that I am still inclined to be more bearish than he is,

27:46

and to think that this recession

27:49

will turn out to be somewhat more severe

27:51

than he at the moment he is inclined to believe.

27:53

But we will see whether the actual course of events

27:55

causes me to reject my estimates up

27:58

or him to adjust his estimates further down.

28:01

-

Thank you very much, we've been visiting

28:04

with Professor Milton Friedman

28:06

of the University of Chicago.

28:08

We've had a number of questions since our last tape,

28:10

some of which you were able to comment on tonight,

28:12

and others we will take up on future interviews.

28:15

May I suggest that those of you

28:18

who would like to suggest questions or subjects

28:20

for Doctor Friedman to discuss,

28:22

please send your suggestions in to

28:24

Instructional Dynamics, 166 East Superior Street,

28:26

Chicago, 6-0-6-1-1.

28:31

This William Clark, we'll be visiting

28:34

with Professor Friedman a couple weeks hence.

28:36

Tape 47 - Japan and Korea, Monetary Developments, Economic Developments

Transcript

Item Info

Economists' Papers Archive

More Info & Options