Tape 59 - Current Economic Condition

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-	Hello, this is Instructional Dynamics inviting	0:02
	you to another of our biweekly interviews	0:05
	with Dr. Milton Friedman, professor of Economics	0:07
	at the University of Chicago.	0:10
	We are taping this interview on Thursday, October 15.	0:12
	Professor Friedman, some new economic figures	0:17
	have just come out.	0:20
	Do they affect your view of the economic picture?	0:21
-	I think the new numbers, which have just come out,	0:24
	are on the whole highly consistent	0:27
	with the general view I have been expressing.	0:29
	The most far reaching of those, of course,	0:33
	are the preliminary estimates of GNP change	0:37
	for the third quarter.	0:40
	These figures show an increase in real GNP	0:42
	at the annual rate of about 1.4 or 1.5%.	0:45
	This is important because in the first place	0:51
	it is positive rather than negative,	0:54
	and in the second place it is somewhat higher	0:57
	than the second quarter performance.	0:59
	Taken by itself, it does definitely suggest	1:04
	a bottoming out of the recession	1:07
	and a beginning of an upward movement.	1:10
	At the same time, it is nothing like so strong	1:13
	as to suggest that we have begun	1:16
	a very strong, a very powerful expansion.	1:19
	I think that figure taken by itself	1:25
	is very much in line with the general attitude	1:27
	that we have about come to the recession	1:31
	that we are poised for an expansion	1:33
	but we haven't had more than a mild resumption	1:35
	of expansion yet.	1:37
	It seems to be contradicted by the Federal Reserve	1:39
	bored in the index of industrial production	1:42
	which shows a sharp decline in industrial production.	1:45
	However, that index is heavily affected by automobiles.	1:49
	You've had an automobile strike.	1:52
	I have not yet seen the figures on what	1:54
	the index would look like if automobiles	1:57
	were left out of it.	1:58
	On another aspect of these figures,	2:01
	the GNP figure implies a rate of price growth	2:04
	for the fourth quarter of 4.5% per year, roughly.	2:08
	This is a little bit higher than the rate	2:13
	of price growth in the second quarter.	2:15
	But is it somewhat a variance	2:18
	with the behavior of cost of living?	2:21
	The cost of living index during	2:24
	the last three months has averaged about 3.5% per year.	2:25
	I understand that there are some problems	2:31
	in the weighting of different components	2:33
	of the GNP which favored the price movement last quarter	2:35
	and which work against it this quarter.	2:41
	Again, if you took those figures	2:43
	by themselves, they would suggest	2:45
	that the tapering off of inflation	2:48
	which was marked in the second quarter	2:50
	has not proceeded any further in the third	2:52
	but was about the same.	2:54
	My impression is that those do not quite represent	2:56
	the situation accurately.	2:58
	That the cost of living index numbers,	3:00
	the wholesale price index numbers,	3:02
	the numbers on the changes in wages	3:04
	and wage rates are more instructive	3:07
	and all of these fit together into a picture	3:10
	of a continuing tapering off of inflation.	3:14
	Taken as a whole, I would say on that side as well,	3:17
	the new figures are consistent with the picture	3:20
	of a gradual but not precipitous tapering off of inflation.	3:23
	I think that those are about the only new figures	3:28
	that have come out and there aren't any additional figures	3:30
	on interest rates, just the standard figures,	3:35
	and those continue to show exactly	3:37
	the same kind of a movement that we've had	3:39
	for some time, ups and downs, but on the whole	3:41
	a declining tendency with a rather larger discrepancy	3:45
	in the decline of short term rates compared	3:49
	to long term rates than in similar periods.	3:51
-	We have two questions from subscribers	3:55
	dealing with the current situation	3:58
	and this might be a good time to answer them.	3:59
	One subscriber writes, "Do you think the Fed	4:04
	has increased the rate of the money supply too much	4:07
	and that as a result we will be back in inflation again?".	4:11
-	As I indicated I believe on my last tape,	4:15
	I do think the present rate of growth	4:18
	of the money supply is somewhat too large.	4:19
	If that continues, then the range of about 6% per year	4:22
	since February for the narrow money supply	4:26
	and one currency and demand deposits	4:29
	and about 9% per year for the broader money supply	4:30
	including time deposits, but excluding CDs.	4:34
	I do think those rates of increase,	4:38
	if continued over the next year,	4:39
	would raise the danger that this subscriber suggests	4:42
	and would produce a resumption of inflation	4:45
	some time by the end of 1971.	4:47
	However, I think it would be a mistake	4:51
	to suppose that those rates of expansion will continue.	4:54
	The Fed has indicated again and again	4:58
	that it is aiming at a rate of expansion	5:00
	of something in the neighborhood of 4 to 5% for M1.	5:02
	I believe there is a considerable chance	5:06
	that the difference between the rates of growth	5:09
	of M1 and the broader total will narrow down.	5:11
	They have been as wide as they have been	5:15
	because on the one hand interest rates	5:17
	have come down and thus made the ceilings	5:21
	on the rates that commercial banks could pay	5:24
	on time deposits less restrictive	5:27
	and thus have encouraged the expansion	5:30
	of time deposits.	5:31
	In the second place the Fed is somewhat eased	5:33
	of those ceilings themselves.	5:36
	It would not be surprising to me	5:38
	if in the course of the next year	5:41
	these two rates of growth came together.	5:43
	If the Fed does bring the rate of growth of M1	5:46
	back down to 5%, if this is associated	5:49
	with a rate of growth of something like 7%	5:52
	in the broader total, I think that's	5:54
	a rate which could be consistent	5:57
	with a continued tapering off of inflation.	6:00
	It would not be consistent with going	6:03
	all the way to zero, but it would be consistent	6:05
	with the tapering off of inflation	6:06
	to a rate of something like 2, 2.5, 3% per year	6:09
	and certainly would not, in and of itself lead	6:12
	necessarily to a resumption of inflation.	6:15
	On the whole, I think we've still got	6:19
	a pretty good chance, but I continue	6:23
	to believe that this is something	6:25
	that has to be watched continuously.	6:27
	I don't believe we're out of the woods	6:30
	and I think there is a real possibility	6:32
	that you may have a repetition of the earlier mistakes	6:35
	of the Fed of swinging too far	6:38
	from one side to another and thus renewing	6:40
	the inflationary pressure.	6:43
-	Professor Friedman, another subscriber writes,	6:47
	"I would like to hear your views	6:50
	on the liquidity crisis.	6:52
	The longer range effect if corporate liquidity	6:54
	continues to decline.	6:57
	Are you familiar with Major Angus' attack on you	7:00
	and the doom prediction of Bolton Trumbly?".	7:03
-	I am very familiar with Major Angus's attack on me.	7:08
	He has spent a lot of his money	7:10
	in trying to persuade me over the long distance	7:13
	telephone call of how misguided I am	7:15
	in my view about appropriate monetary policy.	7:18
	I don't know about the Bolton Trumbly prediction.	7:22
	But I have been aware of similar kinds of predictions.	7:25
	In both cases, I think you have, especially	7:29
	with Major Angus, an extraordinarily intelligent	7:32
	and able man, who has in general a very valid approach,	7:35
	but who has a tendency to swing much too far	7:42
	from one extreme to the other,	7:45
	who has a tendency to take an extremely,	7:46
	to go to an extreme.	7:50
	This is I observe, as you watch people	7:52
	in many different areas, a common human tendency.	7:58
	It is to go from a quantitative difference	8:02
	to a qualitative difference.	8:05
	If you see that there are some signs	8:07
	of weakness in the economy or in the politics	8:08
	to jump to the conclusions the whole thing	8:14
	is gonna come crashing down or if you see	8:15
	that you're starting on a little upturn	8:18
	to run away.	8:20
	I know time and again in public discussions	8:22
	I have met the speakers who when the prospect	8:24
	of inflation is broached, immediately start talking	8:28
	as if the next stage was gonna be a run away hyperinflation	8:33
	along the German lines.	8:37
	Well you know, there's an awful lot	8:39
	of possibility within any society.	8:41
	I keep being reminded of that wonderful comment	8:43
	of Adam Smith's when a young man told him	8:46
	that England was going to be ruined	8:49
	as a result of Cornwallis's defeat at Yorktown,	8:51
	I believe that was the occasion.	8:55
	He came back and said, "Young man", he said,	8:57
	"there's a lot of ruin in a nation".	8:59
	This is much more widely applicable.	9:02
	I think that Major Angus's view,	9:05
	which is that you can have a sudden collapse	9:08
	of velocity, that you have a great demand for liquidity,	9:13
	velocity can go way down and this can produce a crash.	9:15
	It's not something that is impossible.	9:19
	It's not something that can be ruled out	9:21
	on the basis of arithmetic.	9:23
	It's all arithmetically possible.	9:24
	But it does not accord with the way	9:26
	in which people have, in fact, behaved.	9:28
	I believe that the liquidity crisis	9:31
	has been grossly exaggerated.	9:33
	That there are two very different kinds	9:35
	of liquidity crisis that need to be separated.	9:37
	One of those is the fact that you may have	9:40
	an enterprise which is simply in an unsound position,	9:42
	the Penn Central kind.	9:45
	This has nothing to do with monetary policy	9:47
	or with money, this means that that enterprise	9:49
	has engaged in ventures which are not likely	9:51
	to be productive or that it has accumulated debts	9:53
	which it is going to find it difficult to repay.	9:57
	It is short of liquidity in the sense	10:01
	that its future earnings prospects	10:03
	are not very good and therefore	10:05
	it is going to be in a difficult position	10:07
	to realize on its paper capital venue.	10:09
	That kind of thing you undoubtedly	10:13
	have enterprises that are in that position.	10:16
	But that's a very, very different kind of thing	10:18
	from the kind of liquidity crisis	10:21
	you had in the United States let's say	10:22
	from 1929 to '33 when the problem was	10:24
	that the quantity of money was declining	10:27
	at a significant rate, that it was not possible	10:30
	for commercial banks, for example,	10:33
	to convert perfectly sound liquid assets	10:36
	into currency in order to meet	10:39
	the demands of their depositors.	10:41
	That kind of a liquidity crisis	10:42
	has within it the potentials of disaster.	10:44
	It is not a question of a few enterprises going broke.	10:46
	That kind of liquidity crisis,	10:51
	I think there's absolutely no chance whatsoever	10:52
	of right now.	10:55
	The reason why liquidity ratios	10:56
	of corporations have declined,	10:58
	those ratios being interpreted as cash	11:01
	and deposits, demand deposits relative	11:05
	to their total assets or their total liabilities,	11:07
	the reasons those have declined	11:09
	is because it has been in the self-interest	11:11
	of the corporations to keep them low.	11:12
	It's because interest rates have been high	11:15
	and with interest rates high it pays them	11:17
	to devote a good deal of attention	11:20
	to keeping cash balances down low	11:24
	and saving the interest that way.	11:26
	It doesn't involve any weakness	11:30
	in the public at large.	11:32
	Thus I think that those predictions	11:35
	that we are headed for a great collapse or doom	11:37
	or the predictions that in a book	11:41
	that has recently been published	11:44
	to the great devaluation that's coming,	11:46
	I think those predictions are to be taken	11:48
	not with a grain of salt but with a bag of salt	11:52
	and I think that anybody who alters	11:55
	his main pattern of behavior or makes tremendous changes	12:00
	in his portfolio or in his manner of his conducting	12:03
	his business because he is afraid	12:07
	of a collapse of that kind is making a great mistake.	12:08
-	In our tape last time, you discussed	12:13
	your recent trip abroad.	12:16
	You got as far as England and Italy	12:18
	but you did not get to Germany and Iran.	12:21
	What were your impressions in Germany, for example?	12:24
-	Germany of course is a country	12:27
	which has been amazingly successful	12:29
	in its economic policy.	12:32
	It has had a very rapid economic expansion	12:35
	in the post-war period.	12:38
	On the whole it has succeeded rather better	12:40
	than almost any other European country	12:43
	in keeping inflation in check.	12:45
	This is primarily because of the earlier German experience	12:47
	with very great inflation.	12:55
	I was very much impressed in talking	12:59
	with high German officials both	13:01
	in the government and the bank,	13:04
	with their unanimity.	13:06
	This was true even among the officials	13:08
	of the now ruling socialist party,	13:10
	Willy Brandt's party.	13:13
	I was impressed with their unanimity	13:15
	that public opinion within Germany	13:18
	would regard inflation as one	13:22
	of the most undesirable things that could occur.	13:24
	One of the things that fascinates me	13:27
	is how long is a collective memory.	13:29
	Today's events are being influenced	13:32
	by things that may have happened 50 or more years ago.	13:35
	There is no doubt that the major source	13:39
	of this attitude within Germany is still	13:41
	the experience after World War I with the hyperinflation	13:44
	which completely wiped out the middle classes of Germany	13:48
	which had such tremendous social effects.	13:52
	That was reinforced by the experience immediately	13:55
	after World War II, before the Erhard monetary reform	13:57
	of 1948 when you again, in this case,	14:02
	you had suppressed inflation.	14:06
	But once again, the public memories	14:08
	are in terms of inflation.	14:10
	As a result it has been possible	14:12
	for the German central bank and the government	14:14
	to follow a policy of holding down	14:17
	the inflationary pressure.	14:19
	However, given that Germany had	14:22
	a fixed exchange rate with the U.S.	14:24
	and with the rest of the world,	14:26
	and given that that exchange rate	14:29
	at least to begin with, undervalued	14:30
	the German Mark, Germany has for most	14:32
	of the post-war period had a very strong balance	14:36
	of payments and a inflow of capital	14:40
	as well as a current account surplus.	14:45
	This has been because precisely	14:48
	the other side of the coin,	14:51
	it is because Germany has followed a policy	14:53
	of holding down inflation that German prices tended	14:56
	to rise less than prices on the outside,	15:00
	this made German goods cheap, foreign goods expensive	15:02
	to Germany at a fixed exchange rate.	15:05
	This has produced two upward valuations	15:08
	of the German Mark.	15:10
	One back in the, I've forgotten the exact date	15:14
	of the first one, but it was about a 5% valuation	15:19
	and then you had the revaluation	15:23
	or appreciation just last year	15:24
	by about 10%.	15:27
	Altogether you have had over a 15 year period	15:29
	something like a 15% appreciation of the Mark.	15:32
	That has offset about 1% per year difference	15:36
	in price inflation between Germany and other countries.	15:39
	But that hasn't been enough.	15:42
	Germany has still been under pressure	15:44
	and she has been importing the inflation.	15:46
	That tendency to import the inflation,	15:48
	that pressure from the fixed exchange rate	15:50
	to the German price level, has now really begun	15:52
	to show up.	15:55
	Interestingly enough, therefore,	15:57
	what the situation now is with respect	15:59
	to inflation, is that while inflation	16:01
	is tapering off in the United States	16:04
	it is accelerating in Germany.	16:06
	As of the moment, our paths are just about crossing.	16:08
	Right now, depending on what numbers you use,	16:13
	you have the implicit deflator,	16:16
	the GNP has risen 7% over the past year,	16:18
	which is higher than our implicit deflator.	16:21
	However, cost of living has gone up	16:24
	over the past year in Germany only about 4%,	16:26
	which is lower than our cost of living.	16:28
	As near as I could judge putting	16:31
	these various things together,	16:32
	the state at which you are in Germany right now	16:34
	is that German rate of price inflation	16:37
	on the way up is about equal	16:40
	to what our rate of price inflation	16:43
	is as we are coming off of the inflation.	16:45
	Now the Germans, as I say, are very much aware of this,	16:48
	but it isn't clear that they are prepared	16:50
	to take the measures that will	16:52
	be effective in stopping it.	16:53
	You had another one of those episodes	16:58
	in Germany where the quantity of money	17:01
	has been going up very rapidly	17:02
	in the past six or nine months.	17:04
	As such it looks as if much of the inflationary pressure	17:08
	from the internal domestic monetary policy	17:11
	has not yet really worked itself through the system.	17:15
	The indicators that they rely on	17:19
	are rather mixed.	17:21
	There was a great deal of emphasis placed,	17:23
	while I was there, on the fact that new orders	17:24
	had started to decline and they insisted	17:27
	that in all previous cyclical movements	17:30
	in the post-war period, new orders	17:32
	had been a very reliable leading indicator	17:34
	that it had consistently declined	17:37
	some months before the economy as a whole.	17:40
	However it is by no means clear	17:42
	whether that is the case this time	17:44
	because all other aspects of the economy seem	17:47
	to be showing very active upward pressure.	17:51
	Construction is expanding very rapidly.	17:56
	Of course I must say, I got a somewhat misleading impression	17:58
	of this because in Munich where we were	18:01
	for a while is putting in a subway.	18:04
	I thought I was back in Tokyo	18:07
	a couple of year's ago just as when Tokyo	18:09
	was having the Olympic games it started putting	18:11
	in a subway.	18:13
	Munich is going to have the Olympic games in '72	18:14
	and it's putting in a subway.	18:17
	Frankfort was also torn up with the subway,	18:18
	so that both of these towns gave	18:21
	the impression of a great deal of activity going on.	18:23
	I am told by the people who have been following	18:25
	the statistics, that construction activity is booming	18:28
	and consumer spending is very strong and so on.	18:31
	At any rate, even if economic activity tapers off,	18:35
	as we have discovered in the United States	18:39
	that doesn't prevent the price inflation	18:41
	from continuing to go.	18:43
	I think right now the prospect	18:45
	is that Germany is headed for	18:47
	a somewhat higher rate of inflation,	18:49
	that the major political and economic problem	18:51
	for Germany over the next year or two	18:53
	is going to be inflation.	18:54
	Germany has an enormous amount of fat	18:57
	in the form of foreign exchange resources,	19:01
	in the form of having accumulated surpluses	19:03
	in their balance of payments.	19:07
	But none the less, I believe that these fundamental forces	19:08
	of relative price movements are extremely important	19:13
	from the point of view of balance of payments	19:16
	and if Germany should continue	19:18
	to have an inflation while we continue	19:19
	to go in the opposite way, you might see one	19:21
	of those turn abouts that always surprise people	19:25
	when they occur, although they are so obvious	19:27
	after the event.	19:30
	It is not inconceivable to me that a year	19:32
	or maybe if that's too soon two years from now	19:36
	the economic problem that will be facing Germany	19:39
	is not whether to appreciate the Mark further	19:41
	but whether to devalue the Mark relative	19:43
	to the U.S. dollar.	19:45
	I think the German economic picture	19:48
	is one that at the moment is in very much	19:51
	of a state of flux and that for anybody	19:53
	who is interested in German experience	19:55
	over the future is something that should	19:57
	be watched very carefully, particularly with respect	19:59
	to whether they get command over	20:02
	the rate of growth in the quantity of money	20:04
	on the one hand, and whether the present acceleration	20:06
	of price inflation does or does not continue.	20:10
-	Iran of course, the last country you visited	20:14
	is quite different from western Europe	20:17
	and I'm sure your subscribers	20:20
	would be interested in your impressions	20:22
	of that country.	20:23
-	The fascinating thing to me about Iran,	20:26
	when you come to a country like Iran,	20:28
	is the extraordinary role that fashion plays	20:31
	in economic policy.	20:33
	We are accustomed to talking about	20:38
	the strength of fashion on women's clothes.	20:41
	One woman wears a mini, they all wear a mini.	20:44
	Fortunately, the women have been revolting	20:48
	and have been refusing to go along	20:50
	with the newest fashion.	20:51
	I am impressed that the importance of fashion	20:54
	in determining women's clothes	20:57
	is negligible compared with the importance	21:00
	of intellectual fashion in determining economic policy.	21:03
	Here I come into Iran, which is a country	21:07
	I had never visited before, it's a country	21:10
	which in many ways is very different	21:13
	from other underdeveloped countries.	21:15
	Compare Iran for example, with a country	21:18
	like India or Korea.	21:21
	Iran is a very, authoritarian is perhaps	21:23
	too strong a term.	21:30
	But it's a country which is ruled from the top.	21:32
	The Shah of Iran runs Iran.	21:35
	This is in accordance with a very long tradition	21:38
	of central rule.	21:40
	We were enormously impressed	21:42
	that there was absolutely nowhere	21:44
	you could go in Iran without seeing	21:45
	the picture of the Shah or of his wife	21:46
	or of his child, the crown Prince.	21:49
	You contrast that situation with	21:51
	a situation like India where you have	21:53
	a very democratic system of government,	21:56
	where you have a great deal of politics going on,	21:59
	where the Prime Minister Mrs. Gandhi right now	22:02
	may be extremely important, but it's not	22:05
	in the same sense in which the Shah of Iran	22:08
	is really running Iran.	22:12
	Iran is a paternalistic country.	22:14
	Or again contrast that with South Korea	22:17
	which is different from both.	22:21
	It comes closer perhaps to a kind	22:23
	of a democratic representative government.	22:25
	On the political side they're thoroughly different.	22:28
	On the economic side, here is Iran	22:31
	with a billion dollars out of an eight billion dollar	22:33
	annual GNP, a billion dollars of revenue from oil.	22:35
	A great natural resource base,	22:41
	a great source of foreign income,	22:44
	in foreign exchange through the oil.	22:46
	India has no such natural resource base.	22:49
	It gets foreign income primarily	22:53
	of gifts through foreign aid.	22:55
	Korea has no such a base and so on,	22:58
	you can go down the line.	23:00
	Yet these differences completely disappeared	23:01
	the moment I stepped into an office	23:05
	and started talking with people	23:06
	about what was going on.	23:08
	After the first sentence I could proceed	23:09
	to say the second third and fourth.	23:11
	Iran, because it regards itself	23:14
	as an underdeveloped country which is trying to develop,	23:16
	is imitating and following precisely	23:18
	the same economic policies as each	23:20
	of these other countries.	23:22
	If you want to know, you might ask	23:24
	what does a well dressed underdeveloped country wear	23:27
	to keep on with this image of fashion.	23:32
	You know that the very first item	23:35
	that any well dressed underdeveloped country wears	23:36
	is an international airline.	23:38
	Every underdeveloped country as I have often said,	23:40
	as an overdeveloped airline.	23:42
	Iran has an international airline Iran Airways.	23:44
	Korea has a Korean international airway.	23:48
	India has India Airways.	23:50
	Taiwan has Taiwanese Airways.	23:55
	There is no, hardly an underdeveloped country so small	23:58
	that it cannot maintain an international airways,	24:01
	all of which of course fly American jets,	24:04
	frequently hiring American pilots,	24:07
	but they have to have an international airline.	24:09
	That's number one.	24:11
	The second most important item	24:13
	in a well dressed underdeveloped country's wardrobe	24:15
	is unquestionably putting together automobiles.	24:19
	This is where I was particularly struck	24:23
	with the similarity between Iran	24:26
	on the one hand and the two other countries	24:27
	I have described, India and Korea.	24:29
	All underdeveloped countries believe	24:33
	that they are too poor to be able	24:35
	to afford to buy second hand automobiles.	24:37
	They all feel that they must produce new automobiles	24:39
	for themselves.	24:43
	Each and every one of these countries	24:44
	proceeds to impose restrictions	24:46
	on the import of second hand automobiles.	24:49
	Imposes very high tariffs and taxes	24:54
	on the import of new automobiles.	24:57
	Proceeds essentially in this way	25:00
	to subsidize and encourage some foreign country	25:01
	to put up a small assembly plant	25:04
	and produce domestic automobiles.	25:08
	In Iran there were two such things.	25:10
	One of them, which incidentally is	25:11
	by American Motors, a small Rambler.	25:13
	These new cars, small new cars,	25:16
	are the type which might sell	25:19
	in the United States for 2,000, $2,500 new,	25:20
	sell there for something like $5,000 new.	25:24
	We rode in a Mercedes Benz which	25:27
	was five or six years old.	25:28
	Would have had a second hand retail value	25:30
	of maybe a thousand to $1,500 in New York	25:32
	or Munich or Germany, but the market value	25:35
	in Iran was $7,500.	25:40
	This general policy on the part of Iran,	25:43
	the same thing is true of India.	25:46
	I discovered when I was in Korea last spring,	25:47
	the same thing was true of Korea.	25:49
	It's true of South American countries.	25:51
	A friend of mine in Venezuela	25:53
	where they have a Ford assembly plant,	25:55
	which assembles small Ford cars,	25:58
	once made a calculation that if you took all	26:01
	the people in that assembly plant,	26:03
	sent them all home, continued to pay	26:05
	them their full salaries and bought	26:07
	the Ford automobiles in the United States	26:09
	that were being produced or assembled in that plant	26:11
	and brought them into Venezuela,	26:14
	the total cost of those automobiles	26:17
	would be cheaper than what they are now paying.	26:19
	When I was in India about eight or nine year's ago,	26:21
	I estimated that roughly 1/10 of all U.S. foreign aid	26:25
	to India was being wasted in the automobile assembly plants.	26:30
	Now in the case of Iran, since it has	26:36
	its own foreign exchange through the oil,	26:38
	at least its wasting its own funds.	26:41
	It's less objectionable from that point of view.	26:43
	The third element in what every well dressed	26:46
	underdeveloped country will wear is a steel mill.	26:48
	Sure enough Iran is in the process	26:51
	of acquiring one.	26:53
	It has made a deal with Russia	26:55
	whereby it's going to have a steel mill.	26:56
	This steel mill will almost surely produce steel	26:58
	at a very much higher cost than	27:03
	it could buy it abroad.	27:05
	As I have often described the steel mills,	27:06
	they are the modern equivalent of the pyramids.	27:09
	They are monuments.	27:12
	The difference between them and the pyramids	27:13
	is that the maintenance cost is higher.	27:15
	In a sense I really haven't been talking	27:17
	about Iran.	27:19
	I have been talking about the fashion	27:20
	that affects all countries and	27:21
	the extent to which Iran is in the same pattern.	27:23
	In many ways I think Iran has many possibilities	27:27
	and opportunities that are far better	27:30
	than these other countries, precisely because	27:32
	it does have such a large foreign exchange base.	27:34
	It also has a very active indigenous mercantile	27:37
	and trading population.	27:41
	The bazaars are marvels of free enterprise	27:43
	in an extensive way.	27:48
	The Shah of Iran is firmly dedicated	27:50
	to using the oil funds for the economic development of Iran.	27:53
	While much of it is waste, some of it	27:57
	will undoubtedly come through.	27:59
	I am sorry to say I have run out of time	28:03
	and so I'll have to run out of Iran.	28:05
-	Thank you very much Professor Friedman.	28:07
	Remember subscribers, if you have any questions	28:09
	or comments for topics you would like	28:12
	to hear discussed in this series,	28:13
	please send them to Instructional Dynamics Incorporated,	28:15
	166 East Superior Street, Chicago, Illinois 60611.	28:18
	Dr. Friedman will be visiting with you again	28:25
	in two weeks.	28:27

Item Info

Title:

Tape 59 - Current Economic Condition

Date:

1970

Contributor:

Friedman, Milton, 1912-2006

Subject:

Format:

audiocassettes

Language:

English

Digital Collection:

Paul A. Samuelson papers, 1933-2010 and undated

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Paul A. Samuelson papers, 1933-2010

Series:

Economics Cassette Series: Milton Friedman

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samuelsonpaul
duke:325273
pstau001250
ark:/87924/r4cz32n13
ec7ee1b7-4180-4f74-98db-21d11f2fba92

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Tape 59 - Current Economic Condition

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