Tape 29 - Current Conditions, A.B.A. International Monetary Conference

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-	Hello, this is Instructional Dynamics	0:02
	inviting you to another of our bi-weekly interviews	0:04
	with Dr. Milton Friedman, professor of economics	0:07
	at the University of Chicago.	0:09
	Dr. Friedman I understand you have been spending	0:12
	the last week in Copenhagen attending the International	0:14
	Conference of the American Bankers Association.	0:17
	We would like to hear something about this conference	0:20
	but first, I think your listeners would be interested	0:22
	in your reactions to the money supply	0:25
	and other current magnitudes.	0:27
-	There is very little new to report on that front.	0:30
	The money supply continues to behave erratically,	0:33
	but yet also to grow on the average at a very slow pace	0:36
	so that we are keeping on with the monetary policy	0:40
	inaugurated in December of last year.	0:44
	On other economic magnitudes, there are a few	0:49
	additional funds that this policy is finally	0:52
	beginning to pay off in terms of its effect	0:55
	on the growth of the economy as my listeners well know.	0:57
	I have been anticipating that sometime in the	1:01
	third to the fourth quarter this year,	1:03
	probably in the third quarter,	1:05
	one would start seeing a slowing up	1:07
	in the rate of growth in GNP	1:10
	and then shortly thereafter a slowing up	1:13
	in the rate of growth of prices.	1:14
	The most encouraging side along this line	1:16
	is the latest figure on the Price Index.	1:19
	After rising at an incredible rate,	1:23
	annual rate,	1:26
	of course this is one month multiplied by twelve,	1:27
	the incredible annual rate of 9.6% from	1:30
	February to March	1:36
	and then at the rate of	1:38
	7.2% from March to April.	1:41
	The change from April to May was 3/10 of 1%,	1:44
	or modified by twelve, at the annual rate of 3.6%.	1:48
	This is a much more tolerable rate of price increase	1:52
	and much more in line with what one might expect.	1:55
	However, one month doesn't make a season	1:59
	and by itself this is a very minor straw in the wind.	2:02
	To look at other economic magnitudes,	2:07
	the	2:10
	market,	2:12
	stock market,	2:13
	the declining tendency in the stock market	2:14
	is another bit of confirmatory evidence	2:16
	that the monetary restraint is likely to take hold.	2:19
	Empirically, over a long past period	2:24
	the stock market has tended to move down	2:29
	before general business, or put the other way,	2:31
	monetary tightness has always shown up in the stock market	2:33
	at an earlier date than it has shown up	2:36
	in business as a whole.	2:38
	For most of this year, the stock market	2:40
	has been far from ______.	2:41
	At best you can say it's been going horizontally	2:42
	and then, as you know, in the last few weeks	2:45
	it's really been going down at a very marked rate.	2:46
	The high bond interest rates	2:51
	are again further still in line	2:54
	with general expectations.	2:57
	These high interest rates, as I suggested in my--	3:00
	seem to me likely to be the final stage	3:04
	of the	3:08
	bond	3:09
	crunch.	3:11
	I would be very much surprised, as I indicated last time,	3:12
	if the next six months do not see a decline	3:15
	in interest rate and a rise in bond prices.	3:17
	Figures on	3:20
	new orders for durable goods	3:23
	and a number of scattered other economic indicators	3:24
	all show some signs of a tapering off	3:29
	in the rate of economic growth.	3:32
	Again, all of these even all put together	3:35
	would not by themselves be decisive indications	3:38
	that we're heading for a real slow-down in the economy.	3:40
	If it were not for the confidence that one can have	3:43
	that this is likely to be brought about	3:45
	by the	3:47
	change in,	3:49
	by the slow rate of growth.	3:50
	To sum it up, things are very much proceeding	3:52
	along schedule in the relations	3:55
	to be expected from past performance.	3:57
	What is happening, of course,	4:00
	is that you're having widespread impatience	4:01
	on the part of political officials,	4:04
	on the part of businessmen,	4:08
	on the part of bankers,	4:10
	at the fact that things do not proceed more rapidly,	4:12
	and thus, you hear all sorts of cries	4:15
	for more extreme measures	4:17
	such as price and wage controls,	4:20
	or as I should come to in a moment,	4:21
	one of the calls at the International Monetary Conference	4:23
	was a call for direct control over bank lending.	4:26
-	I'm sure your listeners will be	4:30
	encouraged by your optimism.	4:31
	Let us talk a little bit now about what happened	4:33
	at the American Bankers Association meeting.	4:36
-	I'm not entirely sure that's optimism.	4:39
	From the point of view of getting the economy	4:43
	ultimately on a non-inflationary track it's optimism,	4:46
	but it's very hard to use these terms these days	4:49
	when we talk about optimism being that business	4:53
	may get slow and that unemployment may be increased.	4:57
	It's a curious kind of optimism all forced on us	5:00
	by the policy which has produced this inflation.	5:03
	That's the other side of the coin of hyperactivity.	5:07
	Let's go back to the International Monetary Conference.	5:09
	You have a fascinating meeting in Copenhagen.	5:12
	Every other year, once every two years	5:15
	the American Bankers Association holds a conference	5:17
	outside the confines of the United States	5:20
	in order to get together not only	5:23
	many of the top American bankers,	5:25
	but also bankers from other countries.	5:28
	Thus, you had at Copenhagen gathered together	5:30
	the heads of most of the large American banks	5:33
	plus many of the smaller banks,	5:36
	people like David Rockefeller, the Chase Manhattan,	5:39
	more of Bankers Trust and so on.	5:45
	From the other side of the waters,	5:49
	there were present also the people from the	5:51
	central bank of Germany, from Britain, from Switzerland,	5:54
	from the Bank of International Settlements in Basel,	5:59
	and of course, naturally, the local host	6:02
	Mr. Hoffmeyer, who was a chairman of	6:06
	a board of three directors of the Danish national bank.	6:10
	The sessions covered a wide range of topics,	6:15
	but there is no doubt that the topic	6:18
	which occupied most attention,	6:20
	both in the	6:22
	in the sessions,	6:25
	in the formal sessions,	6:25
	in the informal discussions over the lunch tables,	6:27
	the topic that occupied the most attention	6:31
	was the interest rate situation,	6:34
	the extremely tight credit market,	6:36
	and the interrelationships between	6:37
	the American credit market and the Eurodollar market.	6:39
	The thing that really excited astonishment	6:44
	was the fact that Eurodollar interest rates	6:47
	had gone up even higher than U.S. interest rates.	6:49
	They had gone to something like 13% for three months notes	6:52
	which is really an incredible rate in these times,	6:55
	if fallen back a little.	6:58
	But Eurodollar interest rates for three months notes	7:00
	are still	7:02
	are still	7:05
	in the range of about 11%.	7:08
	If you look at the formal	7:11
	sessions	7:14
	several of those were about	7:16
	the international financial picture.	7:18
	And here you had what you might expect	7:21
	at a gathering of bankers.	7:23
	A lot of discussion, most of it directed against	7:26
	the idea that there should be more flexibility	7:29
	in exchange rates.	7:32
	The interesting thing that has been happening	7:35
	in the area of international monetary arrangements	7:37
	is that the whole focus of the discussion	7:40
	has shifted in the past few years.	7:42
	A few years ago, nobody would have talked about	7:44
	flexibility of exchange rates because	7:45
	there was no possibility in the scene at that time,	7:47
	or so it seemed, that anything like that happened.	7:50
	Today, it would be misleading to interpret	7:53
	what's likely to happen from the fact that	7:57
	almost all of the papers at the session,	7:59
	almost all of the discussion at the session,	8:01
	was opposed to flexible exchange rates.	8:03
	The important thing about it is that	8:05
	there was so much discussion.	8:07
	And there was so much discussion	8:08
	because the fact of the matter is	8:09
	that a greater degree of flexibility	8:11
	of exchange rates is in fact the only feasible way	8:13
	in which the adjustment mechanism under	8:16
	our present monetary system is going to be improved.	8:18
	One sign in the wind of this, which was fascinating,	8:22
	was the talk which Mr. Emminger of the German central bank	8:24
	gave a week before the conference convened.	8:28
	In this talk, he suggested as a possibility,	8:31
	and it is one that seems to me	8:35
	to make a great deal of sense for Germany,	8:36
	that Germany might appreciate by the process	8:38
	of a gradual change in its exchange rate	8:41
	instead of a once-for-all exchange.	8:43
	That is to say, instead of Germany saying	8:45
	we're going to make the price of the German mark	8:47
	in terms of other currencies	8:51
	10% more than it was the day before,	8:52
	which would be a great boom to all those speculators	8:55
	who have accumulated German marks,	8:57
	Mr. Emminger suggested that it might be	9:00
	what Germany would say would be	9:05
	we're going to appreciate 10% over the next year.	9:06
	We're going to let the exchange rate	9:11
	go up gradually over this period.	9:12
	That would make a great deal of sense	9:14
	and it would be a private experiment	9:16
	in exchange flexibility,	9:17
	which my listeners well know is something	9:19
	that seems to be eminently to be desired.	9:22
	There's no reason why we shouldn't have	9:24
	a free market exchange rate.	9:25
	Of course what Mr. Emminger is talking about	9:26
	is not a free market.	9:28
	He's talking about control of change	9:29
	under the firm guidance of the central bank of Germany.	9:31
	But nonetheless, it would be a move	9:35
	in the direction of greater flexibility.	9:36
	Of course, as I say,	9:39
	it's understandable that bankers object.	9:40
	Businessmen in general always like prices to be flexible	9:44
	of everything outside their own purview,	9:47
	but they like their own prices to be inflexible.	9:49
	That is, they like to have certainty for themselves,	9:53
	whatever may be the degree of uncertainty for other people.	9:56
	But at any rate, the international monetary arrangements	9:59
	was one major topic of discussion and its focus was	10:03
	on the wickedness of changes in exchange rates	10:06
	and the need to maintain exchange rates.	10:10
	The domestic policy problems in the U.S.	10:13
	received also a great deal of attention.	10:16
	That was perhaps the second of	10:18
	the major topics of the formal sessions.	10:20
	Paul McCracken gave a talk in which he	10:23
	followed the perfectly correct	10:27
	and right line of the administration	10:29
	that what is being aimed at is	10:32
	a gradual slowing down of inflationary pressures	10:34
	and that the monetary tightness	10:37
	they instituted last December is working in that direction	10:39
	and that we must have patience and wait for it	10:42
	to bring about the decline.	10:44
	But it was interesting that partly his talk	10:46
	also consisted of some	10:48
	wondering about whether the lag in reaction	10:52
	might be abnormally long this time.	10:55
	And one of the reasons he cited	10:58
	for the possibility that it might take an	10:59
	abnormally long time this time for the	11:01
	monetary tightness to show up	11:04
	was the idea that bankers had been	11:06
	overextending their loans because of the	11:08
	expectation of further inflation.	11:11
	Now, even so, admirable a person as Paul McCracken	11:13
	who has always had a very	11:17
	sound and firm position in this area,	11:20
	is undoubtedly being affected by being	11:21
	in a position of a governmental official.	11:24
	And the one thing a governmental official	11:26
	must do is to throw the blame on somebody else	11:27
	if things don't go precisely according to form.	11:29
	Now I think Paul McCracken is	11:32
	getting worried a little too soon.	11:35
	There's nothing to worry about,	11:36
	as I said earlier, everything is on target,	11:37
	but yet he seems to be burying his defenses	11:40
	by pointing out that it may be that	11:43
	this time the lag will be abnormally long,	11:45
	and if so, he is trying to find	11:48
	some non-governmental culprits for it.	11:49
	Of course, I should add that there is	11:52
	a good deal of variability in the lag.	11:54
	If six to nine months is the average period,	11:55
	sometimes it's five months,	11:58
	sometimes it's 10, 12 months.	11:59
	So it's perfectly possible that this	12:00
	might turn out to be one of the abnormally long times.	12:02
	If so, one doesn't really need a culprit	12:05
	outside of the fact that economic reactions	12:07
	are not perfectly mechanical and predictable.	12:10
	On the domestic policy problems, however,	12:13
	there was a wide range of agreement that	12:15
	the monetary tightness is tending to show up	12:18
	and can be expected to bring itself	12:21
	more sharply to the fore in its effect	12:25
	on the economy later in the year.	12:28
	Another aspect of this concern	12:30
	with domestic policy problems was a talk	12:32
	by Congressman Reuss of Wisconsin	12:34
	dealing essentially with problems of banking regulations.	12:36
	I may say, there was a whole session and more	12:39
	devoted to technical problems connected with banking.	12:41
	The working commercial bankers are of course	12:44
	extremely interested in such things	12:46
	as government proposals for one bank,	12:48
	holding companies in the like,	12:50
	but these are matters that the more general student	12:51
	of the economy need not be much concerned with.	12:55
	But in this connection,	12:58
	Mr. Reuss threw out the bombshell of proposing	12:59
	that	13:02
	it might be that the Federal Reserve	13:05
	should impose a voluntary,	13:07
	voluntary in this connection only needs	13:10
	to be put in quotes because the Federal Reserve	13:12
	has powers which enables it to convert	13:14
	a voluntary agreement into an involuntary one,	13:16
	but that it should impose a voluntary ceiling	13:19
	on loans made by businessmen.	13:22
	I'm sorry, made by banks.	13:24
	Now this is a device which many	13:27
	European countries have in fact used.	13:29
	The major tool which Britain, for example,	13:31
	has used in trying to squeeze credit, as they call it,	13:33
	is to	13:37
	set a limit,	13:39
	a loan ceiling	13:40
	on the loans that individual banks can make	13:41
	and Mr. Reuss threw out the possibility	13:45
	that this might be a desirable additional step	13:48
	to reinforce the monetary tightness.	13:51
	He pointed out, he was one of those,	13:55
	as he indeed has been in his capacity	13:57
	as a member of the Joint Economic Committee,	13:59
	who has for a long time been in favor	14:01
	of monetary policy operating via	14:04
	control over the quantity of money.	14:07
	But he argued this might need to be reinforced,	14:09
	and if it were to be reinforced	14:12
	he suggested that it should be by a ceiling	14:14
	on the quantity of credit extended.	14:16
	Now I may say the bankers were not	14:19
	very enthusiastic about this device	14:21
	as you well can imagine.	14:23
	And so far as the members of	14:24
	the Federal Reserve Board who were present,	14:25
	they included William Martin, the chairman,	14:27
	and also George Mitchell and Dewey Daane,	14:30
	two of the other members of the board.	14:33
	They were,	14:35
	as you might expect,	14:37
	evasive in their reaction to it.	14:39
	They obviously did not want to	14:41
	they did not want to say anything	14:45
	that would seem impolite or	14:46
	discourteous	14:50
	to a congressman who is not only	14:52
	a member of the Joint Economic Committee,	14:54
	but also a member of the Banking and Currency Committee,	14:55
	and so they make statements like	14:58
	well more firmer measures might or might not be necessary,	15:01
	but they said nothing very specific.	15:05
	Well that's about the	15:07
	nature of most of the public	15:10
	discussions at the conference.	15:12
-	Professor Friedman, I gather you yourself	15:15
	gave a talk there.	15:17
	What did you talk about?	15:18
-	I was set up on a panel on the	15:20
	final morning of the conference,	15:21
	which had been set up as a	15:23
	sort of a confrontation between the Chicago school	15:25
	and the Federal Reserve system.	15:29
	That is, I gave a talk on current	15:32
	monetary and credit policies and	15:33
	comments were made on my talk by Alfred Hayes,	15:35
	President of the Federal Reserve Bank of New York,	15:39
	Darryl Francis, President of the	15:41
	Federal Reserve Bank of St. Louis,	15:43
	and George Mitchell	15:45
	a member of the Federal Reserve Board itself.	15:48
	My own comments were directed at	15:51
	the theme of the importance of distinguishing	15:55
	between monetary and credit policies.	15:57
	I emphasized that in my opinion,	16:00
	current monetary policy is excellent,	16:02
	but current credit policy is terrible.	16:04
	In order to bring home what I meant by that,	16:08
	of course I went into the question of	16:12
	distinguishing between monetary and credit policies.	16:13
	By monetary policy, I mean policies concerned	16:16
	with the quantity of money,	16:19
	with the number of dollars of	16:21
	currency and deposits that people hold.	16:25
	By credit policies, I meant policies concerned with	16:28
	the state of conditions on the credit market,	16:32
	the terms at which loans are made,	16:34
	or the amount of loans, interest rates,	16:36
	availability of credit, and things like that.	16:38
	The theme of my discourse was that	16:41
	commercial bankers in general	16:47
	understood the credit market very well,	16:50
	but no commercial banker	16:52
	really understands the money market.	16:54
	That is, in the sense of the quantity of money.	16:55
	The individual banker understands that	17:00
	when he makes a loan, he is affecting credit.	17:02
	He is providing somebody with credit,	17:05
	he is setting a rate of interest and so on.	17:07
	No individual banker by himself understands that	17:11
	in the process, he is also affecting the quantity of money.	17:14
	This is because of the fact that	17:17
	the effects on the quantity of money	17:19
	derive not from what one any one banker does,	17:21
	but derives from the effects	17:24
	through the system as a whole.	17:25
	One banker will say,	17:29
	every banker always says, and quite correctly,	17:30
	that he can only make a loan	17:33
	if he has the free funds with which to do it.	17:34
	And so from his point of view,	17:38
	all he is doing is paying out money	17:40
	somebody else deposits with.	17:42
	He will say I got an extra deposit of ten thousand dollars.	17:45
	That enables me to make an extra loan	17:47
	of maybe eight or nine thousand dollars	17:49
	because I have to keep some of that	17:51
	deposit on hand as a reserve.	17:53
	What he does not take into account	17:55
	is that if he makes that extra loan	17:57
	of eight or nine thousand dollars,	17:58
	the person who receives it will in turn	18:00
	deposit it in some other bank.	18:02
	From the point of view of the other bank,	18:03
	that other bank will now have eight or nine	18:05
	thousand dollars of additional funds	18:07
	of which it will keep a part as reserves,	18:09
	but then it too can make another loan	18:11
	and in the process of this going from bank to bank,	18:13
	an initial extra deposit of	18:17
	ten thousand dollars, for example,	18:19
	may well build up into an increase in the money supply	18:20
	of twenty or thirty thousand dollars.	18:23
	The result of this is that individual bankers	18:26
	understand very well the credit market,	18:31
	but have a great deal of difficulty	18:33
	understanding their effects on monetary operations.	18:35
	In experience, most central bankers	18:39
	have been drawn from the commercial banking community.	18:41
	As a result, in my opinion,	18:44
	the central bankers as a whole	18:46
	have typically grossly overestimated the credit aspects	18:49
	of their operations and underestimated	18:54
	the effect of their operations on the quantity of money.	18:56
	Yet, in my opinion, what really matters	19:00
	from the point of view of central bank operations	19:02
	is what they do to the quantity of money,	19:04
	not what they do to credit.	19:06
	They can make the quantity of money	19:07
	almost anything they want,	19:09
	whereas on the other hand,	19:11
	they are a small part in the total credit market.	19:13
	Applied to the American scene,	19:17
	I pointed out that it was	19:19
	preoccupation with the credit market,	19:21
	a tendency of central banks to	19:23
	lean against the wind of interest rates,	19:25
	to take as their policy criterion objective	19:28
	what was happening to interest rates.	19:31
	It was this which was alike responsible	19:33
	for the Great Depression of '29 and '33	19:36
	and for the recent inflation of '65 to '68.	19:40
	It sounds hard to see how two such opposite events	19:45
	can be the result of the same policy,	19:48
	and yet a moment's reflection will show	19:50
	that that can be the case.	19:51
	In 1929 after the stock market crashed,	19:53
	there was a tendency for interest rates to go down.	19:56
	The central bank tried to lean against this wind	19:59
	to keep interest rates from going down.	20:01
	The only way it could do that was by selling bonds,	20:03
	which tends to lower their price	20:07
	and therefore raise the yield on them,	20:10
	but in the process of selling bonds	20:12
	it withdraws money from the system	20:13
	and this tends to reduce the base money,	20:15
	that is, high-powered money.	20:17
	This tends to reduce the quantity of money,	20:18
	which in turn tends to produce deflation	20:20
	and subsequently to make interest rates	20:23
	go down even more than they otherwise would.	20:25
	Similarly, in 1965 when we went into the Vietnam War	20:27
	and expanded government spending and government deficits,	20:30
	this tended to be raising interest rates.	20:34
	This time, leaning against interest rates	20:36
	meant keeping them from going up	20:38
	as much as they did, they otherwise would.	20:40
	The only way to do that is to buy bonds	20:42
	which raises their price and lowers interest rates,	20:47
	in the process, however, adding base money	20:50
	and thus promoting an expansion in the	20:52
	quantity of money and inflation.	20:55
	And thus, I argued that the tendency for banks	20:57
	to look primarily at their credit operations	20:59
	of central banks had been a major	21:02
	destabilizing factor accounting for almost	21:04
	every major mistake in monetary management.	21:08
	In the current scene, I emphasize	21:10
	the enormous change that has come about	21:13
	in Federal Reserve attitudes	21:14
	and the fact that now,	21:16
	for the first time in their experience,	21:18
	they were in fact concentrating on,	21:21
	or at least giving considerable emphasis	21:23
	on what was happening to the quantity of money.	21:25
	However, their credit emphasis still	21:28
	has two major effects which are,	21:32
	in my opinion, very unsatisfactory.	21:34
	One is that the methods of operation in New York	21:37
	whereby they translate their directives in Washington	21:40
	into day-to-day policy are still adapted to their	21:43
	earlier tendencies to stress credit conditions	21:45
	as opposed to monetary conditions.	21:48
	In the second place, the regulations that	21:50
	they are imposing on interest rates,	21:53
	the infamous regulation queue,	21:54
	which keeps down the maximum rate that they	21:56
	can make pay on savings deposits,	21:59
	is also an attempt to affect credit conditions.	22:01
	Here, as I've pointed out much against my usual tendencies,	22:04
	I was saying something which would be attractive	22:08
	to my audience rather than unattractive,	22:11
	here it seemed to me the Federal Reserve had been	22:14
	forcing upon the nation's bank a major readjustment.	22:17
	Intermediation and disintermediation,	22:22
	going into the Eurodollar market,	22:24
	trying to get loan participation shares,	22:25
	and all sorts of other devices	22:28
	wrenching the commercial banking system	22:30
	substantially for no social benefit whatsoever.	22:32
	The only effect of all of these operations	22:35
	was to cause banks trouble,	22:37
	to cause the monetary figures to be difficult to interpret,	22:41
	to forcibly expand the Eurodollar market,	22:47
	all to no social advantage and therefore	22:51
	I made a strong play for banks,	22:53
	for the central bank raising regulation queue	22:58
	ceilings or getting rid of it entirely.	23:01
	I emphasized that if they continued their present	23:03
	monetary policy of holding down the quantity of money,	23:06
	this would of course, as I said here,	23:08
	tend to produce a slowdown in the economy.	23:11
	The drastic character of the change	23:13
	in the Federal Reserve's own attitude	23:15
	was brought out in the comments.	23:17
	It turned out that of the three commentators	23:19
	who were supposed to be confronting me,	23:21
	only Mr. Hayes of New York was riffy on the other side.	23:23
	Mr. Darryl Francis of St. Louis was wholly	23:26
	on the side of monetary expansion.	23:29
	The only difference between him and me was	23:31
	on an issue which didn't come much into this discussion,	23:33
	namely my belief that it would be desirable	23:36
	to have an automatic pilot monetary policy	23:38
	of a steady rate of growth in the money supply,	23:41
	and his belief that while you should emphasize	23:43
	the money supply, the Federal Reserve Board	23:45
	should exert discretion in its control.	23:47
	George Mitchell reinforced strongly my views	23:50
	on the undesirability of regulation queue effects	23:53
	and on the whole was not very much opposed	23:56
	to the view I expressed.	23:57
	Perhaps that's because he was once	23:59
	at the Chicago Federal Reserve Bank,	24:00
	so that the Middle West versus New York	24:02
	was a real conflict.	24:05
	Mr. Hayes, on the other hand, was unrepentant	24:07
	central banker emphasizing credit conditions,	24:09
	but yet even he gave lip service to the idea	24:12
	of slowing down the rate of monetary growth.	24:15
	So I was impressed over again with the	24:17
	extreme tendency, the extremely important tendency	24:20
	on the part of the Federal Reserve	24:25
	to change its tune and to have adjusted	24:26
	to the idea that money supply,	24:29
	and not merely credit conditions,	24:31
	was a very important factor.	24:32
	Of course, Mr. Mitchell emphasized the	24:34
	political difficulties raised by people like Wright Patman	24:36
	and people concerned with the housing industry	24:39
	and savings and loan associations	24:41
	and raising regulation queue.	24:43
	He clearly expressed the view that it was	24:44
	desirable to do so as soon as possible.	24:47
	One banker from the west made a comment afterwards	24:50
	expressing the standard view of banks	24:56
	in which he pleaded for not changing regulation queue	24:57
	on the grounds that the small banks would be hurt.	25:01
	Now the facts of the matter are very different.	25:03
	According to the evidence that's available,	25:06
	the bank earnings of large banks,	25:07
	who would have had to pay the very high rates	25:09
	in the Eurodollar market and in	25:12
	the federal funds market to lend,	25:13
	the bank earnings of large banks are going to be down,	25:15
	but the bank earnings of the small banks	25:18
	who have been able to profit by lending	25:20
	their excess reserves on the federal fund rate	25:22
	are going to be sharply up	25:26
	so that all the total banking profits	25:27
	are going to be going up.	25:29
	A look at the detail will show that	25:31
	the large banks have not benefited	25:33
	nearly as much as the small banks.	25:35
	In any event, I may say I commented	25:37
	to this gentleman that he was just giving	25:39
	further evidence of Adam Smith's perspicacity	25:42
	when in 1776 he wrote that	25:44
	businessmen seldom meet together	25:47
	for purposes of jollity without making	25:48
	conspiracy against the public by fixing prices.	25:50
	Well, that about summarizes I think	25:54
	the International Monetary Conference.	25:56
-	Thank you very much Professor Friedman.	25:58
	Remember subscribers, if you have questions	26:01
	or comments or suggestions for tapes	26:03
	you would like to hear discussed in this series,	26:05
	please send them to Instructional Dynamics Incorporated,	26:08
	one sixty six East Superior Street,	26:11
	Chicago six oh six one one.	26:13
	Dr. Friedman will be visiting	26:16
	with you again in two weeks.	26:18

Item Info

Title:

Tape 29 - Current Conditions, A.B.A. International Monetary Conference

Date:

1969

Contributor:

Friedman, Milton, 1912-2006

Subject:

Format:

audiocassettes

Language:

English

Digital Collection:

Paul A. Samuelson papers, 1933-2010 and undated

Source Collection:

Paul A. Samuelson papers, 1933-2010

Series:

Economics Cassette Series: Milton Friedman

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ref2582_z6x
samuelsonpaul
duke:325244
pstau001221
ark:/87924/r4pk07j1p
1b3553f9-a419-4332-b0b2-1fa5916fa31b

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Tape 29 - Current Conditions, A.B.A. International Monetary Conference

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