Tape 43 - Money Stock, Regulation Question, Pollution

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-	Hello, this is William Clark of the Chicago Tribune,	0:02
	welcoming you to another visit	0:04
	with the distinguished Economist Dr. Milton Friedman.	0:06
	Welcoming you of course on behalf of Instructional Dynamics.	0:09
	And we're recording this interview	0:13
	on Lincoln's birthday February 12th.	0:14
	Dr. Friedman I wonder if we can say	0:17
	that the turn in the bond market has finally come	0:20
	with what's been going on the last couple of weeks?	0:23
-	Well sir, there certainly has been	0:25
	a substantial improvement in the bond market.	0:27
	I'm a little gun shy about saying that this is a turn	0:29
	because I must confess that I have been expecting	0:33
	a turn in the bond market as those who've been listening	0:36
	to these tapes know for some time.	0:39
	In terms of the typical relationship between interest rates	0:42
	and other cyclical movements.	0:45
	I had expected that the bond market	0:47
	would peak sometime in the third	0:51
	or fourth quarter of last year.	0:53
	And of course as you recall	0:54
	there were a repeated series of temporary peaks.	0:56
	I'm saying peak I'm speaking upside down	1:00
	I mean yields would peak,	1:03
	rate would peak and prices would drop.	1:05
	And as you recall during the third and fourth quarter	1:08
	there the yield interest rates reached a peak	1:12
	and then fell down,	1:16
	reached a peak	1:16
	and then fell down	1:17
	reached a peak about three	1:18
	or four times.	1:19
	So the crucial question is	1:20
	whether this is another one of those episodes	1:21
	or whether there is a very real and continuing turn.	1:24
	And although	1:28
	I've been wrong in the past	1:33
	thinking it's a turn,	1:35
	one of these turns is going to be the real one	1:36
	and it certainly is time for a distinctive turn	1:38
	in the bond market.	1:43
	That is to say you've had very clear evidence	1:44
	all around of a slowdown in business.	1:49
	You have had no further	1:52
	speeding up	1:56
	of monetary restraint	1:58
	Monetary restraint either has stayed	2:00
	roughly the same as it was for about six months	2:03
	or if anything has eased off a little.	2:05
	Now some of course of the sharp run up of the last week	2:08
	or so may reflect a psychological reaction to a whole series	2:12
	of bland and soothing statements by Secretary Kennedy.	2:16
	Paul McCracken, Arthur Burns and others.	2:22
	So there may be some element in that.	2:26
	And yet as I say it seems to me the evidence would lead	2:27
	to the belief	2:31
	that the prospect for bond prices from here	2:33
	on out are in general to rise.	2:37
-	Isn't there quite a substantial backlog of issues	2:40
	that ought to come out?	2:44
-	Yes there is.	2:47
	This is a very important and interesting point.	2:48
	I hear.	2:50
-	Does it have an impact on the course of prices?	2:51
-	Well it May,	2:54
	but I think that there is a good deal of misunderstanding	2:55
	about the significance and role of that backlog.	2:57
	I hear in talking to businessmen	3:01
	and people involved in the security firms	3:04
	they say, "How can you talk about	3:07
	any possible decline in long term rates?"	3:09
	Here we've got company after company	3:13
	that has been waiting in this high market	3:16
	and the first sign of any decline in rates.	3:18
	Well you're going to have a calendar length	3:21
	and you're going to have a whole series of issues.	3:24
	Now that may be true	3:26
	but it's worth asking yourself	3:28
	what is the financing going to be for.	3:31
	Much of the financing that is waiting to be done,	3:34
	that is waiting in the wings is refinancing.	3:38
	You have concerns that have been unwilling	3:41
	to go into the long term bond market	3:43
	and instead have been borrowing	3:44
	in the short term bond market.	3:46
	They have been raising funds from their banks	3:47
	or in commercial paper	3:50
	or in other short term instruments.	3:52
	Well let's suppose such a company seeks to refinance.	3:54
	The yield from its long term bond issue	3:58
	will repay its short term indebtedness.	4:01
	The people who then loan	4:04
	to that company on the short term have funds,	4:06
	what are they gonna do with them.	4:09
	The effect of this is not really	4:11
	an increase in the net demand on total funds available.	4:13
	It's a shift in demand from short term funds	4:17
	to a long term fund.	4:19
	And therefore you would expect	4:20
	that its main effect would be in changing	4:21
	the interest rate relationship	4:25
	between short and long term funds.	4:28
	At the moment short term rates are very high compared	4:30
	to long term rates by comparison	4:33
	with any previous experience.	4:36
	I don't mean to say that it's completely	4:39
	out of line with previous experience	4:40
	but typically speaking the yield curve	4:42
	is a rising curve that is to say	4:44
	interest rates on short term securities are lower	4:47
	than interest rates on long term securities.	4:50
	But occasionally you do have a reverse pattern.	4:52
	What the people who work in this call a J shape pattern	4:57
	or a humped pattern and that's what you have now.	5:01
	Extremely short	5:05
	rates are still relatively low	5:08
	but then you go up to a much higher rate	5:10
	for three months money	5:13
	and then it comes down again for very long term rate.	5:15
	That kind of a pattern exists	5:18
	whenever the market as a whole thinks	5:21
	that current rates are abnormally high.	5:25
	And rates are going to be lower in the future.	5:28
	The reason for that is	5:30
	that if you think rates issue short term rates are going	5:31
	to be lower in the future.	5:34
	Well then it pays you to pay abnormally high rates	5:36
	for a time in order to wait for that	5:38
	and that's why the emergence of this kind	5:40
	of a of a humped curve	5:43
	or a J shaped curve is always a sign	5:44
	of widespread expectations of a decline in rates.	5:47
	If those expectations were disappointed if rates stayed up,	5:51
	what would happen would be	5:55
	that the long term end of the yield curve would rise	5:56
	to restore a flat or a rising yield curve.	5:59
	Well as of the moment I think those expectations	6:03
	are well-founded at least for the near-term future	6:06
	whether they're founded for the next three or four.	6:08
	Well-founded for the next three	6:11
	or four	6:12
	or five years will depend as I stressed before.	6:13
	And	6:16
	which of two alternative outcomes follows	6:18
	from the recession that we seem	6:22
	to be in the midst of.	6:26
	If in reaction to that recession we overreact	6:29
	and go off onto another inflationary spiral.	6:32
	Well then I think the long term rates now are not below	6:35
	what long term rates will be in the future	6:39
	then we're headed for a long period of very high rates.	6:41
	On the other hand if we keep our cool	6:44
	if we hold on to the to the situation.	6:46
	For the,	6:49
	by we I mean if the government keeps its cool	6:51
	if the Fed doesn't overreact,	6:53
	if the Treasury doesn't overreact	6:55
	and holds it through so that we get back on	6:57
	to the non-inflationary course then long term rates are sure	7:00
	to be lower over the next four	7:04
	or five years than they are now.	7:05
	In the market at the moment	7:07
	is saying that most people believe	7:09
	in the second of those two results.	7:12
	Most people believe that the rates over the next four	7:14
	or five years will be lower than they are now.	7:18
	We'll come back to you,	7:20
	to the main point.	7:21
	Short term rates are abnormally high now	7:23
	because people think rates are going	7:25
	to go down relative to long term.	7:27
	A large part of the bond financing we're talking	7:29
	about we'll be to refinance	7:32
	to get out of shorts into loans	7:33
	that will provide people who now	7:35
	are lending short with funds.	7:38
	The incentive to lend short will be reduced	7:40
	because of short rates will come down relative	7:44
	to the long rates.	7:46
	So much of those funds will shift	7:47
	over onto the long market.	7:48
	As a result this kind of calendar	7:50
	which involves refinancing will have an effect	7:53
	on the yield curve but it will not in my opinion	7:57
	prevent the whole yield curve from declining.	8:00
	What it means only is that short term yields	8:02
	will decline by decidedly more than long term yields.	8:05
	Now one more point on this.	8:10
	The really important factor affecting	8:13
	rates from the point of view of bond issues,	8:17
	is the new financing	8:22
	the funds that are demanded not for the purpose	8:24
	of repaying other debt	8:27
	but for the purpose of financing new	8:30
	equipment,	8:34
	new plant extensions because this kind	8:35
	of demand does require net new saving	8:38
	it is not simply a rollover,	8:41
	it's not simply a restructuring of other debt.	8:42
	And one might ask what is the prospect for that.	8:45
	We still have these projections by various people	8:49
	that capital spending, plant and equipment spending	8:54
	in the early part of 19	8:57
	and early part of this year is going to be relatively high.	8:59
	Well maybe.	9:05
	If so that does really hold,	9:06
	that's a real matter.	9:08
	That's a real fact that doesn't hold up interest rates.	9:09
	My own conjecture is that as this recession becomes clearer	9:12
	and sharper as it already has been I guess	9:18
	but as this develops still more.	9:20
	Many of those plans are not in fact going to be realized	9:22
	that actual capital expenditures are going	9:25
	to be lower than planned capital expenditures.	9:28
	This is what always happens at a turning point.	9:31
	And in so far as that's the case	9:33
	that will relieve some of the pressure on interest rates	9:35
	and would permit interest rates to come down.	9:38
	Similarly, if we look at the government picture.	9:41
	While the Federal Government budget is not going	9:44
	to be as rosy as might have been hoped.	9:48
	It will not have as large surpluses was earlier planned.	9:51
	Still the Federal Government is not going	9:54
	to be a major drain upon the markets for funds.	9:57
	The budget understates the drain	10:01
	because there are quite a number of items	10:03
	that are outside the budget in	10:05
	which the government in one way	10:07
	or another is borrowing on the market	10:09
	although it doesn't go down as a deficit.	10:11
	So I think the budget figures	10:13
	are a distinct overstatement of the case,	10:16
	but nonetheless	10:19
	for the federal government is not going	10:21
	to be a major factor on the market.	10:23
-	Dr. Friedman and shuffling through the cards	10:26
	received from your subscribers,	10:29
	I see a lot of concern expressed in various ways	10:30
	about the whole subject of debt.	10:34
	One man refers to a recent Wall Street Journal article	10:36
	which was headed Worry Over Debt.	10:40
	They seem to wonder if we might not be facing another 1929	10:43
	and a host of bankruptcies and so forth.	10:48
	What would your comment be on that?	10:51
-	Well there is no doubt that the ratio of debt to equity	10:53
	or the level of debt to income	10:58
	or however you want to measure it	11:01
	has risen very greatly in the past few years.	11:03
	Of course it's natural that it should have.	11:05
	It's been very profitable in these last few years to borrow.	11:08
	As we've noted over and over again	11:12
	with prices rising at 5 or 6% a year	11:14
	and 8 or 9%	11:17
	or 10% interest rate is not a high interest rate.	11:18
	It's true also that if the economy slow,	11:22
	as the economy slows down if we get inflation under control,	11:27
	so that the rate of price rise is distinctly	11:31
	reduced if interest rates come down.	11:33
	The debt accumulated at the higher earlier,	11:36
	higher interest rates will turn around	11:39
	and become a hindrance rather than an advantage.	11:41
	So there are many individual enterprises	11:45
	that undoubtedly are going to be in serious.	11:47
	That might be I shouldn't say undoubtedly,	11:51
	might be in serious difficulty about the debt.	11:53
	Of course the people who hold that debt,	11:56
	the people who made the loans in	11:59
	so far as they aren't defaulted go bankrupt.	12:01
	In so far as what happens is that companies are squeezed,	12:04
	you have some people pinched	12:08
	and other people gain.	12:11
	The people who borrowed are in trouble	12:12
	and the people who loaned gained just	12:14
	as in the past few years.	12:17
	It's been the other way the borrowers have benefited	12:18
	and the lenders have been hurt.	12:21
	And it is also true that generally speaking	12:23
	borrowers are the more active entrepreneurs	12:26
	are the people who are engaged in new ventures.	12:29
	The lenders are the people for who are not so active	12:32
	and thus it is also true that in general a period in	12:36
	which debtors are in this sense gaining at the expense	12:39
	of lenders tends to be an active vigorous boom period	12:42
	in the economy in a period in	12:46
	which the other way tends to be a slower period.	12:48
	So I think there is some very real base acceptance	12:51
	to the concern over debt.	12:54
	It means	12:56
	that it's part of the problem	13:00
	involved in getting out of the situation	13:02
	that inflation puts you into	13:05
	and into a sustainable non-inflationary situation.	13:07
	Part of that reversal will have	13:10
	to be not so much a lessening of debt	13:13
	but a re-adjustment of the terms on	13:15
	which the debts are accumulated.	13:17
	Now a lot of this debt is short term	13:19
	and so far as it's short term it will be possible	13:21
	to refinance it as we were saying	13:24
	as I say in just a moment ago.	13:26
	That's really what the lesson is of this alleged	13:27
	long calendar of bonds that want to be issued.	13:30
	These are short are short term funds	13:32
	that people are anxious to refinance	13:35
	at a somewhat lower rate.	13:37
	So that I think that there is a serious problem about debt.	13:39
	On the other hand I don't believe	13:43
	that the size of the debt	13:44
	in any way portends.	13:49
	Well you say another 29.	13:52
	You know it's an interesting thing about	13:54
	that when people say another 29 they don't mean another 29.	13:56
	They mean another 31.	13:59
	Because people tend in retrospect	14:01
	to short circuit that period.	14:04
	And the fact is that the period from 1929	14:06
	to 1933 is really two very very different periods.	14:09
	It's a period from 1929 and the date I always use	14:14
	to end it is a very precise date,	14:18
	it's December 11th, 1930,	14:20
	because that was the day onwards	14:23
	the bank of the United States in New York failed.	14:26
	The Bank of the United States	14:29
	which failed in New York was the largest bank	14:31
	that had ever failed in the history of United States.	14:33
	Moreover, it had even more significance in that	14:37
	because it was a poor people's bank.	14:39
	This was one of the reasons why it failed	14:42
	because the other banks were jealous of its name	14:45
	and didn't really weren't too anxious to save it.	14:47
	It could have been saved,	14:50
	it should have been saved.	14:51
	It was a perfectly good bank.	14:51
	It was brought down by rumors essentially	14:53
	and would have been saved if it hadn't been	14:55
	for John Pierpont Morgan's prejudices.	14:58
	But the reason I say was a poor people's bank was	15:02
	because the name the Bank of the United States	15:05
	was widely recognized by people.	15:07
	regarded by people,	15:09
	by immigrants particularly	15:11
	as reflecting something official about it.	15:12
	Now it wasn't official at all.	15:15
	It was just another bank like the Bank of New York	15:16
	isn't run by New York City.	15:18
	It was just another private commercial bank	15:21
	but it had as a result	15:25
	a very large fraction of its depositors	15:28
	were low income people immigrants who had recently arrived	15:32
	and its failure set off a stream of runs on banks	15:34
	which changed the character of the Depression.	15:38
	If we take the period from 1929 to December 11th, 1930,	15:41
	I'm dramatizing it by taking	15:46
	that particular day but it's around.	15:49
	You had a severe recession,	15:52
	but not anything particularly abnormal.	15:54
	If that depression had come to an end,	15:57
	in the late 1930 as it very well	16:02
	might have if you had halfway sensible monetary policy.	16:04
	If it had come to an end in late 1930	16:08
	or early 1931 when it surely would have,	16:10
	if you had sensible policy.	16:13
	If we went back in our history books	16:14
	now we'd say that was a pretty tough one	16:17
	but nobody would single out 1929	16:20
	any more than you would single out.	16:23
	You don't hear people saying are we gonna	16:25
	have another 1937.	16:27
	Well the 37,	16:29
	38,	16:30
	with a depression recession	16:31
	that was very much more severe than the 1929	16:32
	to 1930 part of that later depression.	16:36
	And in that first year,	16:39
	two years you see the people again tend	16:40
	to date the	16:43
	1929 act.	16:46
	So from Black Thursday on the stock exchange	16:47
	but in fact historians of business cycles date the peak of	16:50
	that cycle several months earlier.	16:54
	They dated in August at the latest at the point at	16:56
	which the economy started coming down.	17:00
	Although, the stock market kept going up	17:02
	for two or three months beyond that	17:04
	and let's see when was Black Thursday	17:07
	that was in October 1929.	17:08
-	Stock market was not a leading indicator at that time?	17:10
-	No.	17:13
	I guess that's right.	17:14
	It wasn't on the average over business cycle peaks,	17:15
	the stock market has been a leading indicator.	17:18
	But on your hadn't quite realized	17:20
	that in October it wasn't because that's when it peaked.	17:23
	And yet the economy peaked in August.	17:27
	Well so from August 1929 until about December	17:31
	the end of 1930 which was a year and a half.	17:35
	During that period there were no widespread bankruptcies.	17:39
	There were a few failures but no widespread ones	17:43
	in particular the banking system was unscathed.	17:46
	There was no runs on banks up to that point.	17:49
	There was no sign of any substantial financial weakness.	17:52
	What you heard was it's unquestionably true	17:57
	that the stock market crash.	18:01
	Again the major decline in the stock market	18:03
	did not come from 1929 to 30,	18:07
	we remember October because that was a climactic variable.	18:09
	But again if the stock market had dropped sometime in 1930.	18:12
	You would not have had the kind of catastrophe	18:18
	that you in fact did.	18:22
	The real depression came from 1930 to 1933.	18:23
	Beginning, I dated December but there were some minor,	18:28
	less serious banking problems	18:33
	that started a month or two early.	18:36
	There was a banking crisis that started about October 1930	18:38
	and it was	18:43
	the climactic phase of that banking crisis was the failure	18:47
	of the Bank of the United States	18:50
	which is why I take that dramatic day	18:52
	and these banking difficulties	18:55
	changed completely the character of the Depression.	18:58
	Up until this time it had been a sort	19:01
	of ordinary garden variety	19:03
	somewhat more severe recession	19:05
	than you you ordinarily have,	19:08
	but nothing extreme out of the ordinary.	19:10
	It was the banking crisis	19:12
	and the subsequent failures of banks.	19:15
	And their effect that the effect on	19:18
	that on the quantity of money.	19:20
	As mediated through the Federal Reserve System	19:23
	which changed the episode from a serious recession	19:26
	into the greatest catastrophe of American economic history.	19:31
	And that's why when people go back	19:35
	and say as you did a moment ago when you go back	19:37
	and say well that brings back memories of 1929,	19:40
	we ought to stop people and say you mean 1930 or 1931.	19:44
-	Well Doctor another thing that people are saying	19:48
	is suppose we have a whole string of failures on Wall Street	19:50
	that plunges back to where we were in the dark days.	19:53
-	Well failures on Wall Street are clearly a possibility.	19:57
	One concern I guess last year and reorganized McDonald	20:03
	and some of the leading firms like bait and company	20:07
	are now showing substantial losses.	20:11
	So I suppose one shouldn't rule out the possibility	20:13
	that you might have failures on Wall Street	20:16
	or even that you might have failures	20:19
	and bankruptcies of some industrial concerns,	20:21
	but again that would not be a pleasant prospect.	20:24
	It certainly would not be a pleasant prospect	20:29
	for people connected with those companies	20:31
	are involved in it.	20:33
	But again I think that would not	20:34
	have any far reaching effects	20:37
	on the economy.	20:41
	In fact in some way given the desirability,	20:42
	if I were being very cynical and hard boiled	20:45
	and I were talking from the standpoint	20:49
	of someone down in Washington,	20:51
	I think I would rather welcomes some failures	20:53
	of that,	20:57
	especially some dramatic ones.	20:58
-	Why is that?	20:59
-	Well because that would,	21:00
	that would take the heat off	21:03
	of the inflationary expectations.	21:06
-	I see.	21:08
-	It would have the indirect effects.	21:08
	Now personally as I mentioned before	21:10
	I don't myself attribute enormous importance	21:13
	to this kind of inflationary expectation.	21:16
	I think people's expectations are based mostly	21:20
	on what they experience	21:23
	and that as people experience a slower level of business	21:24
	a slower rate of demand	21:29
	that's going to be the most effective	21:31
	and the only really effective way	21:34
	of tapering off their expectations.	21:36
	But as you know people in Washington in particular	21:38
	which is the center of the rumor factory,	21:41
	in the center of the factory for emitting stories.	21:44
	Putting in too much emphasis	21:47
	on what people think as opposed to what they do.	21:49
	And the effect of words and what they think.	21:53
	Well I can believe that they would argue	21:56
	that they might argue well some headlines	21:58
	in about the failure of XYZ company might do more	22:01
	to make people all around think	22:07
	we're really in a period where prices	22:09
	aren't gonna continue to rise	22:12
	and we're going to get off the inflation.	22:13
	That might do a good deal more of it	22:14
	that even omit the press	22:16
	performance by Messrs candidate McCracken in mayor.	22:17
	Well at any rate I don't really	22:21
	I'm really being somewhat facetious on	22:23
	that I don't think it would be a good thing really	22:27
	to have such failures.	22:29
	It's far better to get out of this without that,	22:30
	but nonetheless	22:33
	even a significant range	22:36
	of such failures would not in my opinion bring you back	22:37
	to as you were saying the dark days of 1930 to 33.	22:41
	I think in understanding that period.	22:46
	There are two things that were very closely related	22:49
	and that need to be very sharply separated.	22:53
	One of them is the effect on the economy	22:55
	of the failures in and of themselves.	22:58
	And the second is the effect at that time	23:00
	which the bank failures had by producing	23:03
	a decline in the quantity of money.	23:06
	These are two quite different things.	23:08
	If we go back again and look at	23:11
	that episode from 1930 to 33.	23:13
	The failures of banks caused capital losses to the peak	23:15
	to their depositors,	23:20
	to the people who had invested	23:22
	and their owners and so on.	23:25
	But that wasn't what really caused	23:26
	had any significant influence on the contraction.	23:28
	The reason why those bank failures were important was	23:30
	because of bank failures induced depositors to try	23:34
	to withdraw deposits in the form of currency.	23:37
	With the Fractional Reserve System,	23:40
	Of course depositors cannot do that.	23:42
	The most one of them as I've stressed repeatedly	23:45
	one of the most misleading words	23:48
	in the English language is deposits	23:50
	because that leads to the notion that you take money	23:51
	to a bank and deposited there	23:54
	and it's still there	23:55
	and all the bank does is put it in a vault	23:56
	when you want it they are safe keeping it for you	23:58
	and give it back to you and that's of course absurd.	24:01
	What actually is a case is a deposit,	24:03
	you bring a money into one window with a bank	24:06
	and the teller immediately runs as fast as he can	24:08
	to another window to handed out	24:11
	to a person to whom they're making a loan.	24:12
	What you're doing with banks is you're lending the banks	24:15
	and the banks in turn are lending to somebody else.	24:17
	So the bank is an intermediary borrowing	24:21
	from someone lending to others	24:23
	and it does not have cash involved with which to pay it out.	24:24
	Well when a large fraction of depositors try	24:27
	to convert deposits into currency the banking system	24:30
	as a whole cannot do so	24:33
	unless it has some supply of additional currency.	24:34
	The Federal Reserve Act was established in order	24:38
	to provide such an additional supply of currency	24:40
	and to some extent it worked that way.	24:43
	The Fed did permit currency per say to rise	24:44
	but the Fed was extremely derelict in its duty	24:47
	and did not permit,	24:51
	did not provide enough currency	24:53
	to enable banks to meet the demands of their customers.	24:56
	As a result the only way in	25:00
	which banks could meet the demand of their currencies	25:02
	was by liquidating their assets	25:04
	which produced a decline in deposits	25:06
	and a decline in the whole money supply.	25:08
	And so it was via this process	25:11
	that the bank failures had their major impact.	25:13
	They had their major impact because in the period	25:17
	from 30	25:20
	to 33 for example the deposits	25:21
	of banks fell by something like 40%.	25:24
	It was this decline in their deposits not the Fed.	25:26
	Now one striking proof that this is a correct interpretation	25:30
	is provided by our sister nature in Canada	25:34
	because during that same period Canada	25:37
	had no bank failures at all.	25:39
	It has a small number of banks	25:41
	with branches all over the country none of which failed.	25:43
	But the quantity of money declined just about as much	25:45
	over this period about the same order of magnitude.	25:49
	The reason it did of course was because Canada	25:52
	and the U.S. were linked through fixed exchange rates	25:55
	and so Canada had to follow the US essentially	25:57
	and that produced a severe.	26:01
	and deeper depression in Canada as a decline in money	26:05
	in the United States in the United States.	26:09
	So in the present situation the question you wanna	26:11
	ask about whether this is something	26:14
	to be worried about about reproducing the 30,	26:16
	33 episode,	26:18
	is whether there is any chance that	26:19
	that bankruptcy is on Wall Street	26:22
	or of industrial firms elsewhere.	26:24
	Could conceivably produce	26:27
	a drain on the banking system.	26:29
	Which would produce a corresponding	26:31
	decline in the quantity of money.	26:34
	And the answer to that is no	26:35
	there is not the slightest chance for two reasons.	26:37
	The first and in some ways and more important.	26:39
	Is the existence today of Federal Deposit Insurance.	26:43
	The result of that is that even if one bank fails	26:47
	that does not start a run on other banks	26:51
	because depositors have the assurance from FDIC	26:54
	that their deposits will be paid off.	26:58
	The second reason is that while we may not have learned much	26:59
	over the course of time we have learned something	27:03
	and it is inconceivable that the Federal Reserve System	27:05
	today could behave as it behaved from 30 to 33.	27:08
	It could not behave that way if only	27:13
	because at that time it did not even have figures	27:15
	on the quantity of money except once a year	27:18
	or something like that.	27:20
	Now it has them regularly but more important	27:21
	we have all learned from that episode.	27:23
	It would be the obligation of the Federal Reserve System	27:26
	to prevent any sharp decline in the quantity of money.	27:30
-	Thank you very much Doctor.	27:32
	We've been visiting with Professor Milton Friedman	27:34
	of the University of Chicago.	27:37
	I'd like to remind you subscribers	27:38
	to send in your comments and questions	27:41
	and suggestions for Dr. Friedman to Instructional Dynamics	27:43
	166 East Superior Street Chicago 60611.	27:47
	We'll be visiting with Dr. Friedman about two weeks hence.	27:53

Item Info

Title:

Tape 43 - Money Stock, Regulation Question, Pollution

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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ref2610_p8v
samuelsonpaul
duke:325258
pstau001235
ark:/87924/r4qb9vn7p
8a46de2e-2e5f-4b42-895f-35d6b872299e

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Tape 43 - Money Stock, Regulation Question, Pollution

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