Tape 38 - Monetary Developments, Interest Rates, Rinfret's Predictions, Stock Market, Bank Holdings

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-	Hello, this is Instructional Dynamics	0:02
	inviting you to another of our biweekly interviews	0:04
	with Dr. Milton Friedman, professor of economics	0:07
	at the University of Chicago.	0:10
	We are taping this interview on Wednesday, November 19.	0:12
	Professor Friedman, are there any new developments	0:17
	in the monetary situation?	0:19
-	I am sorry to report that there are none.	0:21
	The Federal Reserve is continuing	0:24
	to maintain an extraordinarily tight monetary posture.	0:28
	The quantity of money	0:34
	defined as currency plus demand deposits	0:36
	has now been roughly constant	0:39
	for something like five months,	0:43
	and there is not any sign at all of a let-up.	0:46
	A few weeks ago, I thought	0:49
	that I saw some beginnings of a sign	0:51
	in the statistical figures	0:54
	that there might be a slight easing,	0:56
	that the rate of growth of the quantity of money	0:57
	might be going from the essentially zero percent	1:00
	over the past five months	1:03
	to a slight positive level.	1:06
	But the last couple of weeks'	1:10
	figures again	1:13
	cast that into extreme doubt.	1:16
	For those two weeks, in both of those weeks,	1:18
	the quantity of money was extremely low,	1:21
	lower than in almost any other week	1:24
	of the past five months.	1:27
	And what's true for the narrow definition of money	1:28
	or currency plus demand deposits	1:31
	is true to an even more extreme extent	1:33
	with respect to any broader definition,	1:35
	including and excluding CDs,	1:37
	including commercial bank time deposits.	1:39
	However you look at it, it's perfectly clear	1:41
	that we are continuing on a path	1:44
	of an extraordinarily tight monetary policy.	1:46
	Now I have been expecting, as my subscribers know,	1:51
	some change in this situation.	1:55
	The basis for my expectations has been primarily	1:57
	the logic of the situation,	2:00
	as I have been trying to interpret it	2:02
	not in my terms, not in line with my own reasoning,	2:04
	but in line with the way in which the Federal Reserve	2:08
	system looks at it.	2:10
	It had seemed to me that from their point of view,	2:12
	they have been extremely reluctant	2:15
	to let up in any way on the monetary situation	2:17
	because of the belief that it would unleash	2:20
	inflationary expectations and because of the belief	2:23
	that they could not let up until there was clear	2:26
	and present signs that their restraint	2:28
	was having some effect.	2:32
	Now those clear and present signs	2:34
	have come into the picture.	2:36
	By now, there is widespread agreement	2:38
	that there is very strong evidence of an economic slowdown	2:41
	in terms of the indexes at which they look.	2:44
	The index of industrial production	2:47
	has now declined for three months in a row.	2:49
	A third month's decline was just reported yesterday.	2:52
	And this is the longest period of decline	2:55
	since the so-called mini recession in 1967.	2:58
	In addition, today's Wall Street Journal reports	3:03
	an extremely sharp decline in housing starts.	3:06
	Unemployment, which had been creeping up	3:09
	during much of the summer, jumped, as you know,	3:13
	two months ago to four percent	3:17
	and then backed off only a trifle to 3.9% in October.	3:18
	The rates of interest have been moving up and down	3:26
	within a range, but they have been remaining	3:31
	at historically high, extraordinarily high levels.	3:33
	Thus, every one of these indicators,	3:37
	and many others that I might mention,	3:39
	would seem to be making it clear	3:41
	that there has been a definite turn in the situation,	3:44
	that the policy of monetary restraint	3:47
	has been effective in the sense of starting to produce	3:50
	a decline in the economy.	3:56
	And it was this logic, which led me to suppose	3:58
	that they must ease off,	4:02
	that having seen the beginning of the effects,	4:04
	being criticized by many people,	4:08
	particularly myself and other monetarists,	4:11
	on the grounds that they were laying the stage	4:15
	for an extraordinarily severe recession,	4:17
	being conscious of their tendency in the past	4:20
	to have overreacted,	4:23
	it seemed to me that they would ease off	4:25
	and let the money stock grow	4:28
	at at least a small or moderate rate.	4:30
	And this logic still leads me to believe	4:33
	that they must do so in the next few months.	4:36
	And yet, I have to confess	4:38
	that my confidence in that conclusion	4:40
	is very severely shaken by	4:42
	the lack of any sign in the statistics of even the remotest	4:45
	easing off in the policy.	4:48
	Indeed, this episode is beginning to have	4:51
	very many earmarks reminiscent	4:58
	of two other episodes in the past three years,	5:02
	the behavior of the Fed in 1967	5:04
	and the behavior of the Fed in the middle of '68.	5:07
	For the third time in three years,	5:12
	it looks, from the outside, almost as if	5:14
	the Federal Reserve	5:18
	are deliberately concerned with producing	5:20
	a control scientific experiment	5:23
	designed to demonstrate that after all, they are right	5:26
	and the monetarists are wrong	5:30
	rather than putting their major emphasis	5:32
	on a responsible control of the economy.	5:35
	They did this in 1967 by overreacting	5:38
	and speeding up the growth of the money supply	5:41
	at much too rapid a rate.	5:43
	They did it in the middle of 1968	5:45
	by taking it for, by concluding	5:48
	that the surtax produced the danger of overkill	5:54
	which had to be offset by very rapid monetary expansion.	5:58
	On both of those occasions,	6:04
	the results were precisely	6:06
	what the monetarists had predicted,	6:08
	namely in '67, a turnabout from the slowdown produced	6:10
	by the '66 monetary tightness to a continuance of inflation,	6:14
	and in the second half of '68,	6:20
	there's still further speeding up of the rate of inflation.	6:21
	Now, once again, the monetarists have been urging	6:24
	that they not overkill,	6:28
	that they let up and ease up somewhat	6:30
	on their rate of monetary expense	6:33
	and that they maintain restraint in the sense of	6:35
	not going back to the seven to 10 or 12% rate	6:37
	of expansion of '69, of '68, I'm sorry,	6:40
	but at least keep it at something like	6:44
	a four and a half percent rate of expansion	6:47
	of the first five months of this year.	6:49
	But yet, they continue to hold the money stock	6:51
	at a zero percent rate of growth	6:55
	as if to try to show that after all,	6:56
	the dire consequences which we have been predicting	6:59
	will not in fact follow.	7:01
	I hope this is an erroneous interpretation,	7:03
	but as of now, I cannot offer you much beyond	7:06
	the logic of the situation to justify that conclusion.	7:10
-	What is your reaction to the behavior of interest rates?	7:16
-	Well, interest rates have behaved, as you would expect,	7:19
	given that there has been no change in monetary policy,	7:24
	that the monetary policy,	7:29
	the expansion of the rate of change of the quantity of money	7:30
	has not eased up.	7:32
	If anything, it has tightened up still further.	7:34
	Under those circumstances,	7:37
	interest rates have stayed extremely high.	7:39
	They have not really been rising.	7:42
	If you look at the pattern for the last four or five months,	7:45
	what you have is a pattern of zigzags	7:50
	around a very high level.	7:52
	At the moment, as I speak,	7:53
	there has been a sharp rise in rates	7:56
	or a decline in the prices of long-term securities	7:59
	in the last few days.	8:02
	But we had such an episode a couple of months ago	8:04
	and then they recovered and then they came back down again,	8:06
	and once again, I believe that what you are seeing	8:08
	are sharp movements up and down	8:11
	around a very high horizontal level.	8:14
	As I've indicated in prior tapes,	8:17
	by now, interest rates would be coming down	8:20
	if the Fed had not further tightened the monetary screws	8:24
	in something like May.	8:27
	Even with that tightening of the monetary screws,	8:30
	unless they tighten them still further, still another notch,	8:32
	and I'm not so pessimistic about their behavior	8:36
	to believe that they will really do that,	8:38
	I do not see any possibility whatsoever	8:41
	that interest rates will rise	8:45
	much beyond their present level.	8:48
	And on the contrary, it seems to me	8:50
	the odds are overwhelming	8:52
	that interest rates are now higher than they will be	8:53
	three, four, five, six months from now.	8:57
	What they are compared to what they will be	8:59
	three, four, five, six years from now	9:01
	is a much more complicated matter.	9:03
-	Professor Friedman, in yesterday's Wall Street Journal,	9:05
	Pierre Rinfret is reported as saying	9:08
	that US growth will smash every economic record in 1970	9:11
	and drive prices and interest rates higher.	9:16
	We'll be lucky, he goes on,	9:19
	if we can contain inflation to four and a half	9:21
	to five percent growth.	9:23
	Money rates haven't peaked, he added.	9:25
	I think the rate of July 1 will be between	9:28
	nine and a half percent to 10%.	9:30
	What do you think of Pierre Rinfret's forecast?	9:33
-	Well, Pierre is an ebullient and enthusiastic fellow	9:36
	who has a tendency to take rather strong positions.	9:40
	I have a great deal of personal respect	9:45
	and liking for Pierre	9:48
	because I must say that I have somewhat of a	9:49
	same kind of a tendency myself.	9:51
	And yet, in this case,	9:53
	I think he's gone completely off the reservation.	9:54
	Some of his statements, of course, are true.	9:58
	Even though we have a very severe economic contraction,	10:03
	next year I think it's likely, given the monetary policy	10:06
	that the Federal Reserve has been pursuing,	10:10
	it's almost sure that prices will continue to rise.	10:13
	There is a long hangover of an inflationary process	10:16
	given the way in which prices have been behaving	10:22
	in the last three or four years,	10:25
	given the widespread anticipations	10:27
	that they are going to continue to rise,	10:29
	I agree with him,	10:33
	that you will still see prices rising next summer.	10:35
	I would be more optimistic than he.	10:38
	He says four and a half to five percent.	10:40
	I continue to expect that the rate of price rise	10:42
	will probably be of the order of about four percent	10:45
	by the end of this year	10:47
	and may well be down to a three and a half percent rate,	10:49
	maybe even a three percent rate of rise	10:52
	by the time he's speaking of, namely mid-1970.	10:55
	So I think he's underestimated the downward pressure.	11:00
	But the place where I think he's very, very far indeed	11:04
	off the reservation is in his belief	11:07
	that the US growth will smash every economic record in 1970,	11:10
	if by that he means, as he must mean,	11:14
	that the rate of growth will smash economic records.	11:17
	In order for the rate of growth to smash economic records,	11:20
	you would have to have a real rate of growth	11:23
	of somewhere in the order of six to eight,	11:25
	nine percent per year.	11:27
	It seems to me that's completely out of the cards.	11:29
	The real rate of real economic growth,	11:31
	however measured, has been coming down	11:33
	from a five or six percent in 1968	11:35
	to two percent in the second	11:38
	and probably third quarters of '69.	11:41
	If I am right, that we have already turned around	11:45
	and are in a downward economic movement,	11:49
	something that will after the event be called a recession	11:53
	or a contraction,	11:55
	then the rate of economic growth	11:57
	is bound to come down still farther.	11:58
	I think we shall be very, very lucky indeed	12:00
	if the year 1970 as a whole shows any economic growth.	12:03
	It may.	12:07
	If we were to follow a typical post-war recession pattern,	12:09
	if this were not to be different than the others,	12:13
	we would have a period of mild decline in economic growth,	12:15
	a mild decline in output,	12:19
	from now until about mid-70	12:21
	and then a turnaround and a rise	12:26
	during the latter half of '70,	12:28
	which might well offset the decline in the first half.	12:30
	So 1970 as a whole might be a year of no growth	12:33
	but that it will be a year showing	12:36
	six, seven, eight percent, nine percent rate of growth	12:38
	seems to me almost inconceivable	12:40
	in the light of what is now occurring	12:43
	and what is now going on.	12:45
	After all, we have an enormous range	12:46
	of historical background.	12:48
	One of the problems with commentators like Mr. Rinfret	12:50
	and understandably with people	12:53
	who are linked to the current economic events	12:55
	is a tendency to take a very short time perspective,	12:57
	to look at what's happening	13:00
	in the light of the immediate past,	13:02
	in the light of the very, very recent experience.	13:03
	But we have experienced over a hundred more years,	13:07
	the data have been examined very carefully.	13:10
	They've been analyzed thoroughly.	13:13
	The pattern of change now	13:15
	is not one which seems at all likely	13:17
	to reverse itself in the course of a few months	13:20
	and go from a period of relative slowdown and decline	13:23
	into a period of exuberance and reaction.	13:27
	On the contrary, you're going to have	13:30
	a considerable period of adjustment.	13:31
	Now, when you go beyond this US growth to interest rates,	13:34
	the interest rate behavior is a little bit more difficult	13:38
	because it would be perfectly possible	13:43
	to have a substantial economic decline,	13:48
	a real recession or a real contraction	13:53
	and for a while to have interest rates continue to rise.	13:55
	Indeed, if one does look at the very long pattern	13:58
	of economic history, it's worth noting	14:01
	that until the Federal Reserve system came into the picture,	14:04
	if you go back before 1914,	14:07
	the typical pattern of long-term	14:10
	and short-term interest rates	14:12
	was that they reached their highest level,	14:15
	not when the economic activity reached its level,	14:18
	not at the peak of the business cycle,	14:22
	but quite sometime after,	14:24
	about halfway down the contraction.	14:26
	They then turned around and reached their lowest level	14:28
	about halfway up an expansion.	14:30
	In the post-war period, you had a very different picture.	14:33
	In the post-war period,	14:38
	the peaks and troughs of the interest rates	14:39
	have tended to coincide	14:41
	with the peaks and troughs of the cycle.	14:42
	In the interwar period, you have a rather mixed picture.	14:44
	You do not have anything like the long	14:48
	lags of peaks and troughs that you had pre-1914,	14:50
	but on the other hand, you do not have	14:53
	the strict coincidences that you have	14:55
	in the post-war period.	14:57
	My impression is, however, that the post-war period	15:00
	is still likely to prevail,	15:05
	the post-war pattern, the pattern of the post-war period.	15:09
	And as I said just a little while ago,	15:12
	unless the Fed turns very, very sharply tighter still,	15:16
	which I find almost inconceivable	15:22
	and certainly I find it highly inconceivable	15:24
	after January when a new chairman takes over,	15:27
	unless they turn very, very sharply tighter,	15:31
	it seems to me we are close to the end of the period	15:34
	of very high short interest rates	15:38
	and that the tentative attempts they've made twice	15:41
	in the past few months, the decline will again turn down.	15:44
	If you look at that pattern, look, for example,	15:48
	at the pattern of behavior of the commercial paper rate,	15:49
	which is a reasonably free market rate.	15:52
	It reached a high point of about 8.7%	15:55
	toward the end of June.	16:03
	It then fell to something like eight and a quarter percent	16:04
	in the middle of August.	16:08
	It then rose back again to about 8.7% in early October.	16:09
	It then declined again to about eight and a quarter percent	16:16
	in the end of October.	16:20
	Since then, it's been rising.	16:22
	And it's now back up	16:24
	in the range of about eight and a half percent.	16:26
	It may zigzag around like that a little bit more in the next	16:31
	few months.	16:36
	Conceivably, it could be accompanied by	16:38
	a temporary rise in the prime rate	16:40
	from eight and a half to nine percent.	16:42
	But I find it inconceivable that by June of next year,	16:45
	you will have a commercial paper rate	16:50
	very much higher than you now have.	16:56
	Indeed, I find it inconceivable	17:00
	that the commercial paper rate will not be decidedly lower	17:02
	than it is now.	17:04
	And similarly, I find it hard to believe	17:05
	that the prime rate will be as high as	17:08
	nine and a half to 10%, which is what	17:10
	Pierre Rinfret is suggesting.	17:13
	That seems to me a pattern for which there is no warrant	17:15
	in earlier statistics.	17:20
	Now again, I hasten to qualify everything I say	17:22
	by saying that I am looking at the rather short-term future.	17:25
	From the point of view of three, four, five,	17:28
	six, seven years from now,	17:31
	that's a wholly different story.	17:32
	That depends on how successful we are	17:34
	in containing inflation.	17:36
	If we contain inflation,	17:38
	well then, what I've just been saying	17:40
	will hold for that period as well.	17:41
	But if we should in reaction to the,	17:44
	if we should go through our earlier pattern,	17:46
	if the overreaction by the Fed	17:48
	should produce a sharp decline in economic activity,	17:50
	that there is an overreaction the other way	17:54
	and that we unleash another inflationary movement,	17:55
	well then, I am much less certain	17:58
	about what the long run prospect is for interest rates	17:59
	over three, four, five years.	18:02
-	Sometime ago, a subscriber asked a question	18:05
	that you didn't get around to answering.	18:07
	It seems just as pertinent today,	18:10
	and I wonder whether you would comment on it.	18:12
	He writes, last week, unemployment rose to four percent	18:15
	and profits were still down among corporations.	18:19
	Along with the news came a possible ending	18:22
	of the Vietnam War with all its ramifications,	18:24
	cutback in troops, material,	18:27
	possibly more unemployment, et cetera.	18:29
	Wouldn't you think the stock market	18:32
	would fall instead of rise as it did?	18:34
	The stock market has acted as if it has been drugged.	18:37
-	That's a very good pertinent question,	18:41
	and as you say, it is just as pertinent now as it was then.	18:43
	The stock market has recently not been as ebullient	18:47
	as it was when he wrote,	18:50
	but it is still something like five percent	18:52
	or 40 points on the Dow Jones average	18:56
	above the level at which it was at its trough	18:59
	some months ago.	19:02
	So the question is a very real one.	19:04
	Moreover, in addition to the behavior of the stock market,	19:06
	there has been a new report on corporate profits	19:10
	that has come out from the Department of Commerce,	19:12
	which shows corporate profits down by three billion dollars	19:14
	in the third quarter	19:17
	or by a larger decline than has occurred for several years.	19:19
	And there is widespread anticipation	19:26
	that profits will continue to go down.	19:28
	Under those circumstances, it might be,	19:31
	one might well ask, why is it	19:33
	the market hasn't gone down much farther?	19:35
	I don't have any answer to that in full,	19:39
	but I think there are a number of points	19:42
	that can be mentioned in the first place.	19:43
	One of the interesting phenomena	19:45
	of the post-war behavior of the market	19:47
	has been that in most of the recessions,	19:50
	the market has gone against the recession.	19:52
	When the economy has been declining,	19:53
	the market has been rising.	19:55
	A large part of the reason for that	19:57
	is to be found, I think, in the indirect influence,	20:02
	which changes in the money supply have had on the market.	20:05
	The recessions	20:12
	have been accompanied	20:15
	by an increasing rate of growth of the quantity of money.	20:18
	Let me see if I can put this a little differently.	20:22
	About six or nine months	20:24
	before the beginning of the recession,	20:26
	the rate of change of the quantity of money	20:28
	has typically slowed down, slowed down fairly sharply.	20:29
	Then, when the recession actually started,	20:33
	the monetary authorities have reacted fairly promptly	20:34
	by turning around and starting	20:37
	the money supply going up more rapidly.	20:40
	That hasn't affected the economy	20:42
	for something like six or nine months,	20:44
	but it has shown itself failed in the stock market	20:46
	much more rapidly.	20:49
	And so, the monetary effect	20:51
	has been one reason why the market has gone up.	20:53
	The second reason has been the widespread anticipation	20:55
	that politically it was inconceivable	20:58
	that any party was going to	21:01
	stand for a long, prolonged recession.	21:03
	And consequently, in some ways,	21:06
	the beginning of a recession has been taken by the market	21:08
	as a favorable sign.	21:10
	It's been taken as a sign of the beginning of the end.	21:12
	It's sort of like waiting for the other shoe to drop.	21:15
	Prior to the actual coming on of the recession,	21:18
	everybody's waiting and asking	21:21
	how soon is it going to happen.	21:22
	But once it happens, there is a widespread feeling	21:24
	that after all, it isn't going to be allowed	21:28
	to go on very long,	21:29
	and therefore, the actual beginning of a recession is itself	21:31
	a portent of the further expansion	21:34
	that will come in the not too distant future.	21:37
	Now, the second of these factors	21:39
	may be operating a little now,	21:42
	but I think right now there are a number of other factors	21:44
	that have to be added to what I've been saying.	21:47
	We did have a very, very sharp turn	21:49
	toward monetary tightness in the middle of April or May,	21:52
	and I think this was associated very much	21:56
	with a subsequent sharp drop in the market.	21:58
	Now, it's true	22:01
	that there has been no easing of money.	22:03
	It has continued tight.	22:05
	But if one looks at it in a slightly more	22:07
	subtle and more complicated way,	22:14
	you can say what you experienced was first the shock	22:17
	of going from about seven to 12% monetary increase	22:21
	to going to four and a half percent,	22:24
	then from four and a half percent to zero.	22:25
	But now you've stayed at zero,	22:28
	and in a way, the market in its usual pattern	22:29
	tends to overreact and then rebound.	22:32
	And so, you can say that the market has, to some extent,	22:35
	rebounded and overdid that.	22:38
	The second factor, and here of course I'm engaging in	22:40
	very general speculation and which I must confess	22:43
	I do not have any great confidence	22:47
	because the one thing I have confidence about the market	22:48
	is that those who try to predict its	22:52
	momentary and short-term ups and downs	22:55
	are bound to be disappointed.	22:58
	But another thing that has been happening	23:01
	has been the belief that under almost no circumstances	23:03
	are you going to have a very severe recession.	23:11
	The market has reconciled itself to the idea	23:14
	that a recession is in process	23:16
	or if not will shortly be occurring,	23:18
	or if not a recession, an economic slowdown.	23:20
	But it is persuaded by recent experience	23:23
	that that recession is bound to be slight and moderate	23:28
	and that therefore, if a recession has started now,	23:31
	the worst will be over by the middle of 1970	23:34
	and by the latter part of 1970,	23:37
	profits and the economy as a whole will be on an upswing.	23:39
	Now, if this is right on the one hand	23:43
	and if on the other hand I am right	23:45
	that we are in for a more severe economic contraction	23:48
	than the more recent ones we have had,	23:51
	than the '60, '61, that the extremely tight	23:53
	monetary position spells already	23:56
	a contraction of the order of maybe 1958,	23:58
	then the market is going to be seriously disappointed.	24:01
	It is going to find that the recession, the contraction,	24:07
	the decline in profits is more severe than was anticipated.	24:12
	And in that case, as the subscriber quite properly says,	24:16
	the appropriate thing to anticipate	24:20
	is that you would have a further decline in the market.	24:23
-	Another subscriber asks the following question.	24:26
	I would like to hear your views on the Feds considering	24:29
	placing bank holding company commercial paper	24:32
	under Regulation Q, thereby putting	24:35
	interest rate ceilings and reserve requirements on them.	24:38
-	The subscriber has gotten two different things combined	24:42
	which should be separate.	24:47
	One is the Regulation Q interest rates.	24:49
	The second is reserve requirements.	24:53
	The Fed could impose reserve requirements	24:56
	without putting the paper under Regulation Q.	24:59
	Whether it can do the other,	25:04
	whether it could put commercial paper under Regulation Q	25:06
	without imposing reserve requirements, I'm not sure,	25:08
	but let me instead, in any event, separate these two.	25:10
	So far as reserve requirements are concerned,	25:14
	a case can be made for that.	25:16
	The problem is that	25:19
	under the severe pressure which banks have been,	25:22
	they have been trying to get out from under it	25:26
	in various ways.	25:27
	And one of the ways of getting out from under it	25:28
	is to borrow through commercial paper	25:30
	and to use their holding companies as a means of doing so.	25:33
	This is one of the ways in which they have been avoiding	25:36
	both Regulation Q and at the same time acquiring liabilities	25:39
	which are not subject to reserve requirements.	25:44
	It's a real question of whether you ought to have	25:48
	required reserves under any circumstances,	25:50
	but that's a much more fundamental question.	25:52
	If you do have required reserves,	25:54
	there is a good deal of argument to be said	25:57
	that they should apply equally to all liabilities	25:59
	of a commercial bank, whether those liabilities be obtained	26:02
	by borrowing in the Euro dollar market	26:05
	or whether they be obtained by borrowing	26:08
	in the commercial paper market.	26:10
	Now this whole problem would not have arisen	26:12
	except for Regulation Q.	26:14
	It was Regulation Q which drove commercial banks	26:16
	to go to the Euro dollar market	26:20
	as opposed to domestic CDs,	26:21
	and this in turn was followed by the Feds	26:24
	closing a loophole and imposing reserve requirements	26:27
	on Euro dollar borrowers.	26:29
	It is Regulation Q which drives commercial banks	26:31
	to the commercial paper market	26:34
	and therefore raises requirements on it.	26:38
	So as I say, you can see some sense	26:41
	in imposing reserve requirements.	26:44
	Since I myself see no sense in Regulation Q itself	26:46
	and think that the imposition of interest ceilings	26:50
	on time deposits have caused enormous structural changes	26:53
	in the commercial banking system	26:58
	without any social gain whatsoever,	27:00
	I cannot see any justification at all	27:02
	for putting interest rate ceilings	27:05
	on bank holding company commercial paper.	27:08
	If such ceilings are put on them at their present levels,	27:12
	it's very easy to see what the results will be.	27:15
	Such borrowing will simply disappear.	27:17
	It is impossible for banks to borrow commercial paper	27:20
	in the commercial paper market at six and a quarter percent	27:23
	when other people are paying eight and a half percent.	27:27
	This is like expecting water to flow uphill.	27:30
	And so, the result would simply be	27:34
	to rule out commercial paper.	27:36
	Consequently, if the Fed is serious about imposing	27:38
	Regulation Q on commercial paper,	27:40
	they don't have to worry about reserve requirements.	27:42
	There will be no commercial paper	27:44
	on which reserve requirements should be levied.	27:46
-	Thank you very much Professor Friedman.	27:48
	Remember subscribers, if you have any questions or comments	27:50
	for topics you would like to hear discussed in this series,	27:53
	please send them to Instructional Dynamics Incorporated,	27:56
	166 East Superior Street, Chicago, Illinois, 60611.	27:59
	Dr. Friedman will be visiting with you again in two weeks.	28:04

Item Info

Title:

Tape 38 - Monetary Developments, Interest Rates, Rinfret's Predictions, Stock Market, Bank Holdings

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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RL10082-CS-0230
ref2600_jla
samuelsonpaul
duke:325253
pstau001230
ark:/87924/r4rb6wj5z
03e496d1-afe6-4d46-b7cd-3873d2fad307

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Tape 38 - Monetary Developments, Interest Rates, Rinfret's Predictions, Stock Market, Bank Holdings

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