Nixon, Shultz & McCracken on Economic policy and Inflation

15:22Let's go back in the middle.
15:24Let's come in and stare down here.
15:28I'd like to have attention.
15:39That's the cost.
15:40It was, but we can move it around a bit.
15:47Here we are.
15:48I can sit here.
15:49Art can sit here.
15:58Let's see.
15:59Well, I got into a little trouble on revenue sharing.
16:05Federal Realtors Association for the Post-Racism Initiative.
16:14Oh, yeah.
16:16I didn't know they were talking about 500 young men.
16:18He's insolvent.
16:19This is our first.
16:21This is our first.
16:28I don't know.
16:56What's the matter with you?
16:58Is it that I'm more than capable of keeping an eye on you?
17:01Keep it an eye on you, or I'll have to arrest you.
17:23Thank you.
17:23Thank you.
17:23Thank you.
17:44Huh?
17:44Mister, why did you cut Sarah out of the first job?
17:47There might have been a little Sarah in the middle of the meeting, but it's not that bad.
17:54Huh?
17:54Uh huh.
17:55You were there.
17:56You heard me.
17:59We'll start you playing, and I'll let you know when you're done.
18:02Oh, I know you all.
18:04I just wanted to have a question for you guys.
18:06You know, I actually really had another date on the phone.
18:14I had an hour and a half worth of stuff.
18:18That was in the beginning of the week, and I didn't know what to do anymore.
18:34All right.
18:34Okay.
18:35All right.
19:11Thank you.
19:34What do you think of that 92-year-old?
19:36Anybody see him?
19:36Wasn't he great?
19:37Did you see his grandchild?
19:38No, great-grandchild.
19:40He was a great-grandchild, and they were just starting to see him.
19:42I thought, you know, when I thought of my aunt, I had all the tools.
19:46So I went to Africa.
19:57I thought that was as old as anybody who's ever done that kind of work.
20:05She did Quaker and all that sort of thing.
20:20Here comes a 92-year-old man.
20:24who is a brick maker.
20:27And he can make up to 3,000 bricks a day.
20:29Makes 3,000 bricks a day.
20:31He said when he was younger he could make 5,000 a day.
20:36I don't think he's ever even knew anybody.
20:42to teach the natives how to make bricks.
20:43See, this is something that we don't need in our country.
20:46They're not even commercial.
20:48But he's like, I'm going to teach the natives how to make bricks and build from the day they go to church, say, or whatever it is.
20:58And he's 92 years old.
20:59He owns all the decorations, but he probably made them.
21:03He's a toller.
21:04He's a monarch.
21:04He's a sailor.
21:05Boy, has he ever said what he is?
21:08This is why they thought he got the job.
21:12That's it, somebody saw him.
21:13It's probably one of those shows, What Was Your Line?
21:16It was one of the Trevor Cole pieces on the real deal.
21:18Oh, yeah.
21:18Quick walk over to Miami.
21:19Miami.
21:30Coming back, I'll have you interviewed.
21:42She's my mother's youngest sister.
21:46She's a rather remarkable gang.
21:54Thank you.
21:56I think it would be well
22:04At the outset, perhaps, Paul, if you would take a moment, you don't have to set the stage.
22:15what the Quadrant does, and so forth.
22:17I mean, of course, John knows, I'm sure, I think as well.
22:22We have a track, we have a Quadrant, and how its meetings are called, and so forth, and so on.
22:26Can you take a moment on that subject?
22:32Sure.
22:32And how long has it been set up?
22:34I mean, I don't even know how long we've had a Quadrant.
22:36How long has it already been set up?
22:39Did we have a Quadrant?
22:39Yes.
22:40Well, it was a Quadrant at the time.
22:43Well, uh, you know, the, uh, no, he didn't.
22:47But, you know, I didn't.
22:48The term of the Federal Reserve report was about to come.
22:52Well, that came in the latter years of the Eisenhower administration.
22:54It was very amorphous, and they just sort of, like, tossed it in this thing and came together.
23:05I never heard of it.
23:05In the whole eight years, I've already never heard of the organization.
23:08We weren't intellectuals in the eyes of our administration.
23:10We just looked at the world.
23:15Even while you were chairman of the council, you were intellectual.
23:18And I had an act like the rest of the council.
23:21Well, then the quadriad then, the quadriad meets, as I understand it, it meets not on a regular basis, but at any time where any member of the support body, if I, for example, you suggested a meeting, the Secretary of the Treasury suggested a meeting, I can't, I can't, as far as Arthur in his sentence is concerned, he can't say, I think it's a good idea to do it, but that you have your ear offices and that sort of thing.
23:52You let me know all the time.
23:54I'd like to spend a minute and maybe after this is going to be an outset as to how we ought to do this to get you to the extent that we should.
24:06I mean, if you would want to be more, if you would want to be greater, more often than this, I am available, you know.
24:17of what you all think is the best thing to do.
24:21It might be at this time that John is coming forward, that meeting a little bit, that meeting more often, so to get on track with everybody might be a good idea.
24:31So let's have that as the first segment for discussion.
24:34What do you think about that, Larry?
24:37I'm excited.
24:37I'm excited to hear you talk to me.
24:45It's certain I didn't really make the class of you last week.
24:52Why me?
24:52I ain't gonna be passing through a difficult period, too.
24:56It's a trap.
24:56Why?
24:57I'm careful.
24:57You've got to maintain a flexible position.
24:59And with all candor, some of your White House staff will reach you in and help you.
25:08I tried to help you today with my testimony, but I didn't grab your share of it.
25:11Where'd you testify?
25:12You don't even know me, do you?
25:16I beat the hell out of him.
25:17He was there too mad, and all of that was next to be honest.
25:21But he came out a fresh man, and I came watching over you in decline.
25:27Well, let me say this.
25:27We're going to call through your office for a meeting if that's necessary.
25:30And for me, frankly, the best time is about 5 o'clock.
25:34That's all right with the rest of you.
25:38I think we can meet later today.
25:41And that means we can do all of our committees and the rest of the tick-tocks.
25:48That's not our idea, Senator.
25:52What do you think George is speaking about right now?
25:57Yeah, so I don't know that we need to take your time each week.
26:01I think we should meet ourselves and then meet with you.
26:09Let's put it this way.
26:13The future of this economy depends upon my view of this room.
26:24But that cannot be accomplished simply by...
26:47It has to be a long version of that.
26:52All these things have got to work together.
26:54And I think that, therefore, we need to slow down.
26:56And one thing that has to come out of our heads is, of course, this is one person that has nothing else left to report.
27:05It's one of the reasons we don't have any arguments.
27:12Because, and I want everybody, I'd like everybody that's dealing in this meeting to kick up an idea.
27:15But it's not with Bob and I talking to the record.
27:19We don't, it's a matter of that meeting here.
27:20So that's a, it's a good, it's a healthy thing for me to see to have some, some place where I can sort of cast it to where you can too.
27:30But I want you both to speak that way in these meetings.
27:33Mr. President, there's a problem, you know, I think you ought to be aware of in these meetings.
27:43We now have a new council on volume policy.
27:45Now, I talked to Peterson on this.
27:48I don't see how we can discuss sensitive questions of international, with regard to international monetary policy in that large council.
28:10I don't know.
28:12Monetary.
28:12Monetary.
28:13I would agree.
28:14That must be handled by a national group.
28:19Let me ask this.
28:20There's no reason, isn't there?
28:21Is there?
28:22Where do you have a monetary problem to discuss not to have Peterson and me with us, even if I'm in a group now?
28:28If you meet in a group like this,
28:34Certainly no more.
28:35You'd have to be in the most careful instructions not to talk to this time.
28:40Oh, I have no injury.
28:42I understand.
28:46Well, I think that's it.
28:47That's it.
28:52for certain areas of international monetary products.
28:57But, for example, the troubles of the capital of the U.S. government and the questions we do about that.
29:08Yeah, there's a fortune for a great dollar.
29:22You don't have to ask me there.
29:29What you're referring to is something else.
29:30But we'll work on a proper meeting time.
29:32But if any of you do want to have a meeting, just let us know if you're following, et cetera.
29:44With regard to what we discussed today,
29:54Well, it seems to me that the two twin matters that we're going to have to continue with attention to are, first of all,
30:20and how the economy is moving along relative to the objectives of this .
30:32And secondly, the inflation problem is very interesting.
30:39And before I left this morning, Senator Louie Banks said, without any question,
30:47urgent concerns when it comes to, again, from corporations, their anxiety about inflation.
30:54And the other person, how the economy is moving along, we have now essentially information on one month in a year.
31:09That's about all.
31:13I think the general situation now would be characterized as an economy showing improvement, but the improvement is still a little sluggish.
31:31Retail sales are about 6% above a year ago.
31:33And the auto sales from the improved grade yield by the market were slightly below a year ago.
31:47The market auto sales were about 7%.
31:52It doesn't really show a big gain, but not spectacular.
31:57the unemployment rate was about to step up.
32:02On the other hand, there are these things to say that the unemployment rate, based on unemployment compensation data, which is different from other data, has shown, did show, a decline in recession.
32:28and what is where it's hard to figure.
32:30Well, it has to do with Harrison's seasonal problems.
32:37You know, a lot of people are afraid to do something.
32:39Anyway, it's my hand to be arguing about a problem when it's in our favor, isn't it?
32:43That's the problem with the VLS, is that it seems to be checking and fixing.
32:50Go ahead, go ahead.
32:51The length of the work week is limited.
32:58It's limited, very big.
32:59It's a little bigger.
33:03It's risen in three of the last four months.
33:12Well, you would say that's a very important point.
33:19And, of course, that doesn't help unemployment.
33:21Because after you see, you start putting people in a part-time job.
33:29And then, I mean, some sales continue to pick up.
33:38Yeah, yeah.
33:40But I do think we have to expect rather sluggish improvement in unemployment.
33:49The business is really, through their operations last year, is bad.
33:56And they were going to get some sharp games, but it wasn't a good thing.
33:59It wasn't a good thing.
34:01The other side of the coin, of course, it didn't, it didn't actually want to play.
34:04Everything was a long-run murder for the sharpies, you know.
34:10So there's an unemployment problem that's going to take a little bit of a sensitive look.
34:16And of course we have this abnormal environment, unemployment in the white collar, technical and engineering.
34:24We were raised, we were raised out this morning with this, your attention to this.
34:30My golly, George, we've got to get at that thing, that problem.
34:34Mainly because those are the business side.
34:38But as I say, they're the individual leader type people.
34:42And those folks, they're just something.
34:45You're worried about that.
34:46No, sir, you don't want them.
34:47You want them to let you.
34:50Well, they've got to be in the country.
34:52that when I call leader types, I mean intellectuals.
34:54And I, you've heard about these journalists here.
34:58They're all, you've got them in Pittsburgh, you've got them in Southern California, you've got them in Southwest.
35:06And also, he's just, you know, trying to, you know, they have this guy unemployed, you know, with all the, doesn't have enough skills.
35:13So he goes on, on the unemployment relief and the rest, and it's not a problem.
35:18But it does something to a fellow who's been in a buyer or seller's micro.
35:22It does something to him.
35:23It's a pretty damn cruel, you know.
35:25You know, like I was thinking of this one, Mr. Foster, when I was going to Dallas back, I ran into a former student, a Ph.D., on the lawn.
35:40What this has done, I don't know, and I was thinking, how many of them are you going to want to see me talk to?
35:52A good many of us are concerned, so is it possible to talk to a character we've never seen before.
36:01And this is maybe an unconscious element of bias that we don't recognize.
36:08Or is this thought a success?
36:09You know, I do.
36:12I get a feel of it, as I just told you, that I get a feel of it from all places, from the labor union, the CIA labor union.
36:19These guys don't even know how to run a farm.
36:22And I don't like their job, you know.
36:25But I know how I feel, you know.
36:26Two kids, two kids and a car, you know what it's supposed to look like.
36:33Suburbs of Dallas, L.A., and the rest of it.
36:35Hell, man, you're crazy.
36:37Well, anyway, it doesn't go on.
36:39We're working on that program.
36:41We have some definite things underway that go to the individual.
36:47I think this idea that Mr. Trump and I will actually take a company, an aerospace company that has employed us,
36:57What I would like here, here part of the problem too is these are brown people and they'll get along and they'll survive and they borrow on certain things.
37:19but they don't know we care at some very point.
37:22I like to find, that's why I'd like to have a meeting set up of some sort where we get a group of people in here where we talk about this problem, this journey of ours.
37:35So we took early on that, and then there's a whole layout of things that at minimum do meet the sort of point you were mentioning of value.
37:48the job-finding process can happen, but then there are many substantive things.
37:50And I've seen the desire, for example, to recruit some of these aerospace engineers to be safety engineers and get them employed by industry and by the government in this new safety program, and they're sort of natural.
37:56And so there's that kind of thing that we put our minds to that's going to be helpful.
37:58Well, given that we're taking the National Science Foundation,
38:20Yeah.
38:20Yeah.
38:20Yeah.
38:45and not go into giving jobs to non-law scientists and engineers.
38:52Well, giving jobs, and I'm very concerned about this, but I was talking about this, and in various cases, we're probably going to need fewer international navigators and navigating engineers, but we're going to have to, say, offer a one-year, a 12-day at a university.
39:10We've read that there's fellowships for these,
39:15There's another line.
39:16That's a very intriguing point.
39:20We'll get David in and let's work on that.
39:23That, because I think there's exactly, there's a heck of a lot of money.
39:30It's a half billion dollars.
39:32I think we could have given the asset, the biggest shot the Army's ever had.
39:36But you know, it's a big amount of money.
39:39And you know what happens when it goes in the bank?
39:41Those damn university people have more money, so on.
39:45Some are dead and some are not.
39:48And Frank, but look at them, look at them.
39:51They're weird that they shouldn't give it to an MIT professor who's out, you know, on a pension bomb.
39:56Or give it to some poor aerospace guy, you know, who's out on a job.
40:02Same thing.
40:03Because you put a pension bomb.
40:05That's right.
40:05That's exactly right.
40:07But you'll take away the other old stuff anyway.
40:11So it's a job, a foolish job.
40:12We might find that there are places around government that could use the money to think in terms of their tax program.
40:23There's some terribly incompetent people in that program.
40:31But, gee, some of these people could do all that well.
40:34These are young, aren't they?
40:36They're in their late 20s, late 20s, early 30s, mid 30s.
40:40They're just, they're white people, potentially.
40:44But they don't know anything, except what they were doing.
40:51The problem also, I think, is we've really, we're kind of because while it has a big percentage
41:04intact in certain places, and two of them are scoped.
41:07Our estimates are that we're probably not talking about 100,000 people.
41:12We're talking about 100,000 people.
41:13And let's get at it.
41:14Because again, one of the other vehicles, we can't allow 100,000 people.
41:18You see, that's the thing that's exciting.
41:20Remember I asked for pictures of you, Jerry?
41:23That's all I need you to say.
41:24I think it was less than 100,000.
41:25Well, 65,000 is what we got here.
41:26Oh, I think probably that's a little low.
41:28Well, that's supposed to take 85,000.
41:30But 85,000 people with little skills, by the way, we can do something for everybody.
41:37I just wondered if part of the problem, I talked to Packard about this, of course, the defense is kind of huge law still, but he said, well, we're working on it, but they've got too much to do.
41:48You need one person, somebody sitting here who's, maybe it's in your office, I don't know,
41:52Uh, we have a group that we had to get from the various private partners of the government.
41:54They're charged with this, and they've got a program now, and we hope to have you help kick it off.
41:56I'll be there.
41:56I'll be there.
41:56And hear some things, and that's why people should get time for work to get out.
41:58We do care, and we're doing it, and if we need to...
42:14even a symbolic .
42:16What do you think of that?
42:18I mean, it's good.
42:19Educate somebody to lead the Commission on Productivity, which addresses itself at this very point.
42:24He asked about how the task was.
42:25In fact, it was in the fall, I think, originally.
42:30I'm pushing on this, I'm working on this problem with you.
42:36I'm just one man who was responsible for this.
42:44All right, you take it away.
42:50You bring it in.
42:51I just feel very good about it.
42:54Why don't you go on, I digress.
42:57Well, I think the
43:00The other problem, of course, that we have is trying to carry on through and start to create more confidence in that we're making headway on inflation.
43:17I suppose that the, I've had a lot of time moving back and forth.
43:22I'm sure the concern of the businessmen,
43:33That's right.
43:36On the wage.
43:40On the wage, yeah.
43:45Well, of course, you can talk about going on the wage.
43:55That's a very hard thing that we have.
43:57And you start to get back waves of oil.
43:59Now, fortunately, we've already moved in our so-called job.
44:01And we moved on steel.
44:02We moved on oil.
44:04Now we've got a problem later.
44:07And we're going to come smack down against that on Monday.
44:11We're meeting our grandfather named Jim Hodgson.
44:16You know, I wasn't on Monday.
44:22I've been on Monday.
44:23And we will.
44:25Mr. President, we have several options which will be presented to you.
44:27You know how I feel about this.
44:28I'm urging you now to consider it when I hold this to you.
44:41Today, we're not testing on it.
44:50Senator Humphrey,
44:53And the other is sugar.
44:53Sugar is personal.
44:54I don't know.
44:54I'm thinking of wanting to create a sense of inequity.
45:16That's the line that you're going.
45:19You must keep it down.
45:22But let's look at, let's rather than picking on one entity, let's see what we can do.
45:30That's why it frees.
45:31I think probably there's some wrongness.
45:36But let's look at Davis-Bacon.
45:39Now Davis-Bacon is a, that'll raise hell.
45:42On the other hand, it is, it is,
45:46and exercise a federal, you know, it is a federal action, let's start the word federal, it is government action, which inhibits the free market.
45:58And I think we just buy it now.
45:59The thing about that, John, I understand, and this was not in the state of New York.
46:08For this to be really effective, we've got to get the governors to do it.
46:12Ask the governors to help too.
46:14And the governors have a little bit of space.
46:19All of them.
46:2038 states.
46:2038 states.
46:20So if we, as a federal leadership, what do you think of that?
46:23Here's what we're talking about.
46:25I think those states, the states, all the ones that count, California,
46:36I want to be in your city.
46:40Where do you want to be?
47:06I don't know him.
47:09He don't do it.
47:10He's coming up.
47:14He's got some new troubles.
47:16Ohio, never do it.
47:17Never do it.
47:17He owes himself.
47:18And Michigan, never do it.
47:22That doesn't necessarily give you the answer.
47:28I think there's enough to do.
47:32to accomplish your purpose you're going to have to come back sure sure what you want to do is uh you want to indicate to the countries of the world that you're willing to take whatever actions you're empowered to take on your thing in favor of our business that's correct and in fact some government at some point decided to go on with it think of that as threatening as it is
47:57as though you're singling them out.
47:59They have singled themselves out by the behavior.
48:02When you look at any car wages, and there's this line that spits out, they made themselves signature.
48:13Another thing, I forgot to interrupt you.
48:14One of the reasons why this action is very important now, and see if you agree with this, they think that it will have a very, that anything we do now, say, on this issue, can have a sanitary effect on, say, the steel industry when it comes down to it.
48:29In other words, the people that are thinking in terms of, I don't know if it means that Abel and his group, he'll have a little more strength to keep his people from going wild.
48:43What do you think, George?
48:44Does that make sense?
48:45Well, I think it will have some impact.
48:48I think with steel, we need to figure out some different way to get a handle on that.
48:54We're going to have to ask the following.
48:56There's been the beginnings of a cancer without all of us having to go to the workers.
49:02We didn't have one company program.
49:07It's been an odd and somewhat unfortunate settlement.
49:12Our process is trying to rearrange that so they know they can go to the bathroom and sing about it, so they don't fuzz it up and it won't look quite the same.
49:30Well, here's the rest of it.
49:32For two reasons.
49:37First...
49:38Yes, sir.
49:39Yes, sir.
50:02But oh, I know I didn't have that next week.
50:05You know, I have no doubt about it.
50:06And also, I did, I did that with the little restaurant there.
50:08I just said, I tried to do a recommendation, and we were going to have to act.
50:13And the only argument here is the federal government has $14 billion worth of construction contracts.
50:22Now, by golly, we're just going to sleep with that kind of a state.
50:26But suppose a business had $14 billion in construction coming up in fiscal 72.
50:32They could manage well, but it would have to do everything they could to keep those wages costs from skyrocketing, right?
50:38That's my action.
50:38Don't you think so?
50:39No, this is new money.
50:40New money?
50:41Well, this is new money.
50:41George, am I right in thinking the number of the day was bigger than $900,000?
50:52to cover not only federal construction projects, but also federally needed, federally organized.
50:58Yes, sir.
50:59Sir, our city government is fantastic.
51:02Now, if you cover highways, for example.
51:05I think you cover highways.
51:06I think you cover FHA and VJ.
51:07That's correct.
51:08That's correct.
51:09That was great.
51:09Now, in some cases, the state law is going to apply.
51:14You know, I don't think so.
51:21That is, the federal law is there, it takes the federal law away, and you still have the state law, and it's there.
51:28You know, we can talk, of course, about the EU reaction, but we can react finally.
51:36As far as the workers are concerned, it didn't affect anyone, did it?
51:41You know what I mean?
51:42The hard-hats will go.
51:43The hard-hats are their employees.
51:46I think you need to prepare.
51:48I hope that it already exists in a big group.
51:53To give you a full explanation of your actions, there are two major problems.
52:01First, construction jobs are being lost.
52:02That's right.
52:03And second, the average American family is in danger of not being able to buy a home in a place that can afford it.
52:08In fact, I think we're there already.
52:11Well, the business on unemployment is there.
52:12The great, the great unemployment is around here.
52:14All of a sudden, you start your house and you start looking to buy your second corn cart here.
52:18Well, I don't think so, Your Honor.
52:20Here's why.
52:20We've had a pent-up demand.
52:22After that is satisfied, and it may be satisfied before this year is over, no matter how low the mortgage rates,
52:41Well, I don't question that at all, but this is a very wheezy approach to the problem.
52:46That's not what you're going to get.
52:48He assigns it to one of his reasons, the fact that a house would cost as much as the farm work.
52:53Well, he built a house.
52:54Well, he's going to come right back and say, what are you talking about?
52:57You've got a palace house that starts in the history of the nation.
53:00Ten of the wrongs.
53:01Ten of the wrongs in the country.
53:04I agree that if we go on this thing, we're going to have a lot of...
53:08I do think the fact that it must be recognized that this is a very important thing for the Indian people in the construction industry.
53:24They feel as though it's a jugular kind of thing.
53:28They certainly will dedicate themselves
53:32to going after as hard as they can and whether it's even remotely associated with this.
53:41That's what I'm about to say.
53:42There that is.
53:43So, it's a bit of a red flag.
53:45Are you sure of that?
53:46Well, I'm pretty sure.
53:46I know that there's nothing that they got more excited about when I was Secretary of Labor than the fact that when we started messing around with this law change,
54:00I tell you, it was rain and salt and all that, but as soon as you were right to take the next step, the party was indicted for being a bunch of highways, indicted for being racist as well.
54:13It's the most sacred thing to do to a bunch of New Hampshire Americans, so just to sign that is going to be interesting.
54:21They close their training programs.
54:23They won't let people in.
54:24They've got a monopoly.
54:25And they use that monopoly to gouge people.
54:29They won't permit minority groups to participate.
54:33Now, you'll lose if you're not on that basis.
54:36You don't have to sell me on that.
54:39I've been fighting on that.
54:41Well, I mean, I'm serious here.
54:44If you think you're going to lose a suspension of daily spending, consider it.
54:48He's going one step further.
54:50You don't have to lose.
54:51Sir?
54:51You don't have to lose.
54:52I believe this, but we have a lot of work to do.
55:00I don't mean to lose you, but maybe you would.
55:04I think we have to fight for something.
55:07But here's what we're looking for options.
55:12So you've got to wait for the price to freeze.
55:14And then, frankly, we thought about it.
55:18I told you.
55:20But when you really think of that thing, it's great if it's a grandstand, but even if it freezes on for 40 days, and then what do you do?
55:32And then, you know, afterwards, I mean, I don't mind doing it.
55:34I don't mind grandstands and plays.
55:37But I'm not one of our...
55:40First of all, everybody got this case.
55:56I can see development from the other side.
56:05We've got a hell of a lot of problems with construction.
56:16Well, there's an awful lot of consumers that don't really care about construction.
56:22You see, they don't realize that construction goes absurdly fine.
56:25And not many of them are buying houses on the basis of, well, if you sell two million houses, that's not how many.
56:34The reason that the Davis-Bacon industry is, to me, is that it's using a record.
56:39and it again gets at that fundamental thing which really was the right reason to go after the oil and steel and early we're looking at government actions in those instances which compare to free market and that's the kind of philosophical development that appeals to me I can't, I don't, I don't, I must wait and see what happens I can't wait, I can't wait to do it A special legislation for the building industry
57:10You're not looking in general at all, or being specific.
57:14When was it passed?
57:15Back in the 30s, I don't know.
57:16Was it a congressional?
57:17Yes.
57:17It's clear that one of these non-existent governments, just like Harvard and Syria, is that the government, when it has a big construction contract, should be a party to undermining wage standards by setting up a situation where people
57:34lower their wage rates in order to get that business, and thereby accelerate the ban on the movement of wages.
57:40That's the priority it's built on.
57:42Let me move from that, or hold on to something else.
57:49And I think it's been extremely helpful that you put the ball on that.
57:54I was talking about it in one of our questions.
57:56We had to do this, you know.
57:59And I hate to be approaching people's heart on this, and I don't care.
58:04I don't care any impressions.
58:06I mean, I completely reject the active approach, which is the best we can do, and a little less is good, why not a bigger one?
58:17And what we have here,
58:22philosophical approach.
58:23Everybody knows that in a time of reciting, you have a deficit.
58:27The difficulty is that when you have a time of full capacity, they say, well, have a deficit also, which of course was the Johnson approach in 1967 and 1968.
58:36I also find out that we have a little stranger.
58:41This deficit cannot exceed, and I will meet your bills, which will succeed and exceed what the taxes have introduced for capacity.
58:51Now, we've messed up.
58:53I think we've got to stay in honor here and fight to hold it right to that line.
59:02That is, because as parts of the people have said about us, they've said, you understand the sophistication of this kind of money.
59:11The good part is that a lot of people, with such a budget, keep throwing in the towel on inflation.
59:18They said, we don't have that.
59:21Of course, but there's a lot of people who do that.
59:26I would strongly suggest that Gibson go to changing the concept in terms of public acceptance.
59:35Let's call it a seating limit budget.
59:39This is also a part of the concept of a college budget.
59:43Let's call it a budget with a built-in spending limit.
59:48or call out a phrase that connotes that you put a link on something, this would tend to offset the very thing, the very point they're making.
1:00:00So that's what they're actually doing.
1:00:02That's right.
1:00:08There's another point.
1:00:36Nobody knows how this economy is going to shape up.
1:00:38I'm optimistic.
1:00:41Not as optimistic as these forecasts that the administration indicated.
1:00:49Of course, we have to put a target on your forecast.
1:00:50I know that.
1:00:50Nobody knows.
1:00:51I hate to see you flee to some injured position.
1:01:00You may need to lie to us.
1:01:02If you had to, I would have gone there, yes.
1:01:05And you know how I feel about deficits.
1:01:06I just hate to see you lose your son again.
1:01:10If you're on the danger of freezing yourself in on that, if you're on the danger of freezing yourself in on revenue sharing,
1:01:25You know how I feel about that.
1:01:26But you know, the builder and I are talking about this.
1:01:32In essence, when your program is so solid... Hell, I worked on this with you, you know, finally, before the... You developed the concept.
1:01:39Well, the essence is consolidation.
1:01:45You've got 500 categorical grantee programs that even my team, you can ask, but you can't have a big government.
1:01:50We want to consolidate.
1:01:55Nobody's smart enough to know.
1:01:57Well, you want to consolidate into six large block grants.
1:02:03or go to the ultimate point for a power agency and have a single block net, which we call revenue sharing.
1:02:09Now, there's a danger that we talked about.
1:02:12We talked about this twice.
1:02:14There's a danger that you may cause your government's aggression towards consolidation.
1:02:21would not be your specific grade, and would be widely advertised as a big political defeat, that's what the government wants, you know, a big political defeat for you, when actually the Congress is moving in your direction.
1:02:31So I wouldn't freeze my position on those specific numbers.
1:02:36What you want is consolidation, 500 grants,
1:02:42My God, even if I can't grasp it, there's something you can't evaluate if you're not having good government in certain circumstances, in smaller numbers.
1:02:51You can tell them you're doing it, and they're doing it in a better way than you do.
1:02:55But the optimal point here is a matter for political compromise.
1:02:59Well, we've got to keep your absolutely right.
1:03:02We've got to present this in a way that first we go on and see that we're going to retreat.
1:03:10No.
1:03:10We've got to do this in a way that we make a deal, and we're going to get what we can.
1:03:14I understand.
1:03:14Yeah, well, I want to see you come on and look into it.
1:03:16Look into it.
1:03:17We're already rather than that.
1:03:18I think that's a great thing.
1:03:21And what's your basis?
1:03:22And what's your basis for doing it?
1:03:24You're selling the idea.
1:03:25You're selling the concept.
1:03:28If we'd made it around here, it'd be $3 billion or $15 billion per month.
1:03:31So it was like $3 billion.
1:03:33$3 billion.
1:03:43I mean, the Israelis just took Gladstone's hands off.
1:03:47They're bad songwriters, and the guys wanted to extend the franchise.
1:03:51But the Israelis, and the British, who didn't believe in extending the franchise at all, they got the British to take Gladstone's ideas.
1:03:59And he got through what could be gotten through, so he didn't even try to hit it.
1:04:06You can have a story, Mr. President, a story in the Post this morning, which I thought was unfair in the open paragraph of what you saw.
1:04:15My interview with Dave Brooks.
1:04:19The summary of the read was the first two or three paragraphs was not an act of paternity.
1:04:26He read the whole story.
1:04:28He had a sense.
1:04:30But he, in effect, put me in a position of compromising before he could get started with it.
1:04:36That wasn't the point.
1:04:38But I do think that if you read the whole story, it's the reason.
1:04:42My view of what I read, all along, he said,
1:04:49I think it's a great idea.
1:04:52We thought it through.
1:04:53We believe we have the best resource program right for it, but nobody else has got a better way to keep our idea.
1:05:03We'll work towards a way, and that's what we're reaching for.
1:05:06And we're working for that sense.
1:05:07It's been a great advantage to have the state of the art convention the way it was, but as a philosophic state,
1:05:20I call him Warren because little Pittsburgh used to have a great kid in the halfback and they played the Rose Bowl and so they called me in 35 minutes and I was like, Warren, Warren.
1:05:34And Brad's about this program, so this is great.
1:05:36He says, I thought about it.
1:05:38I was so unobtrusive about it.
1:05:40I don't know.
1:05:41We didn't say it.
1:05:42We said it a little bit.
1:05:43But ours is different for me.
1:05:45It's just mine.
1:05:45I said, great.
1:05:46Thank you for that.
1:05:46Love it.
1:05:46Absolutely.
1:05:47I love it.
1:05:47And I thought, what if we do it that way?
1:05:49Last night when I saw it, I didn't know how hard it was to come up with this.
1:05:51And I said, we need to run it, too.
1:05:54I didn't even think about it.
1:05:58Very good.
1:05:59With, uh... Give her a hug.
1:06:00I did today.
1:06:01Did you?
1:06:01On the same mission.
1:06:03Good.
1:06:03I hope you're...
1:06:06I've worked my heart out.
1:06:07You see, we're trying to get one of those halls to break over.
1:06:09Give her to be a hero if he doesn't.
1:06:10But most of them are kind of dragging in a different way.
1:06:13They're trying to find a way to start to say, well, this is no good.
1:06:19We've got something else.
1:06:20We don't mind.
1:06:20What we have to do is to remember that reform never goes through the way that you present it.
1:06:26Energy.
1:06:27Because we don't have, we aren't the fountain of our genius.
1:06:33But we get it.
1:06:34But on this thing, on the budget thing, you don't think we should freeze it.
1:06:38And I've been very categorical about that.
1:06:41Well, no.
1:06:42I think it was all right.
1:06:45Maybe I better get off that other thing.
1:06:49Well, you think I should freeze it, don't you?
1:06:53Well, when this person asks you, they ask you, well, now, look, let's suppose that the Congress succeeds at one point.
1:07:00Let me tell you, Peter Parker, here's the problem.
1:07:04Certainly, as of present time,
1:07:07We, as a country, you see, they will hog wild if we say that 200,000, 200,000, 250,000, they'll come in here with the county health program, which costs $60 billion, like you see.
1:07:17We've got to have a reason to repeat those bad measures.
1:07:22That's what I think.
1:07:23And also, I think it would have a bad effect on those who are concerned about the patient's psychology.
1:07:32See, that's where that came from.
1:07:34I see your point.
1:07:35Well, but you see, if you got...
1:07:37The governor was getting a language, a seal of knowledge.
1:07:42If you tie it to the full upon the budget, you see, and then when you make circumstances, they force you to buy it.
1:07:52I hope not, and I don't think they will, but it could happen that way.
1:07:57And then I hate to see the...
1:08:01have all of this, build up this concept, and throw it away in six months?
1:08:05You may have to.
1:08:06I've stopped building it up.
1:08:07In the basic statement after last July, the way it's phrased is that the basic rule is that except in an emergency condition, you should never go over this, but in an emergency situation,
1:08:31No, I didn't.
1:08:32Go ahead.
1:08:34The budget tier, and that's because somebody started on this, and that you project the budget authorization in the 72 budget into fiscal 73, which we're now working on.
1:08:53And you're already about $5 billion over what the full amount of receipts are estimated to be.
1:09:01So we're going to have a big battle around here as the year can start now with just the $73 billion to maintain some kind of control on the spending.
1:09:13And I believe that the basic usefulness of this idea
1:09:17is to discipline yourself to an orderly but if you process over a period of time so you don't get into a position that you can't sustain now that we have to
1:09:32to look and think about some kind of combination of what the budget does and what the people of the Federal Reserve do as well as the other things that we've been talking about, construction and so on, as the way to get at this.
1:09:43Seventy years ago, I remember having a talk with my capital office, and I said, I'm going to tell you, why do we have to, you know, we're talking about voting, and what are you going to do?
1:09:51And you gave me a lecture about it.
1:09:53You said, I'm not liking the explanation.
1:10:00Why do you think that...
1:10:03The whole purpose of tying an AA and a currency to a coin is for your strength.
1:10:09If you had all wise people,
1:10:12You wouldn't have to worry about any of that sort of thing.
1:10:17It's a question of what restraints you can put upon them.
1:10:22I agree with Art.
1:10:23I think we have people that are running.
1:10:26But we also have got to disabuse the business community.
1:10:29The idea that we're all wild on that side.
1:10:32The other thing, Art, that I'm concerned about is
1:10:35What it does to you, the monetary side, is that you've got balls in your board, as I understand it.
1:10:41I mean, you've told me yourself that they get a very good view of the spending.
1:10:45They think it would also come to spending.
1:10:47We're going to have to, we have to whack down the money.
1:10:51Or you've got to have control over those.
1:10:53That's a very good point.
1:10:55How about that ball in New York?
1:10:59It is a good idea.
1:10:59Don't you think about it?
1:11:00Money is the central line.
1:11:03You forget about it.
1:11:04I could have read that, but .
1:11:07Do you think you got the thing under control?
1:11:13He told me, right?
1:11:15He told me.
1:11:16All right.
1:11:16He told me.
1:11:17All right.
1:11:18One, we could get some pressure on the government here from the internet or from those concerned about the government.
1:11:36of using a more aggressive way of expansion of the budget policy in order not to push so hard on the monetary policy.
1:11:44And therefore, I think it restrains us.
1:11:49I understand that.
1:11:50I'm looking at Cable.
1:11:51I think if you repeat that with the documents for now, you would take that.
1:11:55They are concerned it has to do with what is the future kind of business.
1:11:59Well, the old international people, for example, Cable today,
1:12:05We are monitoring policy for expansion.
1:12:09That has kept its rate here so low that- Yeah, yeah, yeah.
1:12:17Some of the environment doesn't like it.
1:12:22We are only working against the pressure.
1:12:27You ought to use fiscal policy.
1:12:30Yeah, I saw that in the weekend press.
1:12:32The only difficulty is that, let us remember that the five of us in this room are going to be held accountable for basically whether we're pleased to last.
1:12:48Well, what it really gets down to are the things you and I talked about, which we know.
1:12:57If this administration fails,
1:13:01in other words, fails to, in its essence, to have a responsible economic policy, there isn't going to be another conservative administration in Washington.
1:13:13There will not be.
1:13:14Not in our lifetime.
1:13:15Never.
1:13:16Because then two things will happen.
1:13:19The spenders, and I mean the spenders not the sense you and I are talking about, but the people that believe in it exactly does for its own sake.
1:13:30I told his wife a bunch, I said, you know, this is a part of the wage price rewards for income policy.
1:13:45I said, let's come up with a wage and price controls across the board.
1:13:53take today will show the overwhelming majority of the American people for it, 60%, 65%, and 70%.
1:13:56Of course they will be for it, because they think we're going to control prices and control wages and the other follow-up.
1:14:07But the point is that it's our responsibility to look to see what that kind of
1:14:13I think monstrosity, what kind of legacy it's going to leave if we have to go that far.
1:14:19So our, what we've got to do is to, we've got to, one of the things, I don't think we're going to ever have our difficult time, you know when you've got a roaring inflation or something like that, people who are in a roaring unemployment, they're able to spend money, that's what we did.
1:14:35But right now, we're at a time when the country's gotten used to, in the late 60s, to high employment.
1:14:42even though they didn't make any real gain in wages, you know, there was no real increase in income as far as labor was concerned in 67, 68, and 67.
1:14:53Nevertheless, people got used to it.
1:14:55Now,
1:14:57We're in a position where people expect that unemployment can be held at around 4%.
1:15:05They expect that inflation should be gotten down to what it was in the lower 60s.
1:15:10We should never be able to get down to that.
1:15:14We're going to get out of hand here going into the 80s.
1:15:17And if we fail to realize that those who come in are not, and will succeed, are not those
1:15:26who will take the more conservative policy.
1:15:29That will never, not this time.
1:15:31It will be those who are going the other direction.
1:15:35You just look at our grace.
1:15:36That's what makes sense to me.
1:15:37That's why I think we've got to be very candid on these things, whether it's the money supply or whether it's the interest rates or whether it's our fiscal policy and the rest.
1:15:46We're all trying to do the right thing.
1:15:50The foreigners can say what they want, come up with the bounce bands and all that sort of thing.
1:15:55We've got to remember that the political situation basically here in this country is such and so delicate at the moment that we've got to just keep one step ahead of it.
1:16:06Now, that's the way I feel about it.
1:16:08Now, I don't know the answers, and that's why you called us.
1:16:11The experts have got to give us the best advice, and, John, you've got to.
1:16:15But you were right.
1:16:16Yes, I did.
1:16:17And all the balance papers are bad, but just remember that on your trade accounts, you had a service of $2.7 million.
1:16:25That was my surprise to me.
1:16:27You lost it all the way over there.
1:16:29I know.
1:16:30I know.
1:16:31of money investments.
1:16:32You lost it in maintenance of major enforcers.
1:16:35You lost it in aid, one thing or another.
1:16:38But it wasn't the commercial trade that cost you.
1:16:40And I think the important thing, as far as the central bankers and others are concerned, they are concerned about the disparity of interest.
1:16:50But the main thing they just want to deal with somebody who recognizes we have a problem with the payments now, the Italian said this morning, that they very...
1:17:01The only reference was a throwaway.
1:17:02In effect, you could use that expression, but there was no attention given whatever to the fact that we were worried about it.
1:17:11So everybody knows they have no choice.
1:17:14The economists say,
1:17:16Don't worry about the balance page, what they're looking for.
1:17:21What can you do about it?
1:17:23That's what 25 of them said last Friday.
1:17:25Oh, yeah, they don't work.
1:17:28They said, what can you do?
1:17:29That's when I called them.
1:17:31Yes, they said, what can you do?
1:17:33They said, they can't do anything.
1:17:34You've got a dollar currency.
1:17:36Don't worry about it.
1:17:38And one thing, you can't do that.
1:17:39In fact, that's what you are doing.
1:17:42But it can't be that arrogant, buddy.
1:17:45This country can't.
1:17:47And we have to definitely, I think, give up Hillary.
1:17:49In fact, we have a problem, because the time will come when we're gonna need their help.
1:17:53We need it right now.
1:17:55to help us.
1:17:56They can help us, the war troops at NATO, and they can help us in some of these trade briefings that are buried on agricultural products in the European community.
1:18:05Japan, where we have a billion-three loss made by trade.
1:18:10They can execute a tactical agreement or a steel agreement or anything else that will help us.
1:18:16And that's where I think we have to keep articulating and at least give lip service to it so that our people at home and abroad will say, you're concerned about it.
1:18:24And obviously it's got to sit at the second table when it comes to financing inflation, reducing unemployment.
1:18:32You can't sacrifice those to the question.
1:18:35That's what we're going to be judged by.
1:18:38Well, do you know, this thing is going on for so long, I mean,
1:18:45I think we've been, some people in government have talked loosely on the subject.
1:18:52Talked to some commanders now, they will say you people in the United States no longer care about the balance of things.
1:19:04We've got to stay, we care.
1:19:06I said that in my testimony.
1:19:06What we do, well I indicated there's special measures.
1:19:09And they are.
1:19:10It won't bother you.
1:19:11We've already taken them.
1:19:12You do know some are solid?
1:19:14We took some.
1:19:15The Treasury did, you see.
1:19:16We had an export-import issue.
1:19:18Designed... Are you going to keep poker?
1:19:20Yes, sir.
1:19:20For the president?
1:19:21Is he all right?
1:19:22Poker's fine.
1:19:24Oh, yes, I think he's fine.
1:19:25I think he's probably still a professional, sir.
1:19:31Because I'm wondering about it.
1:19:32Everybody agrees on that.
1:19:34Now, I think we've got to convey...
1:19:38that we care about the balance of things.
1:19:42But,
1:19:43We will attend to a question.
1:19:45There are some special financial things that we can never involve you that we can hang.
1:19:53Whether they will solve the problem for us in that time, we'll tell you.
1:19:57They can help.
1:19:57Let me ask you.
1:19:58Yes, sir.
1:19:58I certainly, of course, agree with this.
1:20:02I do think, however, we need to verify another aspect of this.
1:20:09That is, we need to express our concern in such a way that we do not seem to say we recognize that we must manage our domestic economy in a way that solves the international financial crisis.
1:20:27Because we have this problem that it's easier for a country to de-value its currency than to have received its currency.
1:20:39Consequently, there is some tendency... My team members will never appreciate it.
1:20:44Well, they greatly do.
1:20:45Therefore, there is a tendency to devalue against the standard.
1:20:48What's the standard?
1:20:50It's the top.
1:20:52Now, the interesting thing is that all through the period when we, the Europeans, expressed concern about whether we were managing our affairs,
1:21:06On the average, exchange rate changes have slightly appreciated the U.S. dollar.
1:21:13So I think we have to give expression to concern and we recognize this problem.
1:21:22But at the same time, it's important for the Europeans to understand that
1:21:31We cannot accept the responsibility to manage our domestic economic policy in a way that will reconcile this problem.
1:21:43Because otherwise we would be running out.
1:21:49I'm going to be over there in a couple of weeks.
1:21:53I'm going to get an answer to this question.
1:22:02We tell them as soon as we care, and we care a great deal.
1:22:07Order, that's right.
1:22:09And you can exaggerate.
1:22:10Now then, so that if the hour ever comes, we let it go, and we must let the dollar loose,
1:22:17We will, in the meantime, have shown the Europeans and others that we do care.
1:22:23And my friends have turned around.
1:22:25I think it's about burning rice in because they want it.
1:22:29They can hurt us and hurt us back in the U.S. right now.
1:22:32And I would encourage a student.
1:22:34I think it wouldn't be a student, but they would.
1:22:37They won't do it.
1:22:38What a few points on that.
1:22:39I'm pretty tired of hearing this stuff.
1:22:47Let me ask you, just on the travel thing, what do you think of Secretary Joe?
1:22:50I think he would like to see the Secretary, but he's been to us.
1:22:58I think going over there,
1:23:03It's a time, but it's just as well for my own intuition, unless there's something there, that he ought to wait about 60 days.
1:23:16Well, I agree with that.
1:23:17I don't think I'll go.
1:23:19We go there in May, which I believe is International Banking Association.
1:23:24Well, that's going to be there.
1:23:26Yeah, that's going to be there.
1:23:27Yeah, that's going to be there.
1:23:31And what I think I might do, every secretary of the treasury has always gone over Mexico City.
1:23:34I don't know what it's essentially that I'm doing, but it would be an excuse to do it.
1:23:39That's what I thought.
1:23:39This is for commercial bankers, but I thought we might get the commercial bankers to invite the central heads of all the central banks as their guests and give us a chance to visit with them, where it's going to look like we'll be more than concerned about a
1:23:54and therapy and the balance of things and everything else, and get to know him prior to being here in Washington.
1:24:00This is all the I have.
1:24:02Well, it is very important, and I hear his current expression here, a chance that we're concerned.
1:24:07I agree.
1:24:07I know it just as low profile as possible.
1:24:13The second part is we have to realize that there's political dynamite here at home to indicate that we're going to allow what the Europeans and the Japanese do to have us do the wrong thing about it.
1:24:29and things like that, that I just know.
1:24:31And so if we could sort of play that line, it just, it'll help a lot.
1:24:36Take for example, Arthur, on the whole question of interest rate.
1:24:39I know, I don't know if my interest rate's accepted, too.
1:24:45I pay a lot of interest on my property, but just like Dave, I think it's that, I think that people,
1:24:59I think it, it, it illustrates, uh, uh, hey, and, uh,
1:25:09going down to a lower level would be something which most people, of course, would appreciate.
1:25:17They are not going to sort of buy the wine, or let any tradesmen actually hire, because we don't have the money to go out of the country, and Swiss bankers will start calling in their chips.
1:25:31I know that's a responsibility.
1:25:33Now, they've gone down, the prime rate, what was your discount rate?
1:25:39Four, three quarters, and the prime rate is five, nine quarters.
1:25:44That point usually is one point.
1:25:48No, no.
1:25:50Well, under the circumstances, my view is that all that,
1:25:56And I've seen various people written and said about it, that as far as the interest rates are concerned, it's just a man of money at the present time, what have you.
1:26:09But nevertheless, I think that across the country, and I've been checking, particularly in California, you know, we've got some problems there.
1:26:14Not just the earthquake, it's the problem of the aerospace and all the rest.
1:26:15Not just North Carolina, it's the man-hairs hybrid in the state of Washington.
1:26:28And there, I talked to Senator Gary, the mayor of Los Angeles, and Warren Hart, the county supervisor, and they just compromised on the phone.
1:26:37And there, they just went about the drop in interest rates, which is finally a beneficial effect on the building alone.
1:26:43The savings alone is a big business to California.
1:26:46It's a very big business to California, too.
1:26:52So, you see what I mean?
1:26:53On this one, I don't know what it ought to be, but I guess like you guys say, it's going to go down.
1:26:59Yeah, well, just to put it this way, the SNL is in California.
1:27:02The Bank of America, the most horrible bank, and the other big banks in the area are getting worried about it.
1:27:16Because of their profits.
1:27:18Well, it's forcing men to lower the interest rate, which they pay their depositors.
1:27:25You see, these big California banks, and also the S&M, the first big California banks, unlike the big New York banks, have small deposits.
1:27:36They're very large.
1:27:37They're the silver banks.
1:27:39Not institutional.
1:27:41All right.
1:27:41Now then, the interest rates...
1:27:45that they can cherish coming down, quite simply, they can pay the sales, Mr. Austin.
1:27:53The same is true of the S&Ms.
1:27:54That isn't going to stop us, Mr. Austin.
1:27:57Yeah, I wouldn't let it stop me.
1:27:59Oh?
1:27:59But I do think, I do think this is, Mr. Austin, quite apart from the international situation, as far as my fed is concerned.
1:28:14You've got to stop and catch your breath because the Empress Bracelet is now so sharp that it can easily have a reversal if you do nothing.
1:28:25So let's have a listen now, you see.
1:28:28You're talking about the interest rates?
1:28:31Yeah.
1:28:32What now?
1:28:32On that plane, too, though, getting to the whole problem of money supply, I heard something specifically here.
1:28:47I still would ban myself, and for risking it.
1:28:53on the high side there rather than the low side.
1:28:57I just feel, I feel strongly that I don't, I don't know another very serious story as to what, what effect money supply can have on all the rest.
1:29:06But I, but I had this feeling throughout, in, in a very different sense.
1:29:12The flight is terribly difficult, the decision to go in the box.
1:29:18It's, it's, it's 75 to 80 percent possible
1:29:21We could have come home free without supporting South Vietnamese amongst.
1:29:27But we bought about 25% of the insurance by having to go ahead and rip up that supply thing in terms that our guys could get out in the South Vietnam and survive.
1:29:37So I invited the tuners.
1:29:40I say that if you look down that path, the path we've charted and our targets and the rest, it's to me terribly important.
1:29:51You talk about catching breath about this, but it's terribly important to
1:29:59not at this critical time, but it seems to me everybody's kind of watching here, watching about inflation.
1:30:01And we're looking down the road as to what will be in there.
1:30:02And so that affects commonness, the commonness of business investors, for example, not only a job in the future, but also at this critical time, and the retail sales, but the savings, how prepared, and how much people who are consumer-oriented, who are actually making up a little bit
1:30:29It seems to me that if you had sort of a down,
1:30:38I think the psychology is critical right now.
1:30:42I agree with that.
1:30:44I sort of do it in the back part of it.
1:30:49The idea is not yet crystallized in the minds of the American people that this slowdown is over.
1:31:03So they're still hoping.
1:31:06They're not going to be in 10 week time.
1:31:11And I just... Well, you talk about catching up.
1:31:14Well, I can't.
1:31:15Catching up.
1:31:15Catching up.
1:31:16And this race has gone down in recent months in a great way.
1:31:20There's no precedent in this.
1:31:26Now, terror has been driving...
1:31:37I want it.
1:31:39Yes.
1:31:40Now.
1:31:40Clear.
1:31:40Come on.
1:31:46Maybe a week.
1:31:48Maybe two months.
1:31:51I don't know.
1:31:52Maybe we've got too much money.
1:31:54But now our money's... Well, you're not talking about...
1:31:57Hold on.
1:31:57They're open.
1:31:58We're right.
1:31:59We're right.
1:32:01We're right.
1:32:02We're right.
1:32:02We're right.
1:32:03We're right.
1:32:06We're right.
1:32:07We're right.
1:32:09We're right.
1:32:10We're right.
1:32:13The money is still going to be available then?
1:32:19The money is going to be available.
1:32:26I want you to study my testimony.
1:32:35My judgment
1:32:41The monetary authority has done its job.
1:32:44It's done it well.
1:32:46It's laid the foundation for recovery.
1:32:49The banks are flooded with money.
1:32:52They are hunting for customers.
1:32:54The S&Ls can't put out the money fast enough.
1:32:57They are embarrassed by the inflow of the funds.
1:33:02What is holding back the economy now is not an shortage of money, but a certain shortage of confidence.
1:33:13If we flood it, that's even more than we have.
1:33:14I think you could have awful problems in 1972 and beyond.
1:33:16I think we've done it just about right.
1:33:18We're going to continue to expand the money supply, or more accurately, to try to expand it.
1:33:31You're going to have all kinds of statistics thrown at you, Mr. President.
1:33:37And let me get this out.
1:33:39In January, the rate of growth of the money supply, excuse me, as it's conventionally called, was only 1.1%.
1:33:48Between October and January, the average comes out only about 3.4%.
1:33:52Well, not me.
1:33:53I don't play tricks.
1:33:55You know that.
1:33:56But you know what has happened in the last few months?
1:34:00Quite apart from the general bonus rate, the sluggishness of the economy will demand slack.
1:34:07The Treasury has been building up its cash.
1:34:11If you included Treasury cash in the money supply, you don't in our statistics.
1:34:18If you did that, many times you'd be new children.
1:34:22Many thought that here in the past four months, the rate of increase in the money supply was 6.5%.
1:34:31Now, I...
1:34:32I think I will have to begin sending you a table.
1:34:35I want you to look at it.
1:34:37You see, I have a table right over here.
1:34:39Look at the last column.
1:34:39I've got a table on this for each of you.
1:34:44I gave you my table today.
1:34:48Let's look at the last column.
1:34:51For the moment, that's the simplest way of looking at it.
1:34:54You see, that covers the year, February 7th through January.
1:34:57Reserves that we supply grew at 9% rate.
1:35:04None of our other reserves, which is more important than 12% rate.
1:35:09Now, that's currency plus private demanding bonds.
1:35:13This is what people nowadays call the money supply.
1:35:17That grew at 5.5%.
1:35:19Commercial bank, time of savings deposits, a very important part of the money supply, but somehow we've forgotten about that.
1:35:26That grew to 23.6%.
1:35:28The Delta Line 5, the savings deposits of Eastern Seas, banked at S&Ls, 10.7.
1:35:39Line 6 is really bank credit, as the technical term here that we use, 11%.
1:35:47Now, these are very rapid rates of growth.
1:35:52It seems like any historical year.
1:35:58Don't let anyone mislead you into thinking that line three is the answer.
1:36:02Now, let me tell you why.
1:36:04And I'll tell you why in one sentence.
1:36:07We create reserves.
1:36:11People get demand deposits in the process, but they can convert these demand deposits into time deposits, and there's nothing that the Federal Reserve can do about that.
1:36:22And we can pump reserves into the banking system at any rate you specify, and people can continue, if there's a certain sluggishness in the economy,
1:36:35to convert demand deposits into interest-bearing deposits, which are time deposits.
1:36:44What I'd like to do, let me tell you this, and I think we ought to have a meeting next week, and we'll just talk about the money supply.
1:36:54I would love to.
1:36:55You see, everybody, we all talk about it now, and as you know, I tried to do it, and I said that I...
1:37:01We can rely on the commitment of the chairman of the Federal Reserve to provide an added .
1:37:08I really want to know what the facts are.
1:37:13And this has to be taken.
1:37:16I see your line three.
1:37:18I don't think all these other lines have an .
1:37:30Aren't you, aren't you, aren't you a federalist, Mr. Carroll, who in the streets of Des Moines say over the space of a quarter, my rate of increase, that your board votes for like something, at least I read in the papers, that you think it ought to be increasing somewhere in the neighborhood of five to six percent, and that you are unable,
1:38:06Well, we wanted to.
1:38:08We wanted to badly.
1:38:11Look what we've done.
1:38:15In an effort to increase
1:38:35Money supply has declined on line three of the stable.
1:38:39We've driven the treasury bill rate, it was down to 3.50 today.
1:38:433.50?
1:38:44Yeah, I think it closed at 3.60.
1:38:49We've driven interest rates down so sharply that we haven't succeeded.
1:38:56Now we can try driving them down harder.
1:38:59and get the treasury bill right down to 1%.
1:39:01And we may have more success, and we may have as little success as we've had in the past few months.
1:39:09When you have a sluggish economy like you have, because the transaction demand will be slow.
1:39:17And therefore, while we can have an effect, you see,
1:39:22We may not have any effect.
1:39:25And we've tried all the cards in the past four months.
1:39:27You don't know how hard we've tried.
1:39:29And the figures appear.
1:39:31Look at me.
1:39:33Look at the, uh, look at how the fourth quarter of January figures look.
1:39:40Life's another than one tree.
1:39:41And they exceed the measure of our effort, and lack of success, we don't have the power.
1:39:46Let me suggest this, now that you give us the more confused than I am, anyway, on this complicated matter, I want to learn about it.
1:39:57I don't, you're not presuming you know about it.
1:39:59He knows about it.
1:40:00All right.
1:40:01What I would like to do, I'd like to have a meeting on the money supply.
1:40:04I'm learning what it's about.
1:40:06Let's hear what, you know, to see where the thing, is that all right with you?
1:40:11Well, I don't know.
1:40:12I'd like to, I'd like to.
1:40:13We need to know where we are.
1:40:14I want to hear your views.
1:40:15You know, you've expressed views that are somewhat in variance with this, and you may have some to adjourn.
1:40:22But let's just see where it's coming from.
1:40:25But let me say it.
1:40:27To help out a bit, if we could get a brief paper that I can read shortly before the next meeting.
1:40:35So just a little bit of a brief paper so that we can come in and we'll have a meeting just like this in an hour and a half.
1:40:41Fair enough?
1:40:42One second.
1:40:44I didn't want to join your forces long enough.
1:40:49I got authority yesterday.
1:40:51I haven't gotten it yet.
1:40:52Let me look at the authority.
1:40:55It's the last $10 billion.
1:40:56They have a long-term basis.
1:40:58I don't have any interest in it.
1:41:01And I want you to keep this money.
1:41:04Lots of it.
1:41:05Keep it until I get to $10 billion.
1:41:07That's important.
1:41:08You sure did.
1:41:08I appreciate you.
1:41:10It's important.
1:41:11All of it.
1:41:11We've all had a very, very good understanding.
1:41:15We, as I said, we can all just approach these problems just like you did today.
1:41:22Well, we've got a lot of responsibility here.
1:41:24And of course, the problem is, and let's be quite honest, even people who are new experts, you don't know.
1:41:34You're not really sure, right?
1:41:35Because that uncertain factor is still common.
1:41:38So what we've got to do, though, is to use the best judgment we've got to be darn sure that responsible men are still in this office, wherever it is, maybe eight years from now, four years from now.
1:41:54I think the economic questions and the timeline is a little bit of an incorrect thing.
1:42:04People sit around, certainly most economists do, and they say, what should be the right monetary policy?
1:42:10What should be the right fiscal policy?
1:42:17What should be the proper mix of policy?
1:42:21I think we ought to be asking the question, because I think that today we're doing pretty well on the fiscal front, and if we're doing pretty well on the monetary front, we ought to be asking ourselves the question,
1:42:31What can we do to rebuild or to strengthen confidence?
1:42:37And let's put our energy to work on that rather than on the other.
1:42:45I think we have forgotten that there is a private enterprise system that you can't push around through simple manipulations of the Federal Reserve or simple manipulations by the Treasury.
1:43:02Well, I couldn't read more, and I think this is part of the whole approach on the day, I think, is that you have to control the weightage, per se, with that tax amount.
1:43:09I think you did.
1:43:09The impact, psychologically, in fact, was really going to get at it.
1:43:13Well, at least one, yeah, one thing that's happened.
1:43:15I remember when I met with a group of Wall Street people, a funny last year in this group,
1:43:24May 15th at the hour of 6.32 that day.
1:43:30Now, that means that somebody is betting on a little more positives.
1:43:37That's all.
1:43:38If you remember, you said yourself, Art, that for the past, I think you agreed, that while Jerry's and Roddick said they were never right,
1:43:47that had not all been right, or they'd all be ultra-legionaries.
1:43:50Nevertheless, you made the point very properly that that is an indication of confidence.
1:43:55It's not that they think things are going to go up.
1:43:59I think that's not a part of this.
1:44:01In spite of my comment, it's what they were going crazy at that time.
1:44:05Now, they find a lot of this dark and empty.
1:44:09That's what I said.
1:44:16The fundamentals that bear on the stock market are two.
1:44:21One is the rate of interest.
1:44:23The other is the expected rate of profit.
1:44:28The decline in the rate of interest is quite important on the expected rate of profit.
1:44:33Because when interest rates go down, bond prices go up.
1:44:36You get a strong bond market.
1:44:39The strong bar market communicates itself to the preferred stock market, which communicates itself to the prices of utilities, which communicates itself to prices of investments, and so on.
1:44:54Now, how about the other factor?
1:44:56The other factor is
1:44:59Expectations with regard to profit, and I think those expectations are proving that there's productivity as well.
1:45:06As a matter of fact, we've had some pretty good, pretty good profit reports.
1:45:12You see, one of the, one of the invisible, weren't they quite as in general?
1:45:16They are, and I think, as the economy starts to expand, we're going to have some very dramatic impact on profits.
1:45:26Well, we better go.
1:45:27Your boys are all in a great trouble.
1:45:30That's my welcome.
1:45:41And let me, we'll set a time.
1:45:43If this doesn't work out, I might suggest that we have a practice at 8 o'clock.
1:45:48That's all right on a certain day, but we'll work it out with Paul.
1:45:52All right.
1:45:53With Paul.
1:45:53I don't know how we're going to do this.
1:45:55May I ask one question, Gerald?
1:45:57Yes, I'm going to be interested in the answer.
1:46:00I'm going to have a full cut.
1:46:01I believe he needs to be able to extend your authority with respect to wages, price controls, what position you want us to take.
1:46:08That's the question.
1:46:09I think that's the question.
1:46:12What do you say?
1:46:16We ought to have a position.
1:46:19I think you ought not to be in a position of reducing area of not wanting it.
1:46:25I think we might all say that we don't tend to apply it on a mandatory basis across the board, but this is fine.
1:46:33You are all the two?
1:46:34Yes.
1:46:34That's what I finally want to inform her.
1:46:36Most regardless, you must not give any individual this power.
1:46:43But, if you do give it to them, give it to them for a short period of time.
1:46:49See, not for two years, but for a brief period.
1:46:51I think that's a reasonable position.
1:46:55At an idea, apparently.
1:46:58It's indicated to me that I talk to the Senator not to support him, but to take the decision that this is a kind of serious matter.
1:47:13It's a serious obligation of authority that we would presume to ask for.
1:47:16And the Senator would not refuse to take with the understanding that
1:47:21that they're going to help intend to use it on a mandatory basis across the board and probably even before it was used in any of the first of the standards that would come back to a joint resolution of ratification of the Congress.
1:47:35I think it's perfectly okay to say we'll be tempted, we're not asking for it, but if we make noises,
1:47:50that are even a little bit positive.
1:47:52And I think we may have done a little bit more than that.
1:47:55Why is this construction thing?
1:47:59It gets people thinking that they're making operation price control.
1:48:02And then they start saying, well, we've got to get a price at the best in order to get out of the wire.
1:48:06So I think we need to be rather intensive about this.
1:48:08And I'll let you hear what I need to hear if you have no intention of applying at this time or something like that.
1:48:16This specific matter is such a serious matter that we would, of course, want further joint resolution.
1:48:19Let's do this.
1:48:20You're going up two speeds.
1:48:21Let's get off a little piece of paper on this.
1:48:22I think it's very important.
1:48:23Let me see it.
1:48:23Would you?
1:48:24Of course.
1:48:24There's no other regulation here.
1:48:25That's why we don't have one.
1:48:26There's no way to touch that code.
1:48:49How did you acknowledge during your first state dinner the second person that answered you?
1:48:52Your pocket's rotten, isn't it?
1:48:52Yeah.
1:48:52Oh, you really love it.
1:48:53And it wasn't that little girl.
1:48:54Oh, is it?
1:48:54Yeah.
1:48:54Oh, shit.
1:49:03He was a great man.
1:49:31I don't know the question.
1:49:34She would not recurse.
1:49:35And so they didn't know.
1:49:36It was terrible.
1:49:37You answered the question.
1:49:40No, no, no.
1:49:40I was just...
1:49:41It's wherever you think is the best.
1:49:43Everybody's... And then you've got...
1:50:01He said you keep playing.
1:50:02They won't let me talk to God.
1:50:08Well, I think that's what it is.
1:50:10He's calling on me.
1:50:11My God, we're going to leave.
1:50:13No, not this time.
1:50:20No, no, no.
1:50:34and more of us would be reduced
1:50:37But he's coming along with us this time.
1:50:38Because thank you for running this great bunch of people.
1:50:39People are about ready to take off.
1:50:40We must do it then.
1:50:41We've got to make the future more well.
1:50:42Well, as you said, we're going to have to go and show the children.
1:50:43Show the children.
1:50:43Yes.
1:50:43I have a terrible impression, but I'm alive.
1:50:44I'm alive.
1:51:10We've got a good balance on the first line and then silver price in Texas.
1:51:14Thank God.
1:51:14It's nice to get rid of the money.
1:51:16I used to force my price down all the way up here.
1:51:21And it is very, very good.
1:51:24So I have a good idea of that.
1:51:27The brokerage is great.
1:51:29Well, I want you to be sure that I'm not trying to compromise.
1:51:32My mother-in-law said, I think, I know she's gracious as well, but I was there that way.
1:51:35Well, I'm different.
1:51:36Well, I'm reasonable.
1:51:37You know that I'm not trying to compromise.
1:51:38Well, I'm sure.
1:51:39Why not?
1:51:39You're right.
1:51:40I'm a lawyer.
1:51:46I got to call him and then we're gonna have to say, okay, you got to fill out this with that.
1:51:48You got to clean up with this thing, whatever else there is, right?
1:51:50Whatever it is.
1:51:50And we got to play this thing along.
1:51:51Except you depend on this thing.
1:51:52I think the character's a little bit too big.
1:51:53His team, I don't know what I'm saying.
1:51:54You wouldn't believe too many.
1:52:13I think the fact that
1:52:42Well, that's good.
1:52:42It's just good to do it.
1:52:43It's good to be here at all.
1:52:43They just love to be talking about the show.
1:52:44I get reverberations now.
1:52:45Yes?
1:53:07So, from the Democrats, my God, fellas, I'm excited.
1:53:10The day before the committee, the auditor gets up and out of public hearing and talks about the great presentation that was made with respect to the federal reorganization and revision.
1:53:18I mean, he said, now, before we close, that I want you to know that you can extend your remarks.
1:53:23He said, we don't want to talk to this audience.
1:53:25He said, you're right.
1:53:26We're going to keep going on the reorganization and revision.
1:53:29I mean, please do that.
1:53:31Three in the White Plains.
1:53:33Three in the White Plains.
1:53:37All right, don't work too hard.
1:53:42All right.
1:53:43Mr. President, Terry has to see you tonight.
1:53:46It's really important that he can see you tomorrow.
1:53:51I'll call him.
1:53:53Let him come.
1:53:54I'll call him.

Nixon, Shultz & McCracken on Economic policy and Inflation

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Also recorded on February 19, 1971

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