Conversation 619-012

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Sorry, we had to get you out yesterday, but you know what happened.

I'm here to get it.

But I have a son, and we had to go get him.

He came around.

We made it.

Watch him, so he gets what he needs.

All right.

Now, let me sit here.

All right, man.

Don't be nervous.

Let me sit here.

Help.

You see the son is here, huh?

Well, I read the report.

There he is.

Well, uh, if I may, uh, may I start with something I didn't intend to?

Something just came in just now.

All right.

Uh, you, you're accustomed to getting, uh, doer reports from me.

These things are all good.

Don't tell me, don't tell me, don't tell me.

And what's your feeling about things that move and so forth?

And I said that, and I said, also, I fireballed.

You used to use that one, Mr. Conley, and things of that sort?

I have not.

Is that good?

In case I did, I'm quite sure it was all this stuff.

Well, these are not, these figures are, again, these are two estimates of the rate of change in GMP from the second to the third quarter.

We had some very early estimates, which were based on incomplete data, and you'll notice they show that the annual

the price index was rising at the rate of 3.3, and in place and washed out.

It was about 2.9, that's essentially the third quarter and a slack down.

September, July was in September.

Now, on the basis of more complete figures, you'll notice that all of the changes here go in the right direction.

They sure do.

The price index is less, the price index is less.

Hard to believe that.

How can they be that far off on the estimate at all?

One full point.

That's a 25% error in the rate of change.

Well, it is a 25.

From three to four, anyway, I figure in my simple math, it's a 30% error.

Actually, it's one-third.

How can they be that far off on the estimate?

I know it isn't deliberate, but it's just one of those things.

This is the Department of Commerce.

Now, the second team there, you know, the 34th, how does it start again?

They came out again, huh?

They came out again.

Looks like it.

5.8% and by an alternative estimate, they're in the second to the last column.

A little higher yet.

The one thing is that we've had about six months now when housing starts up and they get two millions of dollars.

What's the figure this month?

It's two million and fifty thousand.

You notice the final figure there in the third column.

I think the

But that's pretty damn good.

Of course, we need more than that.

I know more than that.

It's 100% up.

That's the point.

It's growth.

I mean, the direction of the economy is growing.

I know we need 6%.

I think this is a number that's lower.

I think we may be getting an engine down.

By the way, one other thing which I learned just as I was walking over here.

You may have seen in the paper this morning that all of the sails are down sharply.

Now, actually, that's a seasonal thing.

If you follow all the sales carefully, there is an intra-month pattern.

The first 10 days are always low.

The second 10 days are a little higher than the third 10 days.

That is not on the history.

I see.

It's heavily a function of ordinary company sales, and even they are not quite sure why that happens.

Now, if you adjust out to that, in the first 10 days, the domestic sales were still running at about $10.5 million, a seasonally adjusted rate, which would be this year.

I don't get excited about any of the monthly figures, or the 10-day figures.

Why should we?

Even they don't.

They all lie.

I don't mean the people, but the figures lie.

Well, those figures, that's right.

But I mention this only because even then, you'd have been headlong with those sharp drops.

the auto check was still pretty strong.

It was headlined as a drop, but you don't, about the kind of drop you'd expect in the third 10 days of October, the first 10 days of November.

I think the second point I wanted to comment on was, I do feel, as I indicated in this memorandum, that for two reasons, it's becoming urgently important for us to start shooting away

move ahead in the international monetary area.

One of them is that our not doing it is, I think, having a significantly adverse effect on business sentiment here.

Far beyond New York, it's surprisingly pervasive.

That is the concern about this problem.

And the second one is that I think we can negotiate out something which would have to be interpreted as a massive victory.

When you see the exchange rate changes that we can now get, I'm sure, relative to what they were willing to discuss pre-October 15, they've come a long way.

Now, associated with that is the high probability that our negotiating position is now deteriorating, as these countries, for a variety of reasons, become more and more preoccupied with their own domestic weakness.

Because the Japanese are concerned about their own recession.

In Italy, they're having a recession.

The UK has about the same kind of slight weakness in this, in memorandums.

And as they become more worried about their domestic situation, I think they're going to be less inclined to give ground in terms of their exchange rate, and therefore their competitive position internationally.

So for both these reasons, it seems to me quite desirable that we start to move ahead.

Now, I should mention that I am currently

I thought, sure, I'll take a certain amount back there.

But I thought I can handle the charge that we're not moving in this area by simply saying, this is not the forum where this will be discussed anyway.

So I'm aware that we resolved any issues in the State of the Order.

The Europeans and the Japanese have offered really, up to this point,

And they talked about the re-evaluation.

But let's take the Japanese out of it for a moment.

That may be a special center problem.

The Europeans always said, get rid of the surcharge rates, the price of oil.

Do you know anything else?

I think we... Yeah, that's certainly the British position.

That's the French position.

They look right now, you know, stupid.

They don't know what you're talking about.

They're not...

I think we could get, I think we could probably get close to a 10% change in the DMR dollar relationship.

I think we could get about 15 or, if we pushed hard, possibly a little more with the Japanese, not much.

Now these are, these are major changes.

And, uh, and the, uh,

The Japanese are, of course, they're very preoccupied with the domestic problem.

So I have Okinawa.

And, of course, Okinawa, yeah.

Okinawa's a political problem.

They have conferences, I guess, you know, at the same time that they have to talk about Okinawa.

Traditionally, the other thing that we've got, we get more than Okinawa.

We should already.

Incidentally, when I was in Japan, I mentioned to the economics minister or the director of economic planning that I thought we ought to have a little more consultancy back and forth between the two governments in economic planning since these two economies are so important to each other.

I didn't really put it forward as a big deal.

It was just a suggestion.

It's all an even figure today.

Good.

I don't think there's any problem there, though.

No, no, no, that's fine.

We are reasonable.

We want to be this method.

Oh, God, we cannot.

I know all this flak and so forth that is pervasive to the business community, and the business community will all be excited about the 10 days and how to say let's not pay no attention to these figures.

The businessmen are a bunch.

I'll tell you what's happening tonight.

I don't understand Chicago.

Most of them are managers today.

And they're the most lily-livered, gutless bunch of people I ever saw.

I need that.

I have no respect for the modern business managers.

And I need none.

Oh, I like this .

Makes a nice speech down there.

And some of the others.

But what do they do?

What do they do?

On the wage pricing, they bitch about the fact, we set a 2.5% goal, and well, the profits are too low, so they say that's going to cause the market to go down.

Now, God damn it, how can they expect labor to swallow 5.5% gain, which is a cut of a big half of their wage increase?

It's not limiting their profits, as I understand it, overall.

Correct.

I have never seen a community that was less responsible than the American business community.

The consumers are buying.

Housing is up.

Automobiles are doing rather well.

Retail sales are doing rather well.

The American business community are acting like a bunch of timid goddamn rabbits.

And the reason is that they've had all of their guts washed out of them in school.

I think that's the problem.

Anyone that's got any guts, you know, that business council is the most useless bunch of bastards I ever saw.

Really.

Oh, sure, you've got Don and all you guys, you know, that started selling Coca-Cola.

Most of those folks are down there, you know, checking with each other and having a nice time, seeing whether their wives like to play golf or bridge and all that bullshit.

But they haven't, they have none of any signal.

Believe me, if I want to put, for example, a foreign policy of this kind in the hands of a group of people, the last group I would take would be the business community.

I'd put it with the labor guys first.

And I can tell you something, too.

They're great at making things.

They're great managers and the rest of it.

But they are not great preachers anymore.

They aren't chance takers.

They had it so easy during the 60s.

Everything was going up, you know, just investment.

And now they have a little time, and we're trying to get it.

We had it in 68, and they all thought it was so good.

We had basically a bloated prosperity, and therefore an unhealthy one.

Bloated for $30 million a year, and bloated also with excipient inflation.

Today, we have taken most, a great deal, more of our dollars down, around 10.

And also, they know that the prospect in the future for inflation is down.

So what do they do?

These bastards, instead of, you know, acting buoyantly, making decisions that would have no weight in the future, they become more and more intimate.

Now, I must say, I tell them the same thing when they were here.

Because I agree with him.

I've got very good confidence in them.

And some of them are along the line, just like some of the other senators in Congress.

The cuts were washed out of them.

That's why this country's in trouble today.

Let me tell you, let's forget the Europeans.

The Germans have still got some guts.

The Japanese have still got some guts in the drive.

But you can be goddamn sure the Russians and the Chinese have it.

Terrible systems, but they got it done.

And so we talk about this wonderful education system where both of you, proud creators of the old system, better take a look at the middle of it and give it a good kick in the ass and talk about some character with some of the people that come out of it.

I mean, they're the creative business types.

These labor governments,

You know the best thing about them?

The fact they haven't been educated.

I mean, these D's and those guys, to their great credit, Ben Simmons, me, et cetera, at least, of course, they're out there saying, I want this and that for my labor guys.

They can be very irresponsible.

They can kick us in the teeth and all that sort of thing.

But at least they've got some steel.

I see very little in the business community.

That's the weakness, I think.

Oh, I made this speech before.

I'm very discouraged about the business.

They want to act like men.

They want to be a bunch of rabids by God, and they don't deserve to leave.

And on the other hand, they can't assume the government's going to bail out.

That's not going to happen.

Oh, and my doctor of dissertation advisor is a shoemaker, so...

So I believe in entrepreneurship.

Of course you do.

Where a man should breathe, though, you, George, and myself, we still believe in free enterprise and curry and bullets and the rest of it.

And the business guys don't really want it.

They say they do.

But we really come down to it.

They all come in here, you've seen those sessions, just bitching about the labor unions.

Now, if we just control the labor unions, everything will be hunky-dory.

It wouldn't be hunky-dory.

It would be bad.

But the trouble is not in others, but in themselves.

They should look in the mirror.

I haven't said all that, but there are some very fine exceptions.

There should be not a lot of mainstream exceptions, but I'm thinking about that there are.

It's really, really fine.

The only positive, really, at this assembly is among the Chamber of Commerce members.

Well, who are they?

They're the little guys.

To them, no, too poorly educated, for example.

Thank God to have all the courage

That's inevitable, though.

I mean, I guess there must be societies.

As they become more educated, that's their part.

And they become richer and weaker.

And it's a very, very dangerous thing.

Whether a nation can grow.

A wealth is wrong.

There is a race.

There is a disaster.

There is a fact of the world.

He died of brain, and then he evolved.

You like the Charlie Mortimer cut?

Hell yes.

There's a man.

I mean, but how many Charlie Mortimers you got?

How many Rick Curtis's you have around here, you know?

Harold Curtis.

There was a tough son of a bitch.

Matt Berlus.

I don't know if you may disagree with Berlus and all that, but by God, he was a builder.

Look at the present, guys.

These nice, close-knit, small-spoken, man-to-wise boardrooms of the great companies.

I've seen them on the insurance boards and the rest of them.

They're wonderful people.

They're delightful people.

They travel to all places.

They're the best educated, most godless people, the leaders you can have.

What do you think?

I think that the underlying factor here is

But strong sales are going to, particularly once the tax bill gets through, they are going to resolve decisions about interest rates, some motion in the plan of equipment spending, so that you...

They pulled the law in the United States, but they had this lack of competition.

to the reality of strong sales.

Well, we've had, I think, very strong retail with the automobile industry.

Auto sales are just fantastic.

And that is going to have its impact on the production side.

I don't think this will show up in the .

Well, uh,

pertains to my own personal plans, I have indicated.

I talked to Bob about this yesterday.

But as I indicated to him, it's just not possible for me to extend my duration here until the end of January.

We had talked about this, you may remember.

Yeah, well, I understand.

And I think that now the situation is such that, well, I think it was very important that you not leave at a time that people would say that the policy had failed.

Now, it's very important for you to leave at a time that we say, now we've got phase two on the way and we're moving along.

Right, George?

Now, finding a successor, however, is

Herb is, uh, I'm sure that would be regarded as a very distinguished appointment.

He's a risen man.

Incidentally, Herb has long been in the hospital.

I'll put him on the fence.

Herb?

He wanted to talk with me.

What did he speak of?

You see, Paul, we've got to keep Arthur speaking to the fire and money supply.

I have written here in Kurt's memorandum, which I assume, remember?

I assume when I get to Kurt, it's from the whole council, correct?

While you were gone, and he talked about the money supply then.

And I written to Leonard Arthur about it.

My God, we have got to put his feet to the fire on this thing.

I've got George Allen, old George, big George.

He's going to work on the private side, so.

But you just, we just got to think how we work around this thing.

Don't you agree?

Well, as I indicated, we can't make a federal case out of a short-term wage.

Four months.

Yes, we're in Portland.

And that's pretty long.

Well, I think it hurts not a monstrous enough to bother your honors.

a kind of philosophy which he acquired only after he became chairman.

What do you think?

Yes, he's not a theologian on the issue, but he attaches great significance to it.

He does.

I don't mean to do it, but I just want your view on that.

Well, anyway, we don't have a chance to talk some more, but...

We'll be sorry to see you go, but I think that under the situation now, that the personal factor, just like I told Hart when I didn't see him leave after his foreign military and so forth, he could not turn down an opportunity to get something he's never had, and that is some degree of security for the future.

So he did.

And now I'm in a hell of a fight for his successor.

George, do you have any feelings about the suggestion?

Should we talk about that at a later time?

I think you and Paul and I have had another talk with Conner at the Conner Institution on this, too.

And I'd keep it under that hat if you don't keep thinking about it.

A little, although I hadn't done it.

Is this a lie or is it a bet?

I retired as a defendant.

That curve is a first-class person curve.

I like him for his job.

He's a very...

and he knows a lot of economics, and he knows how to put a proposition he writes extremely well.

Because he has the hard work, and he knows that person.

But we should make a good list of the answers.

Let me ask you this.

It might be, if you and George do talk candidly about it, it might be something.

You have two or possibly three openings.

We want your best.

I don't want to hear, I don't want anything mentioned at this point, because then they'll say that it's what's happening to the economic policy and the rest of it.

We'll all, we'll all handle that.

I mean, also, we want to do it the way that if you believe in the proper style, otherwise, you see what I mean?

You're not going to have to press for time and then say, all right.

Let's get some more good pictures.

Get some more of the first of us and we'll do it.

All right.

Thank you.