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PAV INTERVIEWS
Collection: Paul A. Volcker Papers
Call Number: MC279
Box 25
Preferred Citation: Paul A. Volcker Interviews, 1979; Paul A. Volcker Papers, Box 25; Public
Policy Papers, Department of Rare Books and Special Collections, Princeton University Library
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Citation Information
Document Type: Transcript
Citations:
Number of Pages Removed: 18
ABC News. Interview with Paul A. Volcker, Issues and Answers [transcript], October 29,
1979.
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ABC News
I-984
OFFICE
August 31, 1981
The Honorable Paul A. Volcker
Chairman of the Federal Reserve Board
Federal Reserve Building
Washington, DC 20551
Dear Mr. Volcker:
Thanks so much for being our guest on ISSUES AND
ANSWERS Sunday, August 30th. It was your usual
great show, and your appearance on our program
resulted in good press c overage nationwide
including Sunday night television and radio programs.
We enjoyed having you on the program and look forward
to your next appearance on ISSUES AND ANSWERS.
We are enclosing two transcripts of the program for
your personal use.
fE--- y very best wishes, always, I am
7c/
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NI 8:51
ABC News
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Federal Reserve Bank of St. Louis
1124 Connecticut Avenue, NW.
Washington, D.C. 20036
Telephone 202 393-7700
October 29, 1979
The Honorable Paul A. Volcker
Chairman of the Federal Reserve Board
Federal Reserve Building
Washington, DC 20551
Dear Mr. Volcker:
Thank you so much for being our guest on "Issues
and Answers", Sunday, October 28th. It was a
very good show, and your first appearance on our
program resulted in good press coverage nationwide
including Sunday night television and radio programs.
We enjoyed having you on the program and look
forward to your next appearance on "Issues and Answers".
We are enclosing two transcripts of the program for
your personal use.
With very best wishes, I am
Most sincerely,
(7qa
Pe gy Whedon
ro ucer
es and
swers"
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Citation Information
Document Type: Various
Citations:
Number of Pages Removed: 91
ABC News. Interview with Paul A. Volcker, Issues and Answers [transcript], October
29, 1979.
Memo to Paul Volcker from James L. Kichline, "Questions and Answers for 'Issues and
Answers' Program," October 25, 1979.
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BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
ffi.ce Correspondence
Chairman Volcker
From Division of Research and Statistics
Date
Subject:
October 25, 1979
Questions qnd Answers for
"Issues and Answers" Program.
(James L, Kichline
Attached is material for your use in preparation of your
appearance on the "Issues and Answers" TV program.
Attachment,
•
•
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•
S
QUESTIONS AND ANSWERS
IN PREPARATION
OF YOUR APPEARANCE ON
"ISSUES AND ANSWERS"
October 28, 1979
•
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TABLE OF CONTENTS
Page
Section I.
1.
2,
3.
4.
NONFINANCIAL ECONOMIC DEVELOPMENTS
Outlook for U.S. Economic Activity . • . ...
Price Developments and Outlook
..... . • •
Speculation in Conuilodity Markets
Impact of Wage and Price Standards
Section II.
5.
6.
7.
8.
9.
10.
110
•
12.
13.
14.
FEDERAL GOVERNMENT FINANCE
Federal Government Budget Outlook
Value-Added Tax Proposal
Section III,
16
19
FINANCIAL DEVELOPMENTS
Monetary and Reserve Aggregates
Bank Credit Growth
Aggregate Credit Flows
•
Commercial Bank Liquidity
Debt Markets Reactions to Federal
Reserve Policy Actions
Stock Market Reactions to Federal
Reserve Policy Actions
Mortgage Market Developments . . . • . .
Consumer Credit and Federal
Reserve Policy Actions . . .......
• • •
20
23
25
28
30
• •
• •
STATISTICAL APPENDIX
Current and Prospective Economic and Financial Conditions
(October 12 Report)
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1
5
11
13
33
36
40
•
SECTION I
NONFINANCIAL ECONOMIC DEVELOPMENTS
•
•
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—1--
•
(1)
What is the outlook for the economy in light of the recent monetary
actions?
The staff projection* calls for some weakening in economic activity
in the near term.
Real GNP is expected to decline through early 1980
and growth is likely to remain sluggish for the balance of the year.
Some softening was anticipated before the October 6 announcement,
and the recent actions can be expected to reinforce the fundamental
tendencies already at work in the economy.
1.
Economic activity showed greater than expected strength in the
third quarter, as real output increased at about a 2-1/2 percent
•
annual rate and demand for labor remained firm.
• The output gain reflected sharply increased personal consumption
expenditures, business fixed capital investment, and a markedly
improved net export position.
• At the same time, adverse price expectations apparently intensified
as evidenced by the speculative bulges in the prices of gold and
certain other commodities.
2.
Many of the factors supporting real activity in the third quarter
probably were transitory, and a significant weakening in demand seems
likely in the near future.
• The surge in consumer spending in the third quarter was related
appreciably to sales incentives for new cars, and there is evidence
*CONFIDENTIAL staff projection
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—2—
•
that consumers were buying autos and other durable goods in
anticipation of future price increases.
At the same time, funda—
mental factors indicate a slowing of demand is likely.
Inflation
has continued to erode the purchasing power of consumer incomes,
and real personal income has declined by almost 2-1/2 percent
since last December.
The sharp increase in consumer spending was
associated with a sharp decline in the savings rate to 4.1 percent-the lowest level in a quarter century.
Surveys of consumer sentiment
indicate that confidence remains low, and debt burdens of households
are at record levels.
• Commitments data suggest that capital spending may slow somewhat
•
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in the near term.
Although new orders for nondefense capital
goods rose by 10 percent from July to September, they remain below
the average in the first quarter of the year.
The latest Commerce
Department survey of business spending plans indicates a slowing
in the latter part of this year.
The outlook for new construction
indicates little prospect for increases in this sector, as private
building and nonbuilding contracts have declined since the start
of the year.
• Emerging inventory imbalances could lead to future reductions in
employment and production.
Despite persistent efforts by businesses
to maintain a conservative inventory posture, overhangs appear to
have developed in several sectors, including general merchandisers.
Stocks of materials and supplies held by manufacturers increased
at a record rate in August.
In contrast, new car stocks have been
-3-
•
reduced somewhat as reflected in the relatively moderate increase
in the total book value of stocks in August.
Consistent with a
projected decline in real final sales beginning in the fourth
quarter, the staff projection calls for an inventory correction
that will extend into 1980.
3.
The unsettled financial conditions since the System's recent policy
actions were announced have obscured somewhat the likely response of
businesses and consumers to these actions, and thus the economic
outlook.
As a result of the policy actions, the staff tentatively
has made a small downward adjustment to the projection.
•
• The forecasts for consumption and housing have been marked down in
the near term to reflect possible short-run disruptions in normal
lending activities, heightened uncertainty, and higher interest
rates.
• Inventories have been reduced as a result of the higher carrying
costs now faced by businesses and the reduced level of final sales
in 1980.
• Some capital spending is likely to be deferred.
Andrea Kusko
Ext. 2581
•
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%
—4—
•
PROJECTIONS OF CHANGE IN ECONOMIC ACTIVITY*
(Percent)
1978 QIV
to
1979 QIV
1979 QIV
to
1980 QIV
8-3/4
8-1/2
Real GNP
—1/2
—1/2
Gross business product
fixed—weighted price index
10
9
Consumer price index
12-3/4
9-3/4
Unemployment Rate 1/
6.4
8.3
Nominal GNP
1/ Level of rate in final quarter of year.
_
•
*
•
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Tentative adjustment to October Staff projection to reflect
incoming data.
5
11111
(2)
What factors have contributed to the acceleration in inflation during
the last two years?
What is the outlook for inflation over the next
15 months?
1.
The factors that have contributed most importantly to the acceleration
of consumer price inflation in recent years include food, energy, and
homeownership costs.
a.
The inflation rate, as measured by the CPI, accelerated from
6.8 percent in 1977 to 9.0 percent in 1978, and 13.1 over the
first 8 months of this year.
b.
Food, energy, and homeownership, which comprise about half of
the CPI, have accounted for more than 75 percent of the overall
increase so far this year and about 60 percent over 1978.
c.
So far in 1979 energy items, particularly gasoline, have
accounted for a substantial portion of the rise in all
aggregate measures of prices.
Over the June, July, August
period, energy prices accounted for about 3-1/2 percentage
points of the 12-1/2 percent annual rate increase in total
consumer prices.
d.
The large contribution of homeownership costs, which represent
a substantial proportion of consumer expenditures, mainly
reflects the sharp rise in house prices as well as mortgage
interest rates in 1978 and 1979.
•
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6
•
e.
Recently (through August for CPI and September for PPI), increases
in prices of items other than food, energy, and housing costs
(in CPI) had begun to accelerate.
•
The rate of inflation is expected to remain quite high for the
rest of this year, with only a gradual slowing likely to occur
during 1980.
a.
A primary factor maintaining high inflation rates is the
interaction of prices and wages.
o
Hourly compensation increases probably will remain large
through the end of 1980, in part due to increases in the
minimum wage and social security taxes and to cost of
living adjustment pensions in labor contracts.
•
Upward pressures on wages and prices will persist as long
as expectations of a steep inflationary trend remain.
b.
Energy prices are likely to continue to rise rapidly, albeit
at a somewhat slower pace than in 1979.
o
At the retail level energy prices have risen at about a
48 percent annual rate so far in 1979.
• The average OPEC contract price for crude oil has increased
more than 60 percent since the beginning of the year, after no
change in 1978.
G
The staff is assuming about a 10 percent rise in OPEC
prices during 1980.
o
•
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Phased decontrol of domestic crude oil prices will push
up energy prices through the end of this year and in 1980.
7
•
c.
Food price increases, which were moderate in recent months,
are expected to accelerate over the rest of the year and remain
quite high through 1980.
Food prices at the retail level, which had increased substantially
earlier in the year, virtually leveled off over the summer
months.
The wide fluctuations in these prices mainly reflect temporary
factors influencing livestock and meat prices.
A continuing contraction of beef supplies into 1980, strong
foreign demand for U.S. crops, and governmental farm policies
also will keep food prices rising.
d.
•
STAFF's PROJECTION:
Overall prices (as measured by the gross
business product fixed-weighted price index) are expected to
rise at a 10 to 10-1/4 percent annual rate over the last half
of the year, about the same as the first half.
They are projected
to start slowing during 1930 and to be at an S-1/2 percent annual
rate by the fourth quarter of the year.
Food price increases,
which slowed considerably after the first quarter of 1979, are
projected to accelerate over the next two quarters and then to
ease only moderately.
Energy price increases are projected
to moderate, although still to remain quite large.
Consumer
prices are projected to continue to rise at double-digit
rates into early 1980, but to slow somewhat in the second half
of next year.
•
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Rosemary "..ainey
Ext. 2473
John Rosine
Ext. 3195
- 8 -
Gross Business Product Fixed—Weight Price Index
ENERGY
Percent change. 04 to 04
30
19.8
— —
5.1
7.6
1
1
1
1
1
7.5
0777777,777777"
20
1 ,
7
,
1
•:•:• :• •:•
FOOD
Percent change, 04 to 04
12.2
.• .•
-12
•.•.•.
• • •.•.•
9.6
9.1
•. .
••••
8
•
6.0
.••••••••
4
limmiroma.
•
GBP
Percent change, 04 to 04
••••••=im.10
Total
Total excluding food and energy
0
8.6
— 8.0
=3
6.4 6.4
5.8
4.8
4
1976
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1977
1978
1979
1980
9
•
RECENT CHANGES IN PRODUCER PRICES
(Percent change at compound annual rates; based
on seasonally adjusted data)1/
Relative
Importance 2/
Dec. 1978 --
1978
Dec. 78Sept. 79
August
100.0
25.4
45.9
7.2
38.1
29.4
9.2
11.9
8.4
8.0
8.5
8.0
12.2
6.7
18.1
68.9
9.1
8.1
13.9
14.6
21.3
69.9
10.5
1.7
17.1
22.0
22.6
81.2
8.5
3.3
Intermediate materials 3/
Exc. food and energy
94.6
83.5
8.3
8.9
16.0
12.4
16.7
10.8
18.4
12.2
Crude food materials
Crude nonfood
Exc. food and energy 4/
58.6
41.4
11.2
13.3
15.6
21.3
11.5
24.1
13.1
-2.9
5.8
-31.0
17.5
35.1
3.2
Finished goods
Consumer foods
Consumer nonfood
Energy
Exc. food and energy
Capital equipment
111/11/
2/
3/
4/
1979
September
Changes are from final month of preceding period to final month of period
indicated. Monthly changes are not compounded.
Relative importance weights are on a stage of processing basis, as a percentage
of respective totals for finished goods, intermediate materials, and crude
materials.
Excludes intermediate materials for food manufacturing and manufactured
animal feeds.
Also excludes agricultural nonfood materials.
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- 10 -
•
RECENT CHANGES IN CONSUMER PRICES 1/
(Percent change at compound annual rates; based
on seasonally adjusted data) 2/
Relative
importance
Dec. 1978
All items
Food
Energy 3/
All items less food
and energy 3/
Commodities
Services
siemoranda:
Gasoline
Homeownership
1/
-I/
3/
411/1
1979
Aug.
July
1978
Dec. 78Aug. 79
100.0
18.2
8.5
9.0
11.8
8.0
13.1
9.4
47.9
11.7
1.5
51.0
12.6
.0
38.5
73.3
35.9
37.4
8.5
7.6
9.4
10.4
8.4
12.1
8.7
7.8
12.0
12.2
7.8
14.4
4.2
23.6
8.5
12.4
63.0
18.0
60.3
16.7
47.8
20.1
Based on index for all urban consumers.
Changes are from final month of preceding period to final month of period
indicated. Monthly changes are not compounded.
Energy items: gasoline and motor oil, fuel oil and coal, gas and electricity.
Not seasonally adjusted.
•
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What is the evidence of recent speculation in commodity markets?
1.
Price increases became particularly large in late summer for
a number of basic commodities; these increases appeared to be far
greater than could be explained by fundamental shifts in supply—
demand conditions. Thus, the upsurge in commodity prices in
September doubtless signaled a worsening in inflationary
expectations.
2.
The first indications of speculative activity occurred in the
markets for precious metals (table 1)--a customary haven for
investors seeking shelter from a depreciating currency.
The
advance in these prices was underway by early August, and prices
began to increase even more rapidly in September.
•
3.
Later in September, speculative activity appeared to spread to
markets for other nonfarm commodities.
In the last week
of .the month, copper prices soared, and zinc and lead prices
moved higher.
4.
There were some reports that speculative forces might also be
spreading into the markets for farm commodities in late September.
However, speculative buying in most of these markets did not
appear widespread as most prices continued to trade in the range
of previous months.
5.
In early October, as markets began to anticipate anti—inflation
policy actions, commodity prices weakened somewhat.
In the past
few days copper prices have retreated quite a bit from their
recent peaks.
•
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Federal Reserve Bank of St. Louis
However, prices of precious metals are still being
maintained well—above their levels of July and August.
John Rosine
Ext. 3195
Tabl
1111
1110
RECENT PRICES FOR SELECTED COMMODITIES
(Dollars)
Commodity
Unit
1/
July 16-
1/
Aug. 14-
1/
Sept. 11
1/
Oct. 9
17
October
19
18
22
Near-term futures
prices of precious
Metals:
Cold
Troy oz.
297.600
303.400
339.000
393.500
385.300
386.200
392.700
390.100
Silver
Troy oz.
9.355
9.245
12.710
16.770
16.950
17.050
17.460
17.360
Platinum
Troy oz.
414.400
374.000
425.400
540.000
486.600
498.000
505.800
508.000
Spot prices of
other metals:
Copper cathode 2/
Lb.
.851
.901
.939
.973
.916
.918
.925
.921
Lead
Lb.
.585
.565
.580
.605
.605
.605
.605
Zinc
Lb.
.405
.370
.363
.375
.375
.375
.375
.605 P.N1
1
.375
Tin
Lb.
7.643
7.333
7.624
7.782
7.738
7.811
7.825
7.839
Wheat
Bu.
4.480
4.178
4.210
4.250
4.368
4.408
4.480
4.458
Corn
Bu.
3.050
2.838
2.748
2.800
2.800
2.730
2.788
2.770
Soybeans
Bu.
7.533
7.263
6.950
6.730
6.450
6.405
6.360
6.330
Cattle
Cwt.
67.100
63.450
67.800
68.250
64.900
64.900
64.900
65.400
Hogs
Cwt.
39.500
35.950
38.500
35.450
35.000
34.550
33.400
33.150
Spot prices of
farm commodities:
1/
2/
Mid-month observations taken on the pricing date for the producer price index.
Previous versions of this table had quoted prices for copper wirebar. Cathode prices--which are more easily
obtainable--have tended to exhibit price movements siI'Iimilar to those for wirebar.
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Federal Reserve Bank of St. Louis
1
1110
(4)
What impact has the Council on Wage and Price Stability (COWPS) had on
wages and prices in the past year, and what is the outlook under the
revised guidelines?
1.
The first—year guidelines called for increases in wages and private
fringe benefits of 7 percent and set standards for price increases
intended to limit the change in those sectors covered by the program
to about 6 percent, a 1/2 percentage point deceleration from the
1976-77 average.
a.
On the wage side, actual overall increases during the first program
year have averaged about 1 percentage point above the 7 percent
standard.
•
• Confidential COWPS reports as of July indicate that 163 of the
188 contracts monitored were in compliance with the standard;
another 240 reviews still are pending. COLAs were costed out
at an assumed inflation rate of 6 percent over the contract
life, however, and exemptions were permitted that allowed
contracts that average more than 7 percent annually to meet
the standards.
We have no estimate of how many of these
contracts would have met the standard if real increases in
the CPI were factored
•
Compliance .SS.rsto have been more widespread in the
nonunionized sectors.
7.9 percent and
•
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Federal Reserve Bank of St. Louis
Trade and service sector wages rose just
.S.rcent
respectively, during the year
- 14 -
•
ending in 1979:QIII--down from rates of 9.3 and 7.5 percent,
respectively, over the preceding year.
Manufacturing wages,
at the same time, accelerated somewhat from 3.2 to 8.6
percent over these two yearly periods.
b.
On the price side, increases in covered prices have averaged
about 1 percentage point above the first-year target.
o
Because of large increases in costs, however, many firms
who could not comply with the standard for price
deceleration chose the alternative standard that allowed
them to maintain profit margins relative to the 1976-77
base period.
2.
•
The revised second-year guidelines are not yet final, but they
likely will allow somewhat larger wage and price increases this
year.
a.
On the wage side, the interim standards will be reviewed
by a tripartite Pay Advisory Committee, representing business,
labor, and government.
•
The Pay Advisory Committee plans to submit--by October 31-its recommendations for the basic pay standard, the
inflation assumption for evaluating COLAs, the low-wage
exemption, and the appropriate adjustment for workers not
covered by COLAs.
•
In the interim, the first-year 7 percent guideline will
remain in effect.
•
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Federal Reserve Bank of St. Louis
Workers who complied with the first-year
•
standards, but were not covered by automatic COLAs, however,
will be allowed a "catch—up" increase of an additional 1
percent.
b.
On the price side, the basic standard is a cumulative two—year
increase (October 1978—October 1980) equal to the 1976-77 base
period.
An alternative profit—margin standard has been
retained for firms facing uncontrollable costs.
•
For firms that followed the 1/2 percentage point decelera—
tion in the first year, the basic standard now allows a 1
percent acceleration in prices.
• The provisions of the profit—margin alternative are similar
to those in the first year.
•
Profit margins are not allowed
to be increased, and dollar profit growth is limited to
13-1/2 percent (6-1/2 percent annually, compounded).
The
definition of base—year profits, however, has been tightened
somewhat.
• In the second program year, prices may rise
percent
even if the basic standard would call for a lower rate of
increase; the upper limit on allowable price increases is
8-1/2 percent.
These bounds wereand 9-1/2 percent,
resS.ctively, in the first program year.
Robert Gay
Ext. 2655
Joyce Zickler
Ext. 2475
•
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•
S
•
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Federal Reserve Bank of St. Louis
SECTION II
FEDERAL GOVERNMENT FINANCE
- 16 •
(5)
What is the budget outlook for the current fiscal year (1980)?
1.
The Board's staff currently is projecting a $39 billion unified budget
deficit for the federal government in fiscal year 1980, substantially
larger than the deficit projected by the administration, the House, or
the Senate (see Table 1.)
Table 1
COMPARISON OF VARIOUS BUDGET ESTIMATES
(Fiscal years; billions of dollars)
1978
1979
1980
V
1
Admin,
House
3
Senate
4
FRB
Actual
Actual
Receipts
402.0
465.9
513.9
519.3
514.7
505.2
Outlays
450 8
493.6
547 1
548.2
546.3
544.5
Surplus (+)/deficit (-)
-48.8
-27.7
-33.25
-28.9
-31.6
-39.3
Off-budget deficit
-10.3
-12.4
6
-20.0
n.a.
n.a.
-18.0
Combined deficit to be
financed
-59.1
-40.1
-53.2
n.a.
n.a.
-57.3
Total means of financing
other than borrowing
0.0
6.4
8
11.2
n.a.
n.a.
11.7
Total borrowing from public
59.1
33.7
7
42.0
n.a.
n.a.
45.6
I
•
1/
2/
3/
4/
5/
7
6/
7/
8/
Administration estimates of October 11, 1979, except as noted.
Second Concurrent Budget Resolution passed by the House on September 21, 1979.
Second Concurrent Budget Resolution passed by the Senate on September 18, 1979.
Staff projection of October 12, 1979.
The Administration recently indicated that this deficit will likely be somewhat
higher than this because the economy was not performing as well as expected
when the deficit was projected.
Confidential Administration estimate as of September 4, 1979.
Reflects estimates of components made at different times.
Estimate from July Mid-Session Budget Review.
2.
The smaller fiscal 1980 deficit expected by the administration and by the Congress
are due primarily to differences in projections of economic activity and in assumed
•
IL
fiscal policy initiatives.
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Federal Reserve Bank of St. Louis
- 17 a.
•
The short-term economic forecasts of the FRB staff, the administration
and the Congress are shown in table 2.1/
• The large decline in real economic activity forecast by the Board's
staff
billion
results in a level of estimated receipts that is almost $7
below OMB and congressional projections.
Most of the
difference appears to be in corporate and withheld tax receipts.
• On the outlay side of the budget, FRB staff projects more spending
because of higher interest rates and unemployment insurance payments; at the same time, the FRB staff expects that shortfalls
(mainly in the energy and grants categories) from administration and
congressional spending plans will offset these higher outlays.
b.
In terms of fiscal policy assumptions, a $2.5 billion windfall profits
tax is included in the administration's receipt forecast but not in the
•
staff's projection.
• The House has assumed even higher revenues from the windfall profits
tax ($4.5 billion) than the Senate and the administration estimates.
• The House also has assumed the implementation of an administration
proposal to speed up collections of income and payroll taxes ($2
billion) and $1.5 billion of revenue "feedbacks" resulting from
the increase in economic activity generated by higher unemployment
induced transfers.
3.
The House and the Senate have passed dissimilar versions of a Second
Concurrent Resolution.
A conference committee currently is attempting
to reconcile differences in the two measures.
1/
•
The Administration recently indicated that the economy was not performing as well
as had been expected at midyear and that the deficit was likely to be higher than
the $33 billion figure proj,cted erliel, as shown in Table 1. Both the House
and the Senate used the same economic forecast in formulating the Concurrent
Budget Resolution.
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Federal Reserve Bank of St. Louis
James Fralick
Extension 3344
•
•
Table
FEDERAL BUDGET
ECONOMIC ASSUMPTIONS UNDE
(calendar years; billions of dollars)
1978
Gross National Product
Current Dollars:
Amount
Percent Change (fourth quarter
over fourth quarter)
Constant (1972) Dollars:
Amount
Percent Change (fourth quarter
over fourth quarter)
Prices (percent change)
GNP Deflator (fourth quarter
S ver fourth quarter)
Unemployment Rate (percent)
Total:
Yearly Average
Fourth Quarter
I.
1980
Congress 2/
OMB 3/
FRB 1/
2,571
2,572
2,546
8.4
12.0
10.3
8.6
1,399
1,424
1,424
1,423
1,406
8.3
9.4
8.9
8.1
9.0
Actual
FRB 1/
2,128
2,358
13.4
1-,
CO
6.0
5.8
5.9
6.7
7.2
7.2
6.8
6.9
7.9
8.3
1,717
206
1,918
234
2,107
239
2,109
239
2,094
230
Interest Rate (percent)
91-day Treasury Bills 4/
Incomes
Current Dollars:
Personal Income
Corporate Profits (before tax)
1/
2/
3/
4/
October 12, 1979 staff projection.
Both the House and Senate Budget Committee recommendations for the Second Concurrent Resolution on the
Budget, Fiscal Year 1980 are based on the economic assumptions in CBO's An Economic Outlook for 1979-1980:
An Update, July 11, 1979.
t1f ion Review of the 1980 Budget, July 12, 1979.
Mid-Sess
Average rate of new issues within period.
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Federal Reserve Bank of St. Louis
- 19 -
11110
(6)
New question
Various Congressmen have suggested changes in taxes.
One such involves
the introduction of a broad based consumption tax (value-added tax) in
order to reduce the burden of income and payroll taxes.
What are your
views?
The proposal by Representative Ullman to reduce reliance on payroll and
income taxes and replace the needed revenues with value-added taxes is
difficult to evaluate, since a number of comparisons among various taxes
are involved.
(a)
The introduction of a value-added tax--essentially a sales tax on
consumption--clearly would exert an initial upward push on prices,
•
which would appear as a setback in the efforts to control inflation.
(b)
In the long run, however, this kind of consumption tax tends to
encourage saving and investment.
The reason is that under VAT
incomes are taxed only when spent for consumption, and they remain
tax free to the extent that they are saved.
Such reductions in
income taxes might even encourage some additional work effort,,
Thus, while a VAT tax deserves consideration, its introduction might
better be postponed until inflation has been brought under closer
control.
Helmut Wendel
Ext. 3526
•
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- 20 -
•
"
Recent growth of the key monetary and reserve aggregates and other liquid assets.
1.
Over the first nine months of 1979:
a.
M-1 grew at a 6 percent annual rate, above the 1-1/2 to 4-1/2 percent
long-run range set for QIV'78 to QIV'79 at February's FOMC meeting and
retained in July (see table).
• 1-1/2 to 4-1/2 percent range anticipated that shifting to ATS and
NOW accounts in New York State would slow M-1 growth by 3 percentage
points.
•
Current staff projection is that ATS/NOW shifts will reduce M-1 growth
by no more than 1-1/2 percentage points, implying an adjusted M-1
range of 3 to 6 percent.
b.
•
The annualized rate of growth of M-2 was just above the upper limit of
the 5 to 8 percent long-run FOMC range for this aggregate.
2.
Aggregate reserves (total reserves, nonborrowed reserves, and the monetary
base) were weak in the first half of the year, but most recently all reserves
measures have shown strength.
a.
The weakness in the first half reflected:
Banks'substitution of liabilities not subject to reserve requirements
for large CDs
following the imposition of a 2 percentage point supple-
mental reserve requirement on large time deposits in November 1978.
b.
A substantial reduction of savings deposits in the first six months of
the year.
c.
Reduced growth in demand deposits as individuals shifted deposits from
demand accounts to ATS accounts (ATS accounts have a lower reserve
requirement than demand deposits).
•
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Federal Reserve Bank of St. Louis
- 21 -
•
3.
In the third quarter reserve aggregates grew rapidly, reflecting:
a.
Bank issuance of large time deposits.
b.
Net inflows of savings deposits.
c.
Rapid growth in demand deposits as the shift to ATS accounts abated
and money demand strengthened.
4.
Over the first nine months of this year:
a.
ATS accounts nationwide and NOW accounts in New York State rose an
estimated $6-1/4 billion to a not seasonally adjusted level of $9-1/4
billion.
b.
Assets of money market mutual funds grew by over $24 billion to a not
seasonally adjusted level of $34-3/4 billion.
•
c.
Commercial bank RPs with the nonbank public declined an estimated $1
billion, to a seasonally adjusted level of $42-3/4 billion.
Darwin Beck
Extension 3921
•
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Federal Reserve Bank of St. Louis
- 22 -
•
Monetary and Reserve Aggregate Measures
(Percent annual rates of change)
December
to
March
June
to
September
December '78
to
September '79
M-1
-2.4
11.1
9.5
6.1
M-2
1.7
11.3
12.2
8.5
M-3
4.6
9.2
11.0
8.4
li
Managed liabilities
27.4
-4.9
32.0
18.6
Bank credit
13.2
11.9
15.2
14.0
Business loans
20.4
17.1
22.2
21.5
4.2
4.7
12.4
7.3
Total reserves
-4.4
-3.9
10.5
0.7
Nonborrowed reserves
-5.7
-8.2
11.6
-0.9
7.0
8.1
9.0
24.1
Monetary base
•
March
to
June
Memo: Change in
money market mutual
funds (in billions of
dollars, not at an
annual rate)
1/
Large time deposits, net Eurodollar borrowings from related foreign
institutions, Fed funds and RPs.
•
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Federal Reserve Bank of St. Louis
- 23 -
1110
(8)
What has happened to bank credit growth this year, and what are the near-term
prospects for future growth?
1.
Total bank credit has grown at a 14 percent annual rate so far this year,
slightly above the advanced 1978 pace (see table).
a.
Acceleration reflects a pickup in acquisitions of securities; loan
growth has slowed a bit.
b.
Slowing in total loan growth is due to slower expansion of real estate
and consumer loans more than offsetting acceleration of lending to
businesses.
c.
Pickup in business loan growth reflects strong corporate demands for
shorter-term credit related to:
•
• growth of outlays for inventories and fixed investment exceeding
gross internal funds,
• and the apparent reluctance of corporations to borrow substantially
in long-term markets, given current high bond yields.
GROWTH OF BANK CREDIT
(Seasonally adjusted annual rates)
Major_Loan Components
Real
Business Estate Consumer
Total Loans and
Investments
Investments
Total
Loans
1977
1978
1979 (9 mos.)
10.9
13.6
13.9
3.8
2.9
7.2
14.0
18.0
16.3
10.5
16.3
20.9
17.8
19.9
14.6
18.9
19.3
12.4e
1979:Q1
Q2
Q3
13.2
11.9
15.2
7.6
5.4
8.7
15.1
14.2
17.7
20.4
17.1
22.2
14.6
13.0
14.7
16.3
12.4
7.7e
7.8
3.0
13.7
15.0
14.5
22.6
22.8
19.4
23.3
154
13.6
14. 5
6.1
6.7
10.1e
•
1/
July
13.2
Aug.
11.6
Sept.
20.3
First 8 months of 1979.
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Federal Reserve Bank of St. Louis
•
- 24 -
2.
Bank credit growth is expected to decelerate in the fourth quarter of 1979
and into 1980, as growth of security holdings is likely to abate and lending
activity should moderate further.
a.
Banks have raised their prime rate 3-1/2 points since midyear to a
new high of 15
percent, with over three-fourths of this increase
occurring since August.
b.
Banks may tighten further their nonprice lending terms and credit
standards, reflecting their tighter balance sheet conditions and the
economic outlook.
c.
On the demand side, total private credit needs are likely to weaken in
association with the slowing in economic activity and a reduction of
•
inventory accumulation.
d.
In addition, business borrowers, whose average ratio of short-term debt
to total debt has reached a new high, well above the 1974 level, are
likely to rely more heavily on longer-term financing.
3.
Board's Humphrey-Hawkins projection for bank credit during QIV'78 to QIV'79
and QIV'79 to QIV'80 is 7% to 10/
1
2 percent.
Edward Fry
Extension 3361
•
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Federal Reserve Bank of St. Louis
What has happened to aggregate credit flows recently?
1.
Net funds raised by nonfinancial sectors in the third quarter of 1979
are estimated to have totaled $391 bon (seasonally adjusted annual
rate), somewhat above the first half pace.
Increased borrowing by the
U.S. government, foreign participants, and domestic nonfinancial b
nesses more than offset reduced credit flows in the household sector.
a.
The pace of nonfinancial business borrowing increased only slightly
in the third quarter, totaling $162 bon (SAAR) compared to $159
Son in the first half of the year.
(1)
External financing needs--though remag high--were less
than earlier in the year, as growth in corporate internal funds
•
picked up and reduced inventory accumulation slowed the rate
of expansion of capital outlays.
(2)
The major part of the increased borrowing by nonfinancial firms
continued to be in short- and intermediate-term markets, including a large volume of commercial paper issuance in the third
quarter and sizable borrowing from commercial banks.
Finance
company lending to businesses dropped from the strong pace in
the first half in association with reduced inventories of auto
dealer stocks and declining truck sales.
S.
Flows of funds to the household sector declined in the third quarter
owing to a sharp falloff in the growth of consumer installment credit.
(1)
•
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Federal Reserve Bank of St. Louis
Consumer installment credit is estimated to have expanded at a
seasonally adjusted annual rate near $30 billion in Q-3, well
below the S40-45 billion pace in 1978 and the first half of 1979.
- 76 -
•
(2)
Mortgage borrowing by households in the third quarter remained
near the pace of the first half.
2.
Domestic financial sectors raised an estimated $86 billion (SAAR) in cre-
dit markets in the third quarter--down slightly from the pace of borrowing in the first two quarters of 1979.
a.
Sponsored credit agencies maintained their demands for funds largely
to support mortgage market lending programs.
b.
With stronger time and savings deposit flows, credit market borrowing
by private financial intermediaries declined from the stepped up pace
in the second quarter.
•
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Federal Reserve Bank of St. Louis
Martha Scanlon
ext. 3631
- 27 -
•
Funds Raised in Credit Markets
(net flows in billions of dollars, seasonally adjusted annual rates)
1978
Calendar Year
All sectors
1.
Nonfinancial sectors
2.
U.S. government
State and local gov't.
Foreign
Domestic nonfinancial business
Households
3.
4.
.
•
7.
8.
Financial sectors
1979
H1
H2
482
464
338
400
69
15
21
76
91
57
20
14
108
140
24
H121
Q31/
499
469
476
384
417
380
391
54
24
32
127
163
61
21
20
124
156
46
26
44
132
169
26
16
14
159
164
36
15
21
162
157
54
81
80
82
88
86
17.4
20.6
22.6
22.5
22.7
20.3
19.9
16.0
1.4
17.8
2.8
18.8
3.8
18.7
3.9
19.0
3.7
16.4
3.8
16.4
3.6
1976
1977
1978
296
392
272
Net Funds Raised as a Percent
of GNP:
9.
10.
11.
All sectors
Nonfinancial sectors
Financial sectors
Source:
Federal Reserve Board Flow of Funds.
2/ Preliminary.
f/ Staff forecast as of October 10.
_
S
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Federal Reserve Bank of St. Louis
1,
How do the current levels of measures of commercial bank liquidity and
balance sheet positions generally compare to the last period of monetary
restriction?
The loan-to-deposit ratio is well above the previous peak, reached in
1974 (see table).
The high level of this ratio reflects in part
increased reliance on nondeposit sources of funds.
The liquidity ratio is still above the lows reached in 1974.
However,
this does not necessarily suggest that large banks are more liquid than
in 1974, since a significantly larger share of these liquid assets
collateralize RPs, Treasury tax and loan balances, and other government deposits.
•
3.
The borrowing ratio is currently about at the peak level it reached in
1974.
Any comparisons of relative tightness that might be inferred
from this ratio, however, must recognize its secular increase.
4.
in sum, the level of these key ratios suggest a degree of balance sheet
tautness that in the previous period of monetary restriction was associ—
ated with a tightening of lending terms and restrained credit availability.
a.
However, in 1973-74 one factor affecting the cost and availabty of
credit not reflected in these measures was that the prime rate was a
ficially constrained below banks' marginal cost of borrowings.
This
cSnstraint was a major cause of credit rationing.
S.
In addition, 1974 saw major institutional failure that heightened market
concerns about bank soundness and influenced banks to take a more cautious
•
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Federal Reserve Bank of St. Louis
stance toward further expansion of lending activity.
Perry Quick
Extension 3361
Liquidity Ratios
•
Liquid Assets
to Liabilities
at Large
1/
Commercial Banks-
Borrowing Ratios
at Large
PIN
Commercial Banks-
Loans to Deposits
at all Comm?rcial
Banksa
1973--December
1974--December
I975--December
1976--December
1977--December
1978--December
11.0
9.7
13.0
14.1
14.0
10.5
32.7
36.5
33.2
29.7
31.4
35.5
72.0
72.9
68.7
69.7
72.2
76.9
1979--January
February
March
April
May
June
July
August
September
11.5
11.7
12.2
12.8
12.0
12.3
11.8
11.7
12.0
36.8
38.1
38.4
37.7
38.3
37.7
38.0
38.9
39.5
78.5
78.7
79.7
80.2
81.4
83.2
82.3
n.a.
n.a.
37.4 (August 1974)
78.1 (November 1978)
High or low
reached before
09
8.6 (July 1974)
1/ Monthly averages of Wednesday figures. Liquid assets include Treasury and other
securities maturing in one year or less, loans to brokers and dealers and
domestic commercial banks, holdings of bankers acceptances and gross sales of
Federal funds. Liabilities are total liabilities lass capital accounts,
valuation reserves, and demand deposits due to banks.
2/ Monthly average of Wednesday figures. The numerator includes gross liabilities
of banks to their foreign branches, all large time deposits, net Federal funds
purchased, and borrowings from other than the Federal Reserve. Beginning in 1975
all large time deposits are included. The denominator is total assets less Federal
funds sold less cash items in process of collection.
3/ Last Wednesday of the month except for June and December Call dates. Total loans
exclude loans to banks and total deposits exclude cash items in process of collection.
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•
- 30 (11) What has been the reaction in debt markets to the Feder
al Reserve
actions that were announced on October 6, 1979?
1.
In the money market, yields on 3-month instruments
have climbed
180 to 230 basis points since Friday, October 5
(see table 1).
a.
The spread between the highest and medium qual
ity commercial paper has widened to 138 basis poin
ts, up from
about 50 basis points in early October (see
table 2).
b.
Commercial paper dealers describe market
conditions as
"unsettled."
They also indicate that they have suggested
to some lower -rated firms that they avoid
issuing commercial paper until the market becomes more
settled.
2.
•
In the taxable bond market, long-term yield
s generally have
climbed 60 to 110 basis points since Friday,
October 5.
a.
Several corporations have postponed sched
uled offerings,
citing "unsettled market conditions."
b.
Measures of risk premia have increased
sharply.
Newly
issued A-rated utility bonds currently yield
about 174
basis points more than Aaa-rated utility bonds.
This is
a sharp increase from the spread that exist
ed in September
(see table).
3.
Municipal bond yields have climbed about
75 basis points since
Friday, October 5.
a.
Short-term tax-exempt note yields have
climbed sharply also,
and currently are about 100 to 200 basis
points higher than
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Friday, October 5.
•
- 31 b.
Several state and local governments have chosen to postpone
security offerings owing to the increase in tax-exempt yields
and the unsettled market conditions.
c.
Rate spreads between higher and lower quality municipal bonds
have widened also, but by a smaller amount than corporate bonds
(see table).
4.
The turbulence and uncertainty in securities markets has led to a
deterioration in the operation of the Treasury, corporate and municipal bond markets.
a.
•
Bid -asked spreads have widened, although they currently are
narrower than in the first few days following the Fed announcement.
b.
Market participants report that markets are "thin" and trading
light, owing to both the large losses suffered since October 6
and concern about additional System actions.
c.
To small municipal bond dealers have ceased operating, and
rumors continue that other firms may follow shortly.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
- 32 Table 1
Selected Interest Rates
Levels
•
1974
Highs
(July December)
Short-term
Federal funds
Treasury bill,
3-month
Secondary market CD,
3-month
Commercial paper,
3-month
Prime rate
•
Weekly average.
September
FOMC
(Sept.18)
2/
ocA.a tp
October 5
\
Current
pct.25)
11.371/
11.61
9.74
10.40
10.70 //,/ 12.53
12.74
12.09
12.50 /q3-1 14.71
12.25
12.00
11.81
13.00
11.86
13.50
8.72
9.22
10.52
7.15
9.87
6.49
13.55
Long-term
Treasury bond,
20-year
Aaa-rated corporate
bond, recently
offered
Bond Buyer Index,
general obligation
1/
1979
Change
Since
October 5
g'40p15.00
f4.
/q; // 14.19
+2.33
+1.50
Arco 15.00
9.44 /0- 33/310.4 i-A••• 4 /-
10.25 1t3S- 11.35
6.64 73F 7.38
+1.10
+.74
October 11.
*Average effective federal funds rate on trading days since October 6 has
been 4,41rtir percent.
/91.4RS
Table 2
MEASURES OF RISK PREMIA
(basis points)
Period
1969-78 - Average
High
Low
1979-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
•
Oct.
5 ,
252-/
1/ Multiple dates.
2/ Preliminary.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Med.-grade Comm.
Paper Minus Highgrade Comm. Paper
A-rated Utility
Bonds Minus Aaarated Utility Bonds
A-rated Municipal
Bonds Minus Aaarated Municipal Bonds
43
169 (10/74)
121/
48
140 (8/75)
151/
58
/
1611
20
48
35
37
42
42
41
41
48
51
49
54
51
52
64
51
48
49
54
50
138
90
174
1tvi. 2A.
45
52
31
26
43
51
37
36
43
45
65 (10/19)
35
111/1 (12)
How has the stock market reacted to the recent Federal Reserve actions?
Stock prices have fa . len sharply since the actions of October 6, with
1.
broad market indicators down about 10 to 16 percent.
Recent Stock Price Movements
Year-end
1978
Dow Jones Ind.
S&P 500
NYSE Composite
AMEX Composite
NASDAQ Composite
•
805.01
96.11
53.62
150.56
117.98
Dow Jones Ind.
S&P 500
NYSE Composite
AMEX Composite
NASDAQ Composite
2.
10-5-79
897.61
111.27
63.39
235.15
152.29
- 7?
10-25-79
805.46
100.00
56.61
196.00
132.73
goi '10
Ian.5-7
5<0,°17
2.c.r0:11
1-33:15
Percent Change
Year-end 1978
10/5/79
to
to
Latest
Latest
(/0/10/4
_(ig/a/S) (/04)4j._
+0.1 .6
-10.3
+4.0 4%4;
-10.1
+5.6 +(pa
-10.7 -10.1
-16.4 -164.A4
+30.6 *33.4
+12.5 4.t.
-12.8
5,4
The declines were reported to reflect the rise in yields obtainable on
competing financial instruments
and concern that these higher interest
rates and reduced credit availability would detract significantly from
the level of economic activity and corporate profits over coming quarters.
3.
Selling in response to margin calls was reported not to be a significant
factor in the market decline.
a.
Brokers reported that most margin customers had substantial excess
equity in their accounts as a result of earlier price increases.
b.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
As of the end of September, only 16 percent of margin debt was in
accounts with net equity ratios below 40 percent--the category most
- 34 -
•
vulnerable to declines in market price levels.
down from 33 percent at yearend 1978.
c.
This percentage was
(See table on next page.)
However, with interest rates on margin loans rising along with bank
call loan rates, borrowing to finance stock holdings is being discouraged.
•
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Donald Kohn
ext. 3631
- 35 -
•
Margin Debt
($ millions)
Month-to Month Change
Outstanding
Number of
Margin
Accounts
(thousands)
Percent of Debt
Collateralized
at Greater than
40 Percent
990 (9/78)
615 (12/74)
92 (2/66)
42 (9/74)
. 1/
Record HighRecord Lowl/
12,400 (9/78)
3,780 (7/70)
Year-end Levels:
1971
1972
1973
1974
1975
1976
1977
1978
5,400
7,900
5,050
3,840
5,390
7,960
9,740
10,830
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
675
750
680
615
705
810
885
955
89
85
66
55
75
88
81
67
Month-end Data:
1978
January
February
March
April
May
June
July
August
September
October
November
December
9,590
9,780
9,920
10,260
10,660
11,909
11,190
11,740
12,400
12,090
11,000
10,830
-150
+190
+140
+340
+400
+430
+100
+550
+660
-310
-1,090
-170
890
890
900
915
930
945
955
965
990
960
955
955
75
75
79
85
85
84
87
88
85
53
68
67
10,750
10,790
10,870
11,220
11,130
11,590
11,840
12,060
12,000
-80
+40
+80
+350
-90
+460
+250
+220
-60
950
950
965
960
970
975
960
975
985
79
71
79
77
78
79
81
86
84
•
+660 (9/78)
-1,090 (11/78)
1979
January
February
March
April
May
June
July
August
September
Illk.a. - Not Applicable.
1/ These series were initiated January 1966.
_
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
(1113)
Recent developments in the residential mortgage market.
1.
Mortgage market conditions had been tightening prior to the recent
Board actions.
a.
Average interest rate on new commitments for 80 percent
conventional home loans at sampled S&Ls on October 5 was 1 percentage point above year-end level.
b.
Nonprice terms on conventional home mortgages had tightened as well.
c.
Interest rates had also been rising on residential construction
loans and mortgage company warehousing credit, both of which typically
are marked up above the bank prime rate.
2.
•
Net residential mortgage lending during the first three quarters of
1979 held near the record high current—dollar rate reached late last year.
a.
The continued strength of mortgage credit demands in the face of large
increases in market rates partly reflected expectations of further
substantial inflation in home prices as well as demographic factors.
b.
Innovations on the supply side also had helped to sustain large mortgage
credit flows.
Thrift institution deposit growth, though weaker
this year, has been bolstered by money market certificates.
Furthermore, institutional changes have given thrifts other sources
of funds and have facilitated the channeling of funds into the
mortgage market by diversified investors (e.g., GNMAs pass—throughs).
3.
Following the Board's recent policy changes, tightening in mortgage
markets has accelerated, in part reflecting uncertainty about prospective
•
flows and costs of loanable funds, in the face of substantial backlogs
of outstanding mortgage commitments likely to require future financing.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
- 37 -
•
a.
In the primary market, average interest rates on new commitments for
conventional home loans at sampled S&Ls increased 40 basis points
between October 5 and October 19, to 11.75 percent.
Numerous lenders
have raised their rates even more substantially in an effort to scale
down credit demands sharply.
(Some California S&Ls have posted 14
percent rates.)
• Nonrate loan terms and credit eligibility standards also have
been stiffened, and some institutions have shut down their new
commitment activity completely.
b.
Usury ceilings have become more restrictive in quite a few states,
at least for lenders or loans subject to such limits.
•
•
About a dozen states (including New York and New Jersey)
have ceilings fixed or capped at 12 percent or less; 9 other
states (including Illinois, Pennsylvania, and Texas) have
floating ceilings that are below going yields on higher—risk
mortgages.
•
National banks, of course, may charge up to one percentage point
above the Federal Reserve discount rate, regardless of state
ceilings.
c.
In the secondary market, yields on FNMA's forward purchase commit—
ments for FHA/VA home mortgages jumped 94 basis points in the
October 15 biweekly auction, and bidding was the heaviest of the
year.
With discounts averaging more than 12 points in the auction,
the FHA/VA ceiling rate was raised 1 percentage point to 11-1/2
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
percent, effective October 26.
- 38 -
•
d.
Costs of construction credit to builders have increased further with
the recent hikes in the bank prime rate.
The rate increase applies
to many outstanding construction loans as well as to all new
commitments.
e.
At mortgage companies, higher short— and long—term market rates have
caused a number of problems.
•
Costs of warehousing credit have risen further above yields on
loans in inventory.
The net loss on warehousing has in many cases
consumed the entire loan origination fee received by mortgage
companies.
• Falling mortgage prices have hurt mortgage companies carrying
warehoused loans not covered by take—out commitments from FNMA
•
or other private investors, or through the GNMA securities market.
f.
The GNMA securities market has also been adversely affected as
long—term rates have risen.
•
Supply to the market has declined as originations of FHA/VA
loans have been constrained by the large number of points
required under the 10-1/2 percent rate ceiling.
• Heavy losses on inventories of GNMAs apparently have been
sustained by some securities dealers, and dealer activity in
the GNMA forward market has been reduced.
•
Some investors are now reluctant to honor prior commitments to
purchase (or repurchase) GNMAs from security dealers under
forward—delivery contracts, and some may renege.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
David F. Seiders
Ext. 3179
October 25, 1979
- 39 PRIMARY MARKET--INTEREST RATES AND SUPPLY
OF MORTGAGE FUNDS AT SELECTED S&Ls
•
•
Conventional home mortgages
Basis point
Average rate on
Spreadl/
change from
new commitments
(basis
or
month
for 80% loans
points)
week earlier
(percent)
Period
End of 1978
10.38
1979--High
Low
11.75
10.38
1979--June
July
Aug.
11.04
11.09
11.09
1/
Percent of S&Ls
with mortgage funds
in short supply
+87
58
+172
+67
86
54
+35
+5
0
+154
+157
+160
79
75
77
+3
Sept.
7
14
21
28
11.20
11.30
11.35
11.35
+7
+10
+5
0
+150
+143
+143
+135
78
86
84
82
Oct.
5
12
19
11.35
11.45
11.75
0
+10
+30
+110
+66
+87
82
83
84
Average mortgage rate minus average yield on recently offered Aaa utility bonds.
SECONDARY MARKET--FHA/VA HOME MORTGAGES
Yield in
FNMA
auction
(percent)
Period
Discount
points
in FNMA
auction
9.68
10-1/2
9-1/2
11.77
9.51
4.96
4.27
4.31
10
10
10
11.09
10.88
11.14
10.92
5.90
11.25
--
7.91
10
10
10
10
10.14
10.36
10.38
10.36
11.66
--
7.25
12.60
--
12.54
10-1/2
10-1/2
10-1/2
10-1/2
10.65
11.02
11.21
11.77
10.60
1979--High
Low
12.60
10.42
12.54
4.16
1979--June
July
Aug.
10.77
10.66
10.67
4
10
17
24
1
9
13
22
Oct.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Yield on
GNMA
securities
(percent)
9-1/2
7.13
End of 1978
Sept.
Loan
ceiling
rate
(percent)
--
-40 -
(14)
•
how may the recent monetary policy actions affect the availability and cost
of consumer credit?
1.
Slower growth in consumer installment credit had preceded the Federal
Reserve's recent actions.
a.
The annual rate of growth in consumer installment credit was close
to 10 percent in the period from June through August 1979.
b.
This rate of increase was down from an average growth of 15 percent
during the first half of this year, and was substantially below the
19 percent pace during 1978.
2.
Finance charges on consumer loans at commercial banks had been edging
up for some time before the recent policy decisions.
•
a.
Average finance rates on closed-end consumer installment loans at
commercial banks rose by 10 to 15 basis points between May and
August 1979 and by 50 to 75 basis points since August 1978.
b.
Average finance rates on bank credit card plans had increased by
only 3 basis points during the May-August period.
Finance charges
on most credit card programs have long been at maximum legal rates.
3.
Some further rise in consumer credit rates appears in prospect--especially
on closed-end loans--owing to the impact of higher market rates on
financing costs and deposit flows, even if consumer spending slackens.
a.
However, such rate increases may be quite limited, if they conform
to historical patterns.
During the period of sharply rising market
rates in 1973-74, for example, consumer loan rate increases averaged
no more than one-half to one percentage point.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
b.
In a growing number of states, some loan rates--especially for
borrowers with marginal credit qualifications--are currently at or
near statutory interest rate ceilings.
These rate constraints
- 41 -
•
reach
would become increasingly binding as more consumer loan rates
statutory maximum levels.
Some national banks have raised consumer
rates above state usury ceilings to a level one percentage point
federal law.
above the discount rate, as permitted by
4.
been
Trade reports suggest that credit availability to consumers has
in
curtailed by some lenders, particularly to higher risk borrowers
areas where loan rates are constrained.
a.
Some methods to restrict credit availability include:
• Adoption of more stringent criteria for approving loan applications.
•
b.
•
Tightening of such nonprice terms as downpayment requirements.
•
Accepting loan applications from established customers only.
•
Discontinuing small low-profit loans.
Many lenders suggest that the current high levels of market rates
would have to persist for several months before more severe cutbacks
or abandonment of consumer lending would be considered.
James T. Fergus
Ext. 2868
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
•
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
STATISTICAL APPENDIX
•
ANNUAL MONEY STOCK GROWTH RATES
(Per Cent, QIV Average to QIV Average)
M1
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
M2
M3
1965
4.3
8.6
8.6
1966
2.9
6.0
5.4
1967
6.4
9.9
9.7
1968
7.6
9.0
8.1
1969
3.9
3.2
3.6
1970
4.8
7.2
7.2
1971
6.6
11.3
13.5
1972
3.4
11.2
13.3
1973
6.2
8.8
9.0
1974
5.1
7.7
7.1
1975
4.6
8.4
11.1
1976
5.8
10.9
12.7
1977
7.9
9.8
11.7
1978
7.2
8.4
9.3
•
•
^CT. 26, 1979
Money and Credit Aggregate Measures
Bank
Credit
Bank Reservesj
Period
Total
Non
borrowed
Monetary
Base
1
2
3
Total
Loans
and
Investments
4
Money Stock Measures
Ml
M-1
M
M3
5
7
6
8
(PER CEN3 ANNUAL RATES OF GROWTH)
M 4
M-5
M-6
M7
9
10
11
12
2/
ANNUALLY:
1976
1977
1978
0.6
5.3
6.6
3.8
3.0
6.7
6.7
8.3
9.1
7.5
11.1
13.5
5.8
7.9
7.2
12.6
9.3
5.4
10.9
9.8
8.4
12.7
11.7
9.3
7.1
10.1
10.4
10.2
11.7
10.5
9.9
11.5
10.2
9.9
11.6
11.4
7.6
5.5
7.6
5.6
8.8
9.0
12.5
13.6
8.0
6.1
6.2
4.4
7.7
8.8
8.3
9.9
10.6
9.7
10.0
10.4
10.0.
9.8
11.3
10.8
1ST HALF 1979
QUARTERLY:
-3.9
-J.0
4.9
12.6
2.7
-0.6
5.2
6.3
4.0
5.5
6.9
9.4
4TH QTR. 1978
0.5
2.4
7.3
12.7
0.6
-1.o
4.7
7.1
7.7
8.7
8.4
10.9
1ST QTR. 1979
2ND QTR. 1979
3RD QTR. 1979
QUARTERLY-AV:
-4.4
-3.9
10.3
-5.7
-8.2
11.5
4.2
4.7
12.4
13.2
11.9
15.2
-2.4
11.1
9.4
-5.2
7.2
8.0
1.7
11.3
12.2
4.6
9.2
10.9
2.5
4.4
12.4
5.0
5.1
11.1
b.2
6.8
9.9
8.5
9.1
12.7
4TH QTR. 1978
2.3
4.6
8.4
13.9
4.1
2.7
7.6
1.3
9.3
10.2
9.7
11.1
1ST QTR. 1979
2ND QTR. 1979
3RD QTR. 1979
-2.9
-4.9
6.0
-3.3
-d.8
7.9
5.7
4.0
9.7
13.6
11.2
13.2
-2.1
7.6
9.6
-5.0
3.7
3.2
1.8
8.6
12.3
4.7
7.9
10.5
4.5
3.5
9.2
6.2
4.8
9.0
7.1
6.7
8.5
9.7
8.8
11.3
8.o
5.1
-3.6
-0.1
11.3
-1.2
13.4
-4.9
13.5
8.0
5.7
7.9
16.1
14.1
15.4
8.3
13.5
1.7
-2.0
2.0
12.1
0.8
-4.3
-1.2
12.8
6.4
4.8
2.9
13.3
8.7
6.7
5.6
12.7
5.9
12.9
4.1
13.2
8.3
11.6
6.1
14.1
7.2
10.0
7.9
13.9
8.5
12.7
11.2
6.0
-21.0
1.8
-4.9
-4.9
-1.8
12.0
7.2
11.5
2.2
-20.6
1.3
-2.9
-30.6
8.9
20.0
10.0
4.1
8.6
-0.5
4.6
4.9
3.1
6.1
11.0
12.1
13.7
18.7
12.9
7.7
13.9
8.8
12.5
13.3
11.6
20.3
-5.0
-3.7
1.3
17.7
0.7
14.8
10.4
6.8
10.9
-7.8
-6.8
-1.0
11.4
-2.1
12.3
10.2
6.5
7.2
-1.1
2.3
3.8
14.1
5.4
14.2
12.9
11.0
12.2
2.9
4.8
6.2
10.5
4.9
11.9
11.4
10.0
11.2
3.8
4.1
-0.4
7.7
-0.5
6.0
11.5
5.o
5.7
3.5
7.0
1.3
7.1
10.6
10.4
12.0
6.5
6.1
6.1
9.2
3.1
8.0
9.5
8.7
11.2
9.0
8.4
7.9
11.0
5.7
10.4
12.1
11.6
14.0
2/
SEMI-ANNUALLY:
------------1ST HALF 1978
2ND HALF 1978
I
I
MONTHLY:
1978--SEPT.
OCT.
NOV.
DEC.
1979--JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT. P
BASED ON DATA ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS.
1/
BASED ON QUARTERLY AVERAGE DATA.
2/
P - PRELIMINARY
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
.; '
13
1.
OCT. 26, 1979
COMPONENTS OF MONEY STOCK AND RELATED MEASURES
Time and Savings Deposits
Currency
Period
Demand
Deposits
Other Than CD's
CD's
Total
Total
Savings
Other
Other
Short Term Private
Savings
U S.Gov't Short-term
Bondsil
Assets
Securities
jI
1./
12
10
11
15.4
14.0
10.2
17.8
19.5
15.0
6.9
6.6
5.4
7.1
12.6
8.9
12.1
13.5
46.7
42.6
19.
8.5
11.5
17.0
12.0
6.3
12.5
4.3
4.9
50.9
33.9
17.4
-1.1
8.2
4.5
0.7
39.5
62.2
-5.i
18.1
36.6
10.7
7.7
4.0
(3.2
69.3
4.6
11.5
14.0
-9.5
0.2
5.5
15.6
19.4
19.9
v.9
-57.0
15.1
5.9
8.2
1.5
9.6
20.5
0.0
0.0
0.5
36.1
41.7
-2.7
54.9
51.5
60.3
12.3
10.2
0.2
18.2
25.0
11.8
10.1
4.0
7.3
-6.2
7.5
9.1
8.4
1.2
9.0
4.5
9.4
13.5
-9.6
-3.1
5.5
15.6
18.5
19.2
29.9
-41.0
-17.7
9.6
6.7
7.5
0.8
8.3
19.3
1.5
0.J
0.0
29.2
46.4
8.0
66.9
49.2
58.3
12.i
-O.)
-5.9
-1.4
12.5
8.5
21.7
6.3
12.2
10.0
9.4
3.5
-0.5
-8.5
-7.0
13.9
18.5
23.7
11.2
12.3
1.4
92.1
15./
13.5
12.5
9.8
9.5
16.3
9.2
4.6
9.1
4.5
4.5
3.0
4.5
39.9
-11.4
-14.4
45.3
11.7
41.3
75.0
31.1
28./
-4.5
1.5
46.4
9.7
19.2
-1.5
-6.8
9.6
19.1
58.2
0.0
-36.4
16.0
8.9
55.5
0.0
6.8
5.5
-48.5
38.2
0.0
4.5
3.9
-55.6
27.5
17.8
0.0
-75.5
8.1
-1.2
0.0
24.2
7.9
-2.8
11.7
21.5
0.0
7.2
17.0
4.7
1.5
14.8
30.7
9.2
AVERAGING END OF CURRENT MONTH AND END OF
61.9
53.5
42.3
44.5
50.1
53.8
55.9
58.6
57.9
3
4
9.5
9.3
10.0
4.6
7.4
6.1
8.1
11.4
i2.4
15.0
1/.2
9.4
25.0
11.1
2.2
7.5
11.4
15.6
-23.3
12.8
32.8
1ST HALF 1978
2NU HALF 1978
9.3
13.2
7.6
4.5
12.2
12.0
7.6
10.7
2.9
1.5
11.7
18.4
1ST HALF 1979
8.7
0.0
4.8
7.0
4TH QTR. 1978
9.7
-2.7
11.9
7.7
1ST QTR. 1979
2ND QTR. 1979
3RD QTR. 1979
7.8
8.5
13.0
-6.4
12.3
8.1
5.4
0.5
14.1
4TH QTR. 1978
10.t
1.7
1ST QTR. 1979
2ND QTR. 1979
3RD QTR. 1979
9.1
3.1
11.1
16.6
7.6
10.0
11.2
2/
ANNUALLY:
1976
1977
1978
Credit
Union
Shares -1/
9
7
8
6
5
(Per cent annual rates of growth)
2
1
Mutual
Savings
Bank &
S&L
Shares 1/
2/
SEMI-ANNUALLy:
QUARTERLY:
QUARTERLY-AV:
MONTHLY:
1978-DEPT.
OCT.
NOV.
DEC.
12.8
-11.6
1.6
9.0
8.6
-10.0
1979--JAN.
20.0
-12.0
6.5
8.6
-8.3
3.6
FEB.
F
13.6
-4.9
5.6
-1.4
-0.9
MAR.
6.1
19.8
0.0
11.8
2.1
21.3
9.7
APR.
19.9
-7.2
-1.4
8.7
-1.4
MAY
6.0
17.6
7.6
13.8
0.8
16.8
JUNE
9.5
18.1
v.4
14.6
12.2
10.3
10.o
JULY
19.4
6.6
14.6
13.7
4.0
AUG.
L4.1
21-2_
).5
13_.
1 5-1
I 19
9.8
&FPI P
1/ 6ROWTH RATES ARE BASED ON ESTIMATED MONTHLY AVERAGE LEVELS DERIVED 6Y
PREVIOUS MONTH REPORTED DATA.
2/ BASED ON QUARTERLY AVERAGE DATA.
P - PRELIMINARY.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Removal Notice
The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to internal or confidential information.
Citation Information
Document Type: FOMC
Citations:
Number of Pages Removed: 3
Confidential: Bank Credit, All Commercial Banks, undated.
Confidential (FR): Class II-FOMC: Bank Reserves, October 26, 1979.
Strictly Confidential (FR): Class II-FOMC: Selected Interest Rates: Percent, October 26,
1979.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
1110
CHANGES IN REAL GNP AND SELCTED COMPONENTS
(Percent Change from Preceding Period; Compound Annual Rates
Based on Seasonally Adjusted Data)
1977
QIV
QI
QII
1978
QIII
QIV
QI
1979
QII
QIII(p)
2.2
3.9
4.4
7.4
1.9
.4
.8
1.0
8.3
8.7
10.7
7.9
3.5
4.6
4.4
4.1
5.6
5.7
6.7
6.9
1.1
1.1
1.8
.4
-2.3
-3.9
-4.1
-2.9
2.4
4.8
6.0
3.7
Personal consumption expenditures
Durable goods
Motor vehicles and parts
Other
Nondurable goods
Food and beverages
Other
Services
8.2
12.7
9.8
15.0
9.9
5.6
14.2
5.3
.8
-8.3
-7.1
-9.4
-3.2
-2.1
-4.1
7.9
5.6
26.6
41.5
16.5
2.6
-5.4
10.8
1.4
4.8
-.7
-15.1
11.6
6.3
2.7
10.0
5.5
6.8
13.0
8.6
16.4
8.6
4.9
12.2
3.2
.6
-5.0
1.9
-9.6
-4.9
-3.3
-5.1
7.1
-2.9
-13.6
-36.6
7.1
-4.5
-1.2
-7.5
2.5
4.3
6.2
.0
10.4
2.9
3.9
2.0
4.9
Gross private domestic investment
Residential investment
Business fixed investment
Structures
Producers' durable equipment
-6.9
5.3
2.7
2.6
2.8
12.3
-4.7
4.6
.1
6.6
15.7
11.0
23.2
42.2
15.6
-5.0
-4.9
3.9
12.3
.2
6.6
-1.1
11.3
12.7
10.7
-.5
-14.3
4.8
-5.6
10.1
8.5
-7.2
-.8
19.0
-8.9
-12.9
-4.7
3.6
5.7
2.6
-12.4
20.0
14.9
18.4
38.2
6.5
10.2
7.0
7.1
10.2
11.5
-3.8
-3.1
12.1
24.1
1.0
1.8
-.1
3.0
-1.2
-7.4
2.7
.9
-12.3
9.3
5.0
8.2
3.3
1.8
3.2
1.0
-1.8
7.2
-6.6
-3.3
-11.3
1.6
.2
-2.0
1.5
2.3
2.7
1.8
2.8
9.2
11.0
3.9
4.5
6.4
6.6
1.0
1.7
-2.5
-2.8
2.8
3.1
-5.6
5.2
-.9
-3.4
-.2
.3
5.8
-8.1
Gross National Product
Final purchases
Private
Excluding net exports
Exports of goods and services
Imports of goods and services
Government purchases
Federal
State and local
MEMO:
Cross Business Product
Nonfarm
Net change in Business Inventory
change (1972 $bil)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
OCT g 9 1979
INDUSTRIAL PRODUCTION
(Percentage changes)
FINAL PRODUCTS
•
Total
Index
Total
Consumer
Goods
Business
Equipment
Defense
and Space
Equipment
1968
1969
1970
1971
1972
6.3
4.5
-3.0
1.7
9.2
6.2
3.2
-3.9
.9
8.9
5.9
3.7
-.7
5.2
8.5
5.5
6.6
-4.9
-2.7
13.4
8.2
-3.9
-14.9
-10.8
1.3
1973
1974
1975
1976
1977
1978
8.4
-.4
-8.9
10.8
5.9
5.7
7.5
.6
-5.1
7.5
6.5
4.6
5.7
-9.0
-3.8
10.6
6.0
2.6
13.7
6.1
-10.0
5.6
9.2
8.5
1.9
1.2
-2.9
-.3
1.9
6.4
••••••••••10........•••••••••••1.•
1978:QI
QII
QIII
QIV
1979:QI
QII
QIIIp
OIV
•
Quarterly Changes At Compound Annual Rate
1.4
12.8
7.9
7.8
.9
12.1
6.7
4.2
-3.5
11.5
3.0
2.4
7.3
13.1
11.0
6.3
10.3
13.8
14.9
10.4
4.0
-.8
.8
4.2
-.3
-.5
1.1
-1.8
-3.1
9.5
2.9
2.6
10.6
.0
4.4
----------- Monthly Changes Not At Annual Rate
1978:July
Aug.
Sept.
Oct.
Nov.
Dec.
1979:Jan.
Feb.
Mar.
Apr.
May
June
•
NOTE:
July p
Aug. p
Sept.e
Oct.
Nov.
Dec.
.7
.6
.4
.7
.6
.8
.8
.7
.2
.4
.1
.6
.3
.5
.1
.3
.1
.1
1.0
1.1
.9
.6
.1
1.1
2.2
.5
1.3
.3
1.1
1.2
-.2
.3
./,
-1.4
1.1
.1
.0
.5
1.0
-1.9
1.7
-.1
-.6
.6
.9
-2.5
1.9
-.1
.8
.5
1.1
-1.9
1.6
.1
1.1
.0
.5
.0
-.4
-.2
.1
-.9
.5
-.1
-1.2
1.0
-.5
-1.8
1.0
-.1
-.2
.8
1.1
.1
.6
Annual percentage changes are based on averages of unadjusted monthly
indexes. Quarterly percentage changes are based on averages of seasonally
adjusted monthly indexes.
Data were updated
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
OCT 1 6* 1071
INDUSTRIAL PRODUCTION
(Percentage change)
•
Manufacturing
Nondurable
Durable
goods
goods
Utilities
Energy
Materials
Total
1968
1969
1970
1971
1972
6.6
5.5
-2.9
1.9
9.9
1.7
6.4
4.3
-4.1
1.7
6.5
3.8
-7.5
.1
11.0
6.2
5.0
.7
3.8
8.5
3.4
8.2
6.1
4.8
6.8
5.5
5.3
5.3
2.1
4.8
1973
1974
1975
1976
1977
1973
9.5
-1.1
-12.8
14.0
5.2
7.0
9.9
-.3
-10.1
12.0
6.2
6.1
11.8
-1.1
-13.0
11.9
6.3
7.5
5.8
.6
-6.1
12.2
6.1
4.3
4.3
-1.2
1.7
3.8
3.1
3.1
2.5
-2.2
.0
2.9
2.9
1.9
------------Quarterly Changes At Compound Annual Rate-----------1978:QI
QII
QIII
OIV
QII
QIII p
QIV
1.4
15.9
9.9
12.2
.6
12.4
8.3
8.6
-.6
16.2
11.1
10.8
1.6
8.4
5.8
5.7
6.5
.0
7.5
3.7
-8.7
16.2
3.6
6.6
2.3
.3
2.3
4.6
-.8
.3
5.3
-/.4
-2.7
3.5
1.5
4.0
7.8
-2.4
.5
-2.3
-.6
.3
---------------Monthly Changes Not At Annual Rate
1978:July
Aug.
Sept.
Oct.
Nov.
Dec.
.7
.6
.7
1.3
.8
1.1
.9
.6
.7
.7
.6
.9
1.5
.5
.8
1.2
.6
.9
.1
.8
.6
.1
.6
.8
.9
.1
.5
.1
.3
.6
-.1
.3
-.8
1.6
.7
.0
1979:Jan.
Feb.
Mar.
Apr.
May
June
-.8
.1
.7
-1.2
.8
.5
-.3
.5
.8
-1.9
1.5
.1
.0
.3
1.0
-2.7
1.1
.0
-.6
.8
.6
-.8
i7
•
.1
.9
.9
-.4
.2
-.5
-1.4
-.7
-.4
.7
.2
-.8
-.3
.4
-.8
.1
.1
-1.1
.6
-.3
-2.1
1.0
.6
.1
.2
1.0
.2
.4
.1
.5
.0
July p
Aug. p
Sept.e
Oct.
Dec.
111/1
Annual percentage changes are based on averages of unadjusted monthly indexes.
Quarterly percentage changes are based on averages of seasonally adjusted
monthly indexes.
Data were updated
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
OCT 1
LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
(Household Data, Seasonally Adjusted)
•
Total
Labor
Civilian
Force
Civilian
EmployParticiLabor
ment
pation Rate
Force
Thousands
Employment Population
Ratio 1/
Insured
Insured
Unemploy- Unemploy:;UnemplR
ment,,
ment
Unemployment-i
Rate'
Rate
ment
Thousands
---Percent---
1968
1969
1970
1971
1972
78,737
80,734
82,715
84,113
86,542
59.6
60.1
60.4
60.2
60.4
75,920
77,902
78,627
79,120
81,702
57.5
58.0
57.4
56.6
57.0
2,817
2,832
4,088
4,993
4,840
3.6
3.5
4.9
5.9
5.6
2.2
2.1
3.4
4.1
3.5
1,111
1,101
1,805
2,150
1,848
1973
1974
1975
1976
1977
1978
88,714
91,011
92,613
94,773
97,401
100,420
60.8
61.2
61.2
61.6
62.3
63.2
84,409
85,935
84,783
87,485
90,546
94,373
57.3
57.8
56.0
56.8
57.9
59.4
4,304
5,076
7,830
7,288
6,855
6,047
4.9
5.6
8.5
7.7
7.0
6.0
2.7
3.6
6.1
4.6
3.9
3.3
1,632
2,262
3,986
2,991
2,473
2,334
1978:01
QII
QII1
QIV
99,263
100,127
100,753
101,524
62.8
63.1
63.3
63.5
93,084
94,099
94,726
95,616
58.9
59.3
59.5
59.8
6,179
6,028
6,027
5,908
6.2
6.0
6.0
5.8
3.5
3.1
3.5
3.1
2,427
2,184
2,446
2,280
19/9:QI
QII
QIII
QIV
102,475
102,295
103,202
63.8
63.5
63.8
96,596
96,415
97,208
60.2
59.8
60.1
5,878
5,880
5,994
5.7
5.7
5.8
3.0
2.9
3.0
2,346
2,348
2,496
1978:July
Aug.
Sept.
Oct.
Nov.
Dec.
100,622
100,663
100,974
101,077
101,623
101,867
63.3
63.2
63.3
63.3
63.6
63.6
94,446
94,723
95,010
95,241
95,751
95,855
59.4
59.5
59.6
59.6
59.9
59.9
6,176
5,940
5,964
5,836
5,877
6,012
6.1
5.9
5.9
5.8
5.8
5.9
3.4
3.7
3.4
3.2
3.0
3.1
2,377
2,583
2,377
2,342
2,184
2,315
1979:Jan.
Feb.
Mar.
Apr.
May
June
102,183
102,527
102,714
102,111
102,247
102,528
63.7
63.9
63.9
63.5
63.4
63.5
96,300
96,647
96,842
96,174
96,313
96,754
60.1
60.2
60.7
59.8
59.8
59.9
5,883
5,881
5,871
5,937
5,929
5,774
5.8
5.7
5.7
5.8
5.8
5.6
3.1
3.0
3.0
3.0
3.0
2.8
2,406
2,310
2,317
2,436
2,339
2,268
July 103,059
Aug. 103,049
Sept. 103,498
Oct.
63.8
63.7
63.9
97,210
96,900
97,513
60.2
59.9
60.2
5,848
6,149
5,985
5.7
6.0
5.8
2.9
3.1
3.0
2,388
2,532
2,519
1110 Nov.
Dec.
Annuals are not seasonally adjusted data.
ion.
1/ Ratio of civilian employment to civilian noninstitutional populat
is the Census survey
period
ce
referen
2/ Data cover only regular state programs. Monthly
week; quarterly data are averages of monthly.
Data were updated
OCT 1 1 1979
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
SELECTED UNEMPLOYMENT RATES
(Percent, Seasonally Adjusted)
•
Total
Both Sexes
16-19 20-24
Males
25+
Females
25+
Married
Men
Female
Household
Heads
White
Black
and
Other Races
1968
1969
1970
1971
1972
3.6
3.5
4.9
5.9
5.6
12.7
12.2
15.2
16.9
16.2
5.8
5.7
8.2
10.0
9.3
1.3
1.7
2.8
3.5
3.1
3.2
3.2
4.1
4.9
4.6
1.6
1.5
2.6
3.2
2.8
4.4
4.4
5.4
7.3
7.2
3.2
3.1
4.5
5.4
5.0
6.7
6.4
8.2
9.9
10.0
1973
1974
1975
1976
1977
1978
4.9
5.6
8.5
7.7
7.0
6.0
14.5
16.0
19.9
19.0
17.7
16.3
7.8
9.0
13.6
12.0
10.9
9.5
2.5
3.0
5.5
4.8
4.2
3.3
4.0
4.6
7.0
6.4
6.0
5.1
2.3
2.7
5.1
4.2
3.6
2.8
7.0
7.0
10.0
10.0
9.3
8.5
4.3
5.0
7.8
7.0
6.2
5.2
8.9
9.9
13.9
13.1
13.1
11.9
1977:QI
QI
QIII
QIV
7.4
7.2
6.9
6.6
18.5
18.3
17.6
16.6
11.5
11.0
10.8
10.3
4.6
4.2
4.0
3.9
6.2
6.1
6.0
5.3
4.0
3.6
3.4
3.3
9.6
9.3
9.7
8.8
6.7
6.4
6.0
5.7
12.9
12.9
13.5
13.2
Illi978:QI
QII
QIII
QIV
6.2
6.0
6.0
5.8
16.9
16.1
16.1
16.3
10.3
9.5
9.4
9.0
3.5
3.3
3.3
3.2
5.0
5.1
5.2
4.9
3.0
2.8
2.7
2.5
8.2
9.4
8.6
7.7
5.4
5.2
5.2
5.1
12.4
12.1
11.7
11.5
1979:QI
QII
QIII
QIV
5.7
5.7
5.8
15.8
16.2
16.1
8.7
8.8
9.2
3.2
3.2
3.4
4.9
4.9
4.8
2.6
2.6
2.9
8.1
8.8
7.9
5.0
4.9
5.1
11.4
11.6
10.8
1973:July
Aug.
Sept.
Oct.
Nov.
Dec.
6.1
5.9
5.9
5.3
5.8
5.9
16.3
15.7
16.3
16.2
16.2
16.5
9.9
9.0
9.3
8.6
9.0
9.3
3.3
3.3
3.3
3.3
3.1
3.2
5.4
5.2
4.9
4.9
4.9
5.0
2.7
2.8
2.6
2.6
2.4
2.5
9.8
8.0
8.0
7.5
7.7
7.7
5.2
5.2
5.2
5.1
5.0
5.2
12.3
11.5
11.3
11.3
11.7
11.5
1979:Jan.
Feb.
Mar.
Apr.
May
June
5.8
5.7
5.7
5.8
5.8
5.6
15.7
16.1
15.5
16.5
16.8
15.3
8.6
8.6
8.8
8.5
8.9
8.9
3.2
3.2
3.2
3.3
3.1
3.1
5.0
4.9
4.8
4.9
5.0
4.8
2.6
2.6
2.6
2.7
2.5
2.6
7.8
8.3
8.3
8.4
8.9
9.1
5.1
4.9
5.0
4.9
5.0
4.9
11.2
11.9
11.2
11.8
11.6
11.3
5.7
6.0
5.8
15.3
16.5
16.4
9.0
9.3
9.2
3.3
3.5
3.4
4.7
5.0
4.6
2.9
3.0
2.8
8.1
7.9
7.6
4.9
5.3
5.1
10.8
11.0
10.6
July
Aug.
Sept.
Oct.
Nov.
Dec.
Annuals are not seasonally adjusted.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Data were updated
OCT ii 1971
CHANGE IN NONFARM EMPLOYMENT
(Establishment Payroll Data, Thousands, Seasonally Adjusted)
•
Total
Strike
Adjusted
Absolute Change from Preceding Period
Nonmanufacturing
Manufacturing
Excluding
Strike
Government
Total
Adjusted
Total
1963
1969
1970
1971
1972
2,034
2,487
496
334
2,461
--2,483
562
344
2,395
334
386
-800
-744
528
396
-763
-810
534
1,760
2,101
1,296
1,078
1,933
1,312
1,745
937
731
1,480
1973
1974
1975
1976
1977
1978
3,115
1,475
-1,320
2,437
3,041
4,023
3,055
1,508
-1,331
2,444
3,039
4,028
1,003
-77
-1,754
674
685
794
983
-56
-1,771
699
671
732
2,112
1,552
434
1,763
2,356
3,229
1,714
1,114
-82
1,573
2,148
2,832
940
1,458
607
933
977
1,306
645
896
283
190
67
275
241
131
71
286
657
1,268
540
658
535
1,109
568
699
(9:QI
QII
Quip
QIV
925
629
408
929
662
398
257
44
-54
252
49
-41
668
535
462
645
480
413
1978:July
Aug.
Sept.
Oct.
Nov.
Dec.
96
194
152
392
416
293
121
205
169
357
397
283
17
..
'
35
122
139
109
17
5
47
136
120
111
79
192
117
270
277
184
102
214
163
276
273
184
1979:Jan.
Feb.
Mar.
Apr.
May
June
300
267
339
-3
362
228
326
252
334
53
345
216
77
67
48
-7
-7
4
78
71
38
-6
8
2
223
200
291
4
369
224
218
182
276
-50
335
185
87
5
135
74
34
127
16
-117
24
9
-72
-17
71
122
111
73
88
133
1973:QI
QII
QIII
QIV
11111
July
Aug. p
Sept.p
Oct.
Nov.
Dec.
nuals are not seasonally adjusted.
111/
Data revised 1974 to date
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Data were updated
OCT 1 1 1979
PERSONAL INCOME
(Based on seasonally adjusted annual rate data)
1977
1978
QI
QII
1979
August
QIII
Sept.
- - Average monthly change, in billions of dollars - $13.9
12.6
1.2
$17.8
17.1
.7
Wage and salary disbursements
Private
Manufacturing
8.4
7.0
2.5
11.5
10.1
3.2
Other income
Transfer payments
6.0
1.2
7.1
1.5
Total personal income
Nonagricultural income
Agricultural income
$15.1 $11.0
11.4
15.3
-.4
-.2
$16.7
18.5
-1.8
$11.1
13.2
-2.1
$12.1
14.0
-1.9
11.8
10.8
3:5
6.1
4.9
.5
8.5
7.6
1.0
5.7
4.3
-1.8
10.5
9.9
2.6
5.6
1.8
5.2
1.8
8.7
6.3
5.6
2.8
2.2
2.3
- - Percentage change, compound annual rates 1/ 1 personal income
rrent dollars
1110
onstant dollars 2/
Wage and salary disbursements
Current dollars
Constant dollars 2/
1/
2/
11.5
4.5
12.9
3.6
11.4
.4
8.9
-4.2
11.2
-1.5
6.9
-5.7
7.5
-5.5
11.2
4.2
12.8
3.5
12.7
1.5
8.0
-4.9
8.4
-4.0
5.6
-7.0
10.2
-2.8
ing
Changes over a period longer than one quarter are from final quarter of preced
rates,
annual
at
s
change
t
percen
y
Monthl
period to final quarter of period indicated.
not compounded.
Deflated by the CPI for all urban consumers, seasonally adjusted.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
CHANGES IN RETAIL SALES
(Percent; Eased on Seasonally Adjusted Data)
•
Total
less auto
& bldg.
Total
I/
mat.
grouts
Current $ Constant $
1968
1969
1970
1971
1972
10.7
6.9
6.3
10.3
10.5
6.2
3.0
2.3
6.4
7.4
1973
1974
1975
1976
1977
1978
12.1
6.6
9.0
12.0
10.5
10.3
5.7
-4.2
.9
6.4
5.2
3.7
2.2
3.1
1.3
2.0
.8
4.1
2.5
4.2
-1.2
1.9
.9
2.4
1977:QIII
QIV
111179:Q1
QII
QIII p
1978:Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
1979:jan.
Feb.
Mar.
Apr.
May
June
•
July
Aug.
Sept. a
Durable
Goods
Stores
Nondurable
Goods
Stores
2/
GAF
14.6
6.8
.5
18.0
15.2
9.0
6.9
8.9
7.0
8.4
10.3
6.5
4.9
9.5
10.9
11.4
14.3
10.4
-1.5
8.5
9.1
19.6
9.1
14.3
8.8
12.1
10.1
Quarter to Quarter
2.8
1.9
3.4
3.1
11.0
10.6
9.3
8.6
8.6
9.4
11.3
19.0
-5.5
8.7
9.3
9.7
1.9
2.9
3.5
3.7
-1.0
6.9
3.3
5.7
1.8
2.7
2.1
3.4
-1.1
5.3
2.6
3.2
3.6
5.3
.1
1.4
1.5
.6
.6
.5
-3.4
1.5
1.8
2.3
1.7
.2
9.5
7.1
8.8
7.0
9.3
1.3
3.3
2.6
4.0
1.91.6
-2.7
2.4
-2.1
.5
4.2
3.8
n.a.
3.8
Month to Month
-.6
-2.0
-2.9
-.9
.9
2.1
1.8
1.6
1.4
2.7
1.4
1.9
1.0
.8
3.7
1.7
.5
.9
-.2
.6
.5
.7
1.0
.1
.4
1.2
1.2 .8
1.5
1.2
.5
1.7
.8
.3
2.2
1.0
.4
1.6
1.2
1.3
1.7
1.1
.0
1.2
.5
.7
1.1
.5
.7
1.2
1.3
.9
2.1
1.2
.4
2.5
1.1
2.3
2.2
.8
-.1
.4
1.3
-.9
.8
-.2
-1.4
-.8
.4
-1.9
.2
-.9
-.9
1.2
1.0
.3
1.0
1.0
.3
-.9
1.7
-3.3
.5
-1.7
-.3
1.1
1.1
.3
.9
.6
2.5
-4.4
3.4
-1.2
2.8
-.8
.8
3.1
2.2
.5
2.2
n.a.
.9
1.9
1.9
.6
5.6
2.4
.9
1.9
2.1
2.6
3.3
1
.-
IT BCD series 59.
2/ Excludes mail order houses.
NOTE: Constant dollar data for latest two months are based on latest available current
https://fraser.stlouisfed.org
dollar data and may not agree with those published in BCD as series number 59._
Federal Reserve Bank of St. Louis
AUTOMOBILE PRODUCTION AND SALES
Seasonally adjusted
Sales
U.S.
Production
Total:
U.S. &
Foreign
Domestic-Type Models11
Foreign
Models
Total
Standard
Interned
Compact
SubCompact
1968
1969
1970
1971
1972
3.8
8.2
6.5
8.6
8.8
9.6
9.6
8.4
10.3
10.9
1.0
1.1
1.3
1.6
1.6
8.6
8.5
7.1
8.7
9.3
5.3
4.0
4.7
4.9
2.2
1.8
2.0
2.1
1.4
.9
1973
1974
1975
1976
1977
1978
9.7
7.3
6.7
8.5
9.2
9.1
11.4
8.8
8.7
10.1
11.2
11.3
1.7
1.4
1.6
1.5
2.1
2.0
9.7
7.4
7.1
8.6
9.1
9.3
4.7
3.1
1.9
2.4
2.8
2.7
2.2
1.8
2.1
2.8
3.0
3.1
1.7
1.8
2.4
2.8
2.3
2.4
1.1
.8
.7
.6
1.0
1.2
--
Annual Rates, Millions of Units
8.5
9.5
9.2
9.5
10.8
12.1
11.2
11.1
2.0
2.1
2.0
2.0
8.8
10.0
9.2
9.1
2.6
2.9
2.5
2.7
2.8
3.3
3.2
2.9
2.3
2.6
2.4
2.2
1.1
1.2
1.1
1.3
9.0
8.8
8.1
11.5
10.6
10.8
2.4
2.6
2.3
9.1
8.0
8.5
2.7
1.9
2.2
2.7
2.2
2.7
9.0
2.2
2.2
1.7
1.7
1.3
1973:July
Aug.
Sept.
Oct.
Nov.
Dec.
9.4
9.4
8.9
9.5
9.7
9.3
10.9
11.9
10.6
11.2
10.9
11.1
1.9
2.1
1.9
2.0
2.1
1.9
9.0
9.8
8.7
9.2
8.8
9.2
2.6
2.7
2.2
2.5
2.7
9.9
3.1
3.5
3.0
3.1
2.9
2.8
2.3
2.5
2.5
2.4
2.1
2.1
1.1
1.1
1.1
1.2
1.2
1.3
1979:Jan.
Feb.
Mar.
Apr.
May
June
8.9
8.3
9.4
7.9
9.4
9.1
11.0
11.4
12.3
11.4
11.0
9.5
2.1
9.3
2.9
2.7
2.9
2.4
8.9
9.0
9.5
8.7
8.2
7.2
2.8
2.7
2.6
2.2
1.9
1.6
2.8
2.6
2.6
9.4
2.2
9.0
1.9
2.0
2.2
2.3
2.3
2.0
1.4
1.8
2.0
1.8
1.7
1.5
8.8
7.5
7.9
10.6
11.0
10.7
2.5
2.2
2.2
8.1
8.8
8.5
2.0
9.5
2.2
2.4
2.9
2.7
2.1
2.1
2.5
1.7
1.2
1.1
1973:QI
QII
QIII
QIV
July
Aug.
..41e Sept.
'1. Oct.
Nov.
Dec.
Size classification is based on several factors, one of which is wheelbase measurement
with some overlapping between groups: standard 114.4 inches and up; intermediates
108.1-114.9 inches; compact 100-109.9.inches; and subcompacts 94.3-97 inches.
*Sales of new, domestic-model automobiles in the first 10 days of October are estimated to
have been at a 6.5 million unit annual rate; the lowest rate in any 10-day period since
May 1975. Sales for these cars in the Oct. 11-20 period are estimated to have been at an
8.1 million unit annual rate.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
G page 3
BUILDING PERMITS, HOUSING STARTS AND MOBILE
HOME SHIPIIENTS: PRIVATE DWELLING UNITS
(Thousands, seasonally adjusted annual rates)
Permits Issued 1/
Total Single- Multifamily
family
Housing Starts
Total Single- Multifamily
family
Mobile Home
Shipments 2/
Housing Starts
plus mobile
home
shipments 2/
1968
1969
1970
1971
1972
1,353
1,324
1,351
1,925
2,219
695
626
647
906
1,033
659
698
705
1,018
1,186
1,508
1,467
1,434
2,052
2,357
899
811
813
1,151
1,309
608
656
621
901
1,048
313
413
401
497
576
1,826
1,380
1,835
2,549
2,933
1973
1974
1975
1976
1977
1978
1,820
1,074
927
1,297
1,677
1,801
882
644
669
894
1,126
1,183
937
431
278
403
551
618
2,045
1,338
1,161
1,533
1,987
2,019
1,132
888
892
1,162
1,451
1,433
913
450
269
376
536
587
567
329
213
246
277
276
2,612
1,667
1,374
1,784
2,264
2,295
1973:QI
QII
' QIII
QIV
1,723
1,884
1,773
1,817
1,131
1,232
1,151
1,216
592
653
622
601
1,805
2,102
2,044
2,073
1,291
1,461
1,439
1,492
513
641
605
586
289
266
266
290
2,094
2,368
2,310
2,368
1,496
1,591
1,638
952
1,032
1,021
544
560
617
1,615
1,834
1,824
1,119
1,264
1,236
496
570
588
284
274
n.a.
1,900
2,108
n.a.
1973:July
Aug.
Sept.
Oct.
Nov.
Dec.
1,765
1,716
1,838
1,835
1,789
1,327
1,140
1,129
1,184
1,209
1,172
1,268
625
587
654
626
617
559
2,104
2,004
2,024
2,054
2,107
2,074
1,455
1,431
1,432
1,436
1,502
1,539
649
573
592
618
605
535
255
267
275
236
280
303
2,359
2,271
2,299
2,340
2,387
2,377
1979:Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
1,442
1,425
1,621
1,517
1,618
1,639
1,528
1,654
1,733
920
881
1,056
1,036
1,047
1,012
1,001
1,030
1,032
522
544
565
481
571
627
527
624
701
1,679
1,331
1,786
1,745
1,835
1,923
1,786
1,806
1,881
1,139
953
1,266
1,278
1,226
1,288
1,220
1,240
1,249
540
428
520
467
609
635
566
566
632
311
272
270
273
271
279
282
277
n.a.
1,990
1,653
2,056
2,018
2,106
2,202
2,068
2,083
n.a.
1963-66 based on 12,000 permit-issuing places, 1967-71, 13,000 permit-issuing places,
1972, 14,000 permit-issuing places, April 1979 to date, 16,000 permit-issuing places.
' New mobile homes shipped by manufacturers for private domestic use only.
1/
_
111/1
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Data were updated
OCT 2
BUSINESS (MFG. & TRADE) INVENTORIES: CHANGE IN BOOK VALUE
(Millions of dollars; seasonally adjusted annual rates)
End of
period
Total
mfg. &
trade
1968
1969
1970
1971
1972
10,831
13,675
8,496
10,226
14,598
5,958
7,593
3,457
1,011
5,619
4,873
6,082
5,039
9,216
8,979
1,227
2,510
3,689
3,020
3,963
3,646
3,572
1,350
6,196
5,016
7,348
9,117
3,541
5,605
8,810
3,484
4,558
4,955
4,621
5,787
1973
1974
1975
1976
1977
1978
31,002
51,356
-484
25,701
27,363
41,531
16,376
33,243
263
11,973
9,825
18,060
14,626
18,113
-747
13,723
17,538
23,471
6,468
10,283
-1,424
6,194
6,691
12,773
8,158
7,830
677
7,529
10,847
.10,698
17,989
31,988
939
15,386
18,221
26,513
13,013
19,368
-1,422
10,315
9,143
15,018
1978:0I
WI
QIII
QIV
45,232
42,632
36,648
41,612
16,340
20,804
17,988
17,108
28,892
21,828
18,660
24,504
18,524
10,248
7,688
14,632
10,368
11,580
10,972
9,872
27,568
26,244
23,700
28,540
17,660
16,392
12,948
13,072
49,052
56,292
30,192
35,000
18,860
21,292
13,228
4,668
5,632
16,624
35,804
39,843
13,244
16,444
1978:July
Aug.
Sept.
Oct.
Nov.
Dec.
35,796
42,312
31,836
38,124
52,896
33,816
18,192
19,548
16,224
8,832
27,636
14,856
17,604
22,764
15,612
29,292
25,260
18,960
6,636
7,128
9,300
18,144
10,812
14,940
10,968
15,636
6,312
11,148
14,448
4,020
23,460
27,576
20,064
23,484
35,196
26,940
12,312
14,760
11,772
14,628
17,700
6,888
1979:Jan.
Feb.
Mar.
Apr.
May
June
54,720
43,584
48,852
67,644
47,688
53,544
34,404
32,808
23,364
43,068
22,884
39,048
20,316
10,776
25,488
24,576
24,804
14,496
9,264
17,544
12,876
10,740
3,408
-144
11,052
-6,768 •
12,612
13,836
21,396
14,640
43,723
43,716
19,968
48,468
40,272
30,804
10,980
-132
28,884
19,176
7,416
22,740
93,708
41,004
31,212
29,040
62,496
11,964
34,788
9,060
27,708
2,904
53,088
25,560
40,620
15,444
July r
Aug. p
Sept.
Oct.
Nov.
Dec.
Type of holder
ManufacTrade
turin
Total
Vnolesale
Type of product
Durable
Nondurable
Retail
111/1
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Data were updated
OCT 1 5 1979
RATIOS: INVENTORIES TO SHIPMENTS
Eased on seasonally adjusted data
End of
Period
Total
Mfg. &
Trade
Maaufacturers
Total
Durable
Nondurable
Total
trade
Automotive
group
Retail Trade
Durable
Nondurable
excl.
goods
auto
stores
1968
1969
1970
1971
1972
1.54
1.56
1.63
1.59
1.51
1.74
1.77
1.90
1.83
1.68
2.06
2.11
2.34
2.23
2.01
1.36
1.36
1.39
1.37
1.29
1.33
1.34
1.36
1.37
1.35
1.52
1.63
1.76
1.69
1.56
2.35
2.50
2.33
2.33
2.27
1.18
1.18
1.17
1.18
1.19
1973
1974
1975
1976
1977
1978
1.45
1.49
1.58
1.49
1.45
1.42
1.59
1.67
1.83
1.66
1.59
1.52
1.90
2.07
2.36
2.07
1.95
1.85
1.22
1.93
1.29
1.23
1.20
1.15
1.31
1.31
1.35
1.32
1.32
1.33
1.59
1.89
1.86
1.64
1.62
1.67
2.36
2.53
2.59
2.51
2.52
2.46
1.18
1.20
1.13
1.11
1.12
1.16
1978:QI
QII
QIII
QIV
1.47
1.43
1.43
1.41
1.57
1.54
1.54
1.50
1.91
1.87
1.88
1.81
1.18
1.15
1.15
1.13
1.37
1.33
1.33
1.32
1.73
1.65
1.66
1.71
2.65
2.51
2.42
2.26
1.15
1.17
1.19
1.17
1.41
1.44
1.49
1.5
1.82
1.94
1.11
1.11
1.33
1.33
1.70
2.01
2.34
2.30
1.14
1.14
1978:July
Aug.
Sept.
Oct.
Nov.
Dec.
1.44
1.41
1.42
1.40
1.40
1.39
1.55
1.51
1.52
1.49
1.49
1.48
1.90
1.84
1.84
1.81
1.80
1.78
1.16
1.14
1.15
1.12
1.13
1.13
1.33
1.32
1.32
1.31
1.31
1.31
1.67
1.63
1.64
1.64
1.65
1.70
2.43
2.41
2.38
2-33
2.25
2.21
1.18
1.18
1.17
1.17
1.17
1.15
1979:Jan.
Feb.
Mar.
Apr.
May
June
1.41
1.41
1.37
1.44
1.40
1.43
1.48
1.50
1.44
1.56
1.48
1.54
1.81
1.82
1.76
1.94
1.34
1.95
1.11
1.12
1.07
1.13
1.07
1.10
1.33
1.33
1.30
1.33
1.31
1.33
1.68
1.70
1.70
1.85
1.96
2.09
2.35
2.38
2.30
2.33
2.28
2.24
1.15
1.12
1.13
1.13
1.13
1.13
1.43
1.43
1.54
1.54
1.95
1.95
1.09
1.09
1.33
1.32
2.16
1.97
2.24
2.20
1.15
1.14
July r
Aug. p
Sept.
Oct.
Nov.
Dec.
al rates are averages of monthly ratios. Quarterly ratios are end quarter invenories to quartErly average monthly Flhipments in he quarter.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Data were updated
OCT 1 5 1979
•
HOURLY EARNINGS INDEX 1/
(Percent change at compound annual rates;
based on seasonally adjusted data) 2/
Total private nonfarm
Manufacturing
Contract construction
Transportation and public
utilities
Total trade
Services
1/
2/
Sept. 77Sept. 78
Sept. 78Sept. 79
8.4
7.9
8.5
7.0
8.2
7.5
8.5
6.6
8.5
7.7
8.5
9.5
7.6
9.0
7.8
7.2
8.6
10.3
7.5
QI
QII
1979
QIII
Aug.
Sept.
8.1
6.9
7.9
9.7
7.6
7.4
6.1
5.5
4.8
7.0
4.5
2.9
5.8
5.4
17.8
6.8
6.7
14.7
7.8
6.2
5.2
6.3
13.0
Excludes the effect of interindustry shifts in employment and fluctuations in
overtime pay in manufacturing.
Monthly percent changes at annual rates, not compounded.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
5, 1979
October
PrIODUCE11 PiliCE INDEXES
PERCENT CHANGE; BASED ON SEASONALLY ADJUSTED INDEXES
alla••••••••••••••
...
........41••••1......••••••••••••••••••MonomMe......a.o.....•maimammaumaaA.••■•••••••,
Stage of Processing Groupings
Period
1 01,11
Relative importance?)
100.00
Consumer
Foods
25.42
Crude Materials
Finished Goods
Excluding Food and Energy
Energy
6 Capital
Consumer
Total
Equipment
7.16
67.44
Intermediate
Materials I,
Nonfood
58.56
41.44
20.0
13.9
23.0
6.7
6.0
7.7
9.0
14.2
-3.4
7.2
25.9
11.6
10.3
5.7
7.8
12.8
18.3
25.6
8.1
7.2
6.9
11.2
14.0
14.3
19.8
25.1
26.6
2.8
21.2
31.0
-7.1
13.9
10.7
14.9
16.9
19.8
29.2
22.0
21.2
1.2
1.0
1.1
1.6
1.0
.8
1.6
1.4
1.5
2 8
3.8
.3
-0.4
-0.2
-1.2
2.1
-.2
1.5
1.6
2.7
2.2
-0.5
2.4
3.2
1.4
.5
2.9
94.58
29.36
38.08
Food
3/
CHANGES OVER YEAR Sept. 77-Sept.78
Sept. 78-Sept.79
I
8.4
11.8
10.2
8.8
3.9
55.9
8.1
8.1
8.4
I
8.4
8.3
7.5
14.8
1
14.9
3/
CHANGES OVER HALF YEAR AT COMPOUND ANNUAL RATE 1977: 1st
2nd
1978: 1st
2nd
'19/9: 1st.
half
half
half
half
half
7.1
6.0
9.5
8.9
10.5
8.2
5.4
14.1
10.0
3.7
16.1
1.7
1.1
15.1
52.4
5.9
6.6
8.8
7.7
9.2
5.8
8.5
8.1
7.9
9.7
5.9
5.3
9.3
7.8
8.6
CHANGES OVER QUARTER AT COMPOUND ANNUAL RATE
1978: I
II
111
IV
1979: 1
8.7
10.3
7.4
10.5
14.3
Ill
15.7
16.8
11.4
4.9
15.3
21.0
-11.1
12.9
-1.0
3.3
8.0
22.7
31.4
76.8
107.5
7.0
10.8
7.8
7.5
10.3
8.0
7.7
6.9
11.8
9.2
6.5
10.0
7.2
10.1
7.1
9.1
7.0
8.8
10.3
9.2
4.9
MONTHLY CHANGES NOT AT ANNUAL RATES
1979: January
February
March
April
May
June
July
August
September
NOTES:
it
2/
3/
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1.3
1.1
1.0
.9
.4
.4
1.1
1.2
1.4
1.8
1.8
1.2
-0.4
-1.5
-1.1
.0
1.2
1.8
2.1
1.5
3.3
4.5
4.9
5.2
6.2
5.8
6.8
1.0
.9
.6
.9
.7
.4
.8
.5
1.0
.7
.7
.7
.7
.3
.8
.9
.7
1.0
.9
.6
1.2
.6
.4
.8
.1
.3
Excludes intermediate materials for food manufacturing and manufactured animal feeds.
December 1978 weights on a stage of processing basis, as a percentage of respective totals for finished goods,
intermediate materials, and crude materials.
Changes are from final month of perceding period to final month of period indicated.
FR 712-G
Rev. 9/79
•
CONSUMER
October 26, 1
PER CENT CHANGES, BASED ON SEASONALLY ADJUSTED INDEXES
2
All Items
ENERGY ITEMS
ALL ITEMS LESS FOOD AND FNLItGl•
I.4 6.:!,oline & 5 Gu-, and
I- (lel Oil u
Electr:city
Food
Lorn ,n r)(1,
6
lota!4/
•
Relative importance4/
0
'I •
1
Period
77
CES - I
100.0
18.2
8.5
5.27
3.4
73.3
7
Total
35.9
8 Appare!
19
1:AF'
s,,rvii
Ennf
t'S7)
4.83.9
37.4
CHANGES OVER YEAR
Sept1977--Sept_1971
Sept1978--Sept197
8.3
10.8
7.0
5.6
9.1
7.9
6.8
2.9
8.8
9.1
12.1
10.0
35.2
49.8
13.5
9.9
8.3
4.0
8.2
11.5
CHANGES OVER HALF YEAR AT COMPOUND ANNUAL RATE -3-/
1978:
1st half
2nd half
9.8
8.5
16.6
7.4
9.1
7.0
4.2
12.2
15.8
.8
8.4
8.7
7.6
7.8
3.1
1.5
8.3
4.1
9.6
9.5
1979:
1st half
2nd half
13.2
12.5
45.5
62.8
19.9
10.2
8.5
3.7
12.7
11.5
.0
6.4
1.5
1.5
6.4
10.2
7.2
1.0
8.9
10.2
10.8
8.3
CHANGES OVER QUARTER AT COMPOUND ANNUAL RATE"
1978:
1979:
„
I
II
III
IV
8.9
10.7
8.5
8.5
14.?
18.3
4.8
10.2
5.8
12.5
8.2
5.8
8.4
12.5
11.9
19.=,
4.c
-2.6
6.3
10.4
9.7
7.7
6.7
8.4
7.2
8.3
I
II
III
13.0
13.4
13.2
17.7
2.5
4.2
24.6
70.0
49.1
32.3
100.2
70.0
10.7
29.9
18.9
9.3
11.2
11.5
9.8
7.3
8.0
7.6
.0
7.2
12.8
10.5
1%2
:
i
.9
.8
.7
.7
.5
.5
.7
.6
.6
.1
.2
1.6
.4
-.1
-.2
-.1
.6
1.2
1.1
1.2
.7
1.4
1.1
.5
.8
.4
.4
.5
1.0
.9
1.0
1.2
.8
1.0
1.2
1.1
MONTHLY CHANGES NOT AT ANNUAL RATES
1979:
January
February
March
April
May
June
July
August
September
.9
1.2
1.0
1.1
1.1
1.0
1.0
1.1
1.1
1.4
1.6
1.1
1.0
.7
.2
.1
.0
.9
1.4
1.5
2.6
3.7
4.2
5.6
4.2
3.2
2.7
1.4
2.1
3.6
5.7
5.2
6.9
5.6
4.6
3.4
.9
.8
.8
.7
2.6
3.3
1.7
1.3
.5
.9
.8
.9
.9
.8
.7
1.0
1.0
NOTES:
ji Includes motor oil, coal and bottled gas; not seasonally adjusted.
2.1 December 1978 weights, in percent.
2/ Changes are from final month of preceding period to final month of period indicated.
*Based on new Consumer Price Index for all urban consumers.
rot seasonall- adlusted.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
FR 712-P
Rev 5/78
•
October 26, 1979
CONSUMER PRICES - II
RECENT CHANGES IN THE CPI AND HOMEOWNERSHIP COMPONENT 1/
(Percent change at compound annual rates; based on seasonally
adjusted data) 2/
Relative
Importance,
Dec. 1978 3/
1977
1978
HI
100.0
6.8
9,p
13.2
11.7
12.1
13.0
23.6
9.2
12.4
17.3
16.7
20.1
16.6
10.2
8.4
11.2
13.1
14.1
18.3
13.8
9.7
11.2
14.7
24.5
21.7
25.6
21.3
All items
Homeownership
Home purchase
Financing, taxes and
insurance
•
Contracted mortgage
interest cost 4/
1979
July
Aug.
Sept.
7.3
n.a.
21.9
28.5
32.1
36.4
29.4
(7.3)
(7.3)
1.9
8.4
9.7
11.2
12.6
13.8
14.0
16.8
20.4
15.5 .
14.3
15.3
1.8
11.0
-5.4
2.2
3.3
8.6
10.5
Property insurance 4/
.6
6.4
7.3
14.5
7.3
8.3
8.0
Maintenance and repairs
3.7
7.2
10.1
9.6
9.9
8.9
11.6
Mortgage int. rates 4/
Home purchase 4/
Property taxes
if
27
3/
4/
Based on CPI for all urban consumers.
Changes are from final month of preceding period to final month of period
indicated; monthly changes are not compounded.
Weight in CPI total. Relative importance weights for the mortgage interest
rate and home purchase components of the mortgage cost index are not additive.
Not seasonally adjusted.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
•
CONSUMER PRICES -
Octcber 26, 1979
PER CENT CHANGES, BASED ON SEASONALLY ADJUSTED INDEXES
Housing
'
Pendd
Relative,rnocrtance.:
r
4
F!iel and
Food and
Beverages
T ,ital
Shelter
19.2
44.3
29.8
100.0
61-iouehoi(::
urnishir.F.s
t', fJperit,of::,
--
()trier Utilities
6.3
8.1
Apparel
and
!Joke e ;)
iranspor t i t 1o n
Medir.at
C. .- ..
5_5
17_8
s_n
8.0
9.3
CHANGES OVER HALF YEAR AT COMPOUND ANNLAL RATE
1978:
1979:
9.8
1st half
2nd half
8.5
16.0
7.4
10.5
9.6
11:4
11.7
10.1
2.2
7.4
7.8
4.1
2.3
5.7
10.0
1st half
13.2
12.4
13.3
15.1
18.1
6.2
5.0
19.4
5.5
9.3
7.4
8.2
1.5
6.5
2.3
2.3
5.0
6.3
9.0
11.1
3.7
7.3
8.7
10.8
12.0
14.3
9.6
6.9
15.5
27.3
15.9
1V1014
)
rilLY CHiifGS NOT Al2 NYOJAL RAT'S54
8.7
14.6
24.4
19.5
9.4
7.7
9.9
.5
1.1
1.1
1.2
2.0
1.8
1.7
1.3
1.5
.4
1.2
1.1
.6
.6
.6
.6
.7
.7
.s
.9
CHANGES OVER QUARTER AT COMPOUND ANNUAL RATE ;
1978:
I
IV
1979:
1979:
I
LI
III
January
February
March
April
May
June
July
August
September
8.9
10.7
8.5
8.5
14.4
17.7
4.9
10.0
13.0
17.6
7.5
4.3
13.4
13.2
.9
1.2
1.0
1.1
1.1
1.0
1.0
1.1
1.1
1.4
1.6
1.0
.9
.7
.2
.1
.0
.9
9.5
11.4
10.5
8.8
.6
1.3
1.0
1.1
1.2
1.3
1.2
1.4
1.2
10.7
12.1
13.0
10.4
.7
1.6
1.1
1.2
1.3
1.2
1.3
1.5
1.3
8.8
11.4
3.7
.7
.8
1.1
.9
2.2
3.0
1.9
1.3
1.7
.7
.5
.5
.6
.4
.3
Also includes entertainment 3nd other goods and services
NOTES:
2.
3/
December 1978 weights, in per cent.
Changes are from final month of preceding period to fina! :nonth of oerihd indicated.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
..„
1.5
7.7
.3
1.5
.5
•
PRODUCTIVITY AND COSTS
(Per cent change from preceding period at compound annual rates;
based on seasonally adjusted data)
1978
OIII
QIV
QI
1979
QII
1976:QIV1977:QIV
1977:QIV1978:QIV
1978:QII
1979:QII
Output per hour
Total private business
Nonfarm business
Manufacturing
Durable
Nondurable
2.6
2.9
6.8
5.3
9.1
.8
1.3
2.0
1.3
3.4
-2.8 -2.4
-3.0 -4.3
-2.3
2.8
-3.1
3.1
-1.0
2.2
1.8
1.6
3.3
2.8
4.2
1.3
1.6
1.9
1.3
3.0
-.5
-.8
2.3
1.6
3.4
9.4
9.1
9.2
8.6
9.3
9.0
9.4
9.3
9.7
7.8
11.4
10.7
10.4
10.4
9.9
9.3
7.8
9.9
9.7
10.8
7.8
8.0
8.4
8.7
7.4
9.7
9.7
9.1
8.8
9.2
9.8
9.2
9.7
9.6
9.4
6.6
6.0
2.2
3.1
.1
8.2
8.0
7.1
8.3
4.2
14.6
14.1
13.0
13.9
11.0
12.0
12.7
6.9
6.5
8.3
5.8
6.3
4.9
5.8
3.1
8.8
8.0
7.1
7.4
6.0
10.3
10.1
7.3
7.9
5.8
Compensation per hour
Total private business
Nonfarm business
Manufacturing
Durable
Nondurable
111111Jnit labor costs
Total private business
Nonfarm business
Manufacturing
Durable
Nondurable
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
CORPORATE PROFITS (NIA BASIS)
(Billions of dollars at seasonally adjusted annual rates)
•
Book Profits
Prof. after
Prof. tax
tax
liabilities
Economic Profits
Corp. prof.
W/IVA & CCA
IVA
1968
1969
1970
1971
1972
85.8
81.4
67.9
77.2
92.1
-3.4
-5.5
-5.1
-5.0
-6.6
3.7
3.5
1.5
.3
2.5
85.6
83.4
71.5
82.0
96.2
39.4
39.7
34.5
37.7
41.5
46.2
43.8
37.0
44.3
54.6
1973
1974
1975
1976
1977
1978
99.1
83.6
95.9
126.8
150.0
167.7
-18.6
-40.4
-12.4
-14.6
-15.2
-25.2
1.9
-2.9
-12.0
-14.5
-12.0
-13.1
115.8
126.9
120.4
156.0
177.1
206.0
48.7
52.4
49.8
63.8
72.6
84.5
67.1
74.5
70.6
92.2
104.5
121.5
1974:QI
QII
QIII
QIV
90.1
86.3
80.1
77.6
-30.4
-37.3
-54.4
-39.6
.2
-1.7
-3.6
-6.7
120.3
125.3
138.2
123.9
49.4
52.5
57.2
50.4
70.9
72.8
81.0
73.5
1975:QI
QII
QIII
QIV
75.0
88.2
110.1
110.3
-16.6
-10.1
-10.6
-12.5
-9.0
-11.5
-13.3
-14.4
100.6
109.8
134.0
137.2
41.4
45.1
55.8
56.9
59.1
64.6
78.1
80.3
1976:QI
QII
QIII
QIV
130.1
125.6
126.9
124.6
-9.4
-15.2
-15.4
-18.6
-15.5
-15.4
-14.4
-12.8
155.0
156.2
156.7
156.1
64.0
64.5
63.8
62.9
91.0
91.6
92.9
93.2
1977:QI
QII
QIII
QIV
137.1
148.9
160.8
153.0
-18.7
-15.9
-8.9
-17.0
-12.6
-11.4
-11.2
-13.0
168.4
176.2
180.9
183.0
69.2
72.5
73.7
75.1
99.2
103.7
107.2
107.9
1978:QI
QII
QIII
QIV
141.2
169.4
175.2
184.8
-23.9
-25.1
-23.0
-28.8
-12.4
-12.6
-13.8
-13.8
177.5
207.2
212.0
227.4
70.8
84.7
87.5
95.1
106.7
122.4
124.6
132.3
1979:QI
QII
QUI p
QIV
178.9
176.6
r.:7.] -)4
-39.9
-36.6
-40.8
-14.5
-14.7
-17.6
233.3
227.9
--
91.3
88.7
142.0
139.3
11111
Note:
111PFR
CCA
Prof. before
tax
.111•••••
.1••••••
IVA is inventory valuation adjustment.
CCA is capital consumption adjustment.
StcS
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
osecJ.; o
oc-obex--
Data were updated
OCT 7
t379
PERCENT CHANGE IN TOTAL PROFITS (NIA BASIS)
(SeasonAlly adjusted aunaal rates)
ECCDOMiC Profits
Corporate Profits
W/IVA & CCA
LI
8.2
-5.1
-16.6
13.7
19.3
Book Profits
Profits Before
Profits After
Tax
Tax
10.7
2.9
-14.3
14.7
17.3
-15.5
19.7
23.3
20.4
7.6
9.6
-15.6
-5.1
14.7
29.6
32.2
13.5
18.3
197816.3
1975:QI
QII
11111
22.9
11.0
I.
13.3
16.3
-32.2
-15.8
-25.8
11.4
17.7
48.0
14.8
11.2
53.3
-32.2
-12.7
91.3
142.3
41.9
121.8
-53.2
42.8
113.6
11,8
93.6
-13.1
4.2
-7.1
62.9
3.1
1.3
-1.5
64.9
2.7
5.8
1.3
46.6
39.1
36.0
-18.0
35.4
19.9
11.1
4.7
28.3
19.4
14.2
2.6
-27.5
107.2
14.4
23.3
-11.5
85.7
9.6
32.4
73.2
7.4
27.1
-12.2
-5.0
10.8
-3.9
QTV
1979:QI
QII r
32.7
ca7. 62
--XQIII(pro.3.)
QIV
Note:
IVA is inventory valuation adjustment.
CCA is capital consumption adjustment.
S't
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
F
yoi ec-Li eny
cloier /cA
SFP 2
1979
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To
Chairman Volcker
From
Joe Coyne
Date
October 26, 1979
Subject:
Here are the pertinent facts for Issues and Answers on Sunday,
October 28:
Program will be broadcast live at noon from ABC-TV New York studio.
Studio is at 7 West 66 Street.
ABC asks that you arrive at the studio at 11:15 a.m. to allow time
for make-up, lighting tests, to say hello and have coffee. (Don't forget to
have the make-up gal put something on your upper lip.)
The interviewers will be Dan Cortz, ABC News Economic Editor and
formerly with Fortune, and Bob Clark, Chief Correspondent for Issues and
Answers. Cortz formerly worked in Washington where he covered economics
on the Hill and at the agencies; thus he is fairly knowledgable.
Peter Bakstansky will meet you at the studio to brief you on any
last minute -developments, etc.
Attached are some materials that might be helpful background:
1.
A transcript of the last appearance by a Fed Chairman on the program.
2.
Our October 6 press release, your ABA speech, your October 17 statement
to the JEC, and the letter sent this week to all member banks on lending
policies.
3.
Transcript of press conference on October 6.
4.
The transcript of Charley Schultze's appearance last Sunday on Meet
the Press.
5.
Transcript of your appearance on McNeil-Lehrer.
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Federal Reserve Bank of St. Louis
-0-
9ctober 24, 1979
CONG
• Mr. STEVENSON. Mr. President, tolay after long and arduous negotiations
vith the House, the Senate. hopefully,
sill settle the amendments in disagree:nent on the HUD-Independent Agencies
.1ppropriations Act, 1980. One of the isAles in disagreement was the NASA
research and development appropriaion. As I understand it. the conference
•onunittee accepted the language of the
fouse report on this bill (H.R. 4394);
lowever, according to a colloquy between
:he chairman of the House Appropriaions Subcommittee (Mr. 13oLaisni and
he chairman of the House Science and
fechnology Committee I Mr. Fuqua) on
September 27 (page H8264 of the CON;RESSIONAL RECORD No. 127), the Ianaiage of the House report is not meant
•co stop efforts on Space Shuttle thrust
iugmentation, and indeed NASA can
ontinue to use funds for design work
dready in progress in this area. Accords
ng to the colloquy. NASA is required only
o touch base with the committee on the
ase of 1980 funds for this purpose in
slew of the fact that the House cut the
ull $15 million for thrust augmentation
;soul the fiscal year 1980 appropriation.
The conference agreement on the
YASA research and development approariation for fiscal year 1980 also rids the
of the House language which would
lave permitted a committee veto of the
_lathe° program and rids the bill of the
>23 million set aside for the Space Shut.1e, some of which was not authorized.
Purther. I understand that the conferlice agreement on the fiscal year 1980
,ppropriation for NASA research and deelopment provides $5 million for a pro:ram on advanced rotorcraft technol)gy—a most important program—and $3
million for additional work on the vasttble cycle engine.
In dollars the conference, therefore,
agreed to a total of $3.807,500.000 for
NASA's research and development program for fiscal year 1980; this is $15 mil:ion less than requested by the administration.
This result. Mr. President, is one that
the National Aeronautics and Space Administration can live with.
The Appropriations Committee Is to
ae commended for Its tenacity in this
:natter. In particular. I want to thank
:he chairman of the subcommittee (Mr.
Paoxasiat) and the ranking minority
Member of the Subcommittee (Mr.
NIA-runts) for their diligence in supporting the Senate's position and bringing
tins fine result to the Senate.•
Mr. PFt0XMIRE. I move the adoption
jf the conference report.
The PRESIDING OFFICER. The question ta on agreeing to the conference
report,.
The report was agreed to.
CONTINUATION OF R(ifs T!N F:
MORNING 1.it.::6INE.sS
Mr: PROXMIRE. Mr. President, I understand that the conference report has
been agreed to and that bitsiness has
been completed.
The PRESIDING OFFICER. the Senator is correct.
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Federal Reserve Bank of St. Louis
SSIO ,AL RECORD -SENATE
ssttOXMIRE. Mr. President, I also
1
understand that the Chair closed morning business a few moments ago. I ask
unanimous consent to be permitted to
speak as if in morning business for not to
exceed 6 minutes.
The PRESIDING OFFICER. Without
objection? Without objection, it is so
ordered.
FIGHT FOR LOWER INTEREST
RATES
Mr. PROXMIRE. Mr. President, one of
the most persistent myths in the country
is that the Federal_Resene is determined, for one reason or another, to push
up interest rates. Many people, including
some distinguished Members of this body,
have said that before the Senate.
The fact is that no one on the Boarof the _ Eederal _Reserve wants high interest rates. They are a sign of the failure of our monetary policy. They are a
source of concern and loss to the bankers. not of gain, as well as lass to the
farmers and the small business people
and others who have to pay those high
interest rates.
Interest rates are not high because
that is the objective of the rederaLliesserve_ Done!. The Board wants urgently
to get them down. But the Board recognizes that the only way to get them
down is to turn inflation around.
To understand the truth of that proposition consider a simple mathematical
proposition. Suppose you have an inflation rate of 15 percent, and the public
expects that 15 percent rate to continue.
Now let us suppose that one way or another you get interest rates down to 10
percent and keep them there. What happens? Answer: The speculators have a
field day with other people's money. You
cannot stop them. How can they resist?
Here is why: A speculator can borrow
a million dollars at 10 percent and invest it for a year. Cost of the money:
100,000. He invests the money, real
estate, commodities, almost. anything
that is rising at the average inflation
rate. With a 15-percent inflation, he enjoys a $150,000 profit. The full cost of
his money was $100,000, so using the
lender's money he has made himself a
nice fat $50,000 profit.
Do you see why an interest rate lower
than the perceived inflation rate is bound
to push up inflation, is bound to push up
prices, is bound to be inflationary? It
%kill do so throush the sheer force of
speculation when the investors perceive
a sure thing, a cannot lose bargain.
In the real world, of course, it does not
work that way, and the distinguished occupant of the chair knows why it does
not.
That is why the 8- or 10- or 12-percent usury laws are such a disaster.
After all you cannot count on the
lender being a complete idiot. And just
as the borrower in the example makes a
tidy $50,000 profit, the lender suffers a
350.000 loss. He lends a million dollars
at 10 percent interest, so at the end of
a year he gets $1,100,000 back, but that
is worth $50.000 less than his original
million dollars in real terms—thanks to
inflation.
S 15073
So what does the lender do? He says,
"Nix. I won't lend. I'll take my million
dollars and I'll put it into commodities
and real estate so that I won't take an
inflation beating."
Now if you think this is all theory,
just consider what has happened in Arkansas and is happening in every other
State that has usury statutes that are
2 percent or less. The lenders will not
end, so the small businessman, the farmer, the home buyer who depends on credit, cannot get any credit, not any. He is
out of business. He is in worse shape. At
least if interest rates are high the borrower has the option of paying the higher
rate or refusing to take the loan. With
the limit on interest rates below the inflation rate, he has no option at all. In
a credit economy, he is out of business.
eresisstvlIY.the inflation situation has
become so overwhelmingly serious and
why it has become so quinessential for
the FesieralR.eserse Board to follow the
tough limitation of credit policy they
are pursuing.
This policy is going to cause pain.
Anybody who says we can do it without
more unemployment or more recession
is just either deceiving you, Mr. President, or is deceiving himself, because
there is no way you can do it without
more unemployment, without sonic business failures you would not otherwise
have, without serious farm losses and,
for millions of Americans who will be
affected by it. as Paul_yntelser has said,
who has been attacked for it but he is
speaking the truth, a lower standard of
Mr. President, the first step In stopping
the rise In prices is to recognize that
there are only a few actions we can take
that will help, and that whatever we do
that will work will be painful, will require
sacrifice and Will require more sacrifice
from some than from others.
If there is a better policy to stein inflation by all means let us pursue it.
ThLs policy has been attacked by
many, but nobody offers a different
course. I wish there were a different
course. If there were, we should follow
it immediately.
As I say, this is a bad policy from the
standpoint of sacrifice and it hurts
many, many Americans, hundreds of
thousands, millions of them. But we
ought to either come up with an alternative or say that we are not interested,
really, sincerely in fighting inflation and
paying the tough price we have to pay,
or we should support this policy and
recognize and speak out on it, pointing
out why it is needed.
There are other things we can do to
make this policy work more effectively.
We know them here in the Senate. We
can hold down Government spending.
We can encourage wage restraint. We
have to do all we can with taxation
Policy and research to encourage productivity insprovement.
We can eliminate our present statutory restricttons on interest paid to
savers, to rya and thrifty people who are
fighting inflation by holding down consumption and putting their money in
the bank.
We have a bill before us that is going
CONGRESSION A I. R EC
D
SENATE
October 24, 1979
be printed
(The conference report will
UNTIL
of RepORDER FOR RECESS
proceedings of the House
the
in
TOMORROW
resentatives.)
ident. the last
Mr. President,
Mr. STENNIS. Mr. Pres
Mr. ROBERT C. BYRD.
respect to this
with
the
r
n
floo
whe
the
that
on
on
ent
acti
I ask unanimous cons
to a flaw
business today it measure was yesterday. Due
Senate completes its
t in the
poin
l
n
nica
noo
tech
a
12
of
to
r
ect
hou
with resp
stand in recess until the
referred
be
it
that
d
aske
we
measure.
tomorrow.
erence.
conf
the
t
to
hou
Wit
back
R.
by the Senste
The PRESIDING OFFICE
.
done
LE
was
UGG
ch
red.
whi
STR
orde
so
NT
is
objection, it
A CONSTA
short conferI will take up first the
President, yesyesterday afternoon.
had
we
Mr. PROXMIRE. Mr. opening of a
ence
from North
duled
ITION OF SENI see that the Senator
terday was the sche
ORDER FOR RECOGN
Cologne. West GerSenator from Virginia
IRE TOMORROW
the
XNI
and
PRO
R
lina
ATO
long overdue trial in
Caro
will proceed
three men. charged
many. Accused are
Mr. President, are in the Chamber, so I
time.
Mr. ROBERT C. BYRD.
ting in the crime
this
abet
at
rt
and
repo
the
ng
re
r
enti
aidi
with
victims were I ask unanimous consent that afte the with the ident, this conference report
ged
alle
r
Thei
.
der
Mr. Pres
of mur
ed under
te
all deported to the two leaders are recogniz
RE is signed by a majority of the Sena
75.000 French Jews,
p during standing order tomorrow, Mr. PROXMI
se
cam
who
n
two,
atio
pt
entr
exce
all
conc
,
fact
Auschwitz
exceed 15 min- conferees—in
War.
be recognized for not to
n, as I understand, was
ctio
obje
the Second World
real
ers.
e all SS offic
g a small
utes.
The three men sver
R. Without limited to one matter, involvin
took part in the
The PRESIDING OFFICE
but it involved
ey,
mon
of
stationed in Paris, who
unt
amo
Jews onto sealed objection, it is so ordered.
. Two memroundup and loading of
weaponry of a certain kind
Poland. There is
reason. Other
that
for
sign
not
did
boxcars bound for
bers
ing this, there
our condocmented evidence prov ify to it, and ORDER REDUCING TIME OF THE than that, it WEIS signed by all
test
conferees
will
OW
the
RR
all
who
MO
by
s
TO
eve
esse
beli
witn
ON
I
and
S
are
ferees
TWO LEADER
es freely admit
se of Representatives, with
the defendants themselv
maintain
BYRD. Mr. President, for the Hou
do
C.
y
ERT
The
h.
ROB
trut
Mr.
the
is
the final report we made.
to
that it
ect
time
resp
the
that
ent
ce report
I ask unanimous cons
their innocence. though.
The approval of this conferen
not aware
ers be reduced to 5 minous
They claim that they were , women, of the two lead orrow.
g to a close a long and ardu
brin
will
ing men
ses of Congress
utes each on tom
Hou
both
in
t
of why they were herd
ess
hou
proc
Wit
R.
cars. They say
y but anteThe PRESIDING OFFICE
and children into cattle
Started officially in Januar
owing orders.
objection, it is so ordered.
preparation by a year
in
time
that they were just foll
that
d
date
as this
As depressingly familiar
or two or more.
shows us that
tee exscenario is, it once again
The Armed Services Commit
RUM CALL
QUO
be
r
neve
can
budget
nse
defe
t's
iden
Pres
the issue of genocide
the
D. Mr. President. amined
is something
BYR
than
It
e
.
C.
mor
past
ERT
ing
the
ROB
hold
to
,
d
Mr.
year
gate
rele
minutely this
bat again and I suggest the absence of a quorum.
hearings on all aspects o:
we must face and com
tee
mit
com
31
k
cler
m
fro
The
R.
to be free
passed th(
The PRESIDING OFFICE
again if we are to able
our defense posture. S. 428
echo of the will call the roll.
and after some de
13:
e
It. Moreover, the hollow
Jun
on
ate
k
Sen
cler
ive
slat
reminder that
began on
The second assistant legi
defense in this case is a
lay in the other body, we
our actions. precee(led to call the roll.
21.
ber
tem
Sep
we are all responsible for
on
ce
eren
conf
ask
t, I
ances, our
to ex
Mr. STENNIS. Mr. Presiden
Regardless of the circumst
Without any criticism. I pause
mate guide unanimous consent that the order for
n was nc
atio
situ
the
conscience must be the ulti
that
et
regr
s
pres
d.
the querum call be rescinde
d get this bill movin
for our decisions.
R. Without such that we coul
her exThe PREPIDING OFFICE
and have it finishe
way
Closer to home, there is anot
ary
in its custom
ly pledge objection, it is so ordered.
ample of how we must constant
back in final agreemei
rted
repo
and
an
hum
of
It is nem
ourselves to the sanctity
to this body very near July 1.
example
0— sary and needed greatly by the servicl
198
rights. Unfortunately, it is an
NS.
TIO
IZA
HOR
AUT
so. I am DEFENSE
nistrs,
of how we are failing to do
and the Congress, for the admi
CONFERENCE REPORT
for the Preincluding coi
ers
speaking of the Convention
matt
ted
rela
of
tion
cide.
t, I submit
opriations Con
vention and Punishment of Geno
Mr. STENNIS. Mr. Presiden
erence sideration by the Appr
ts treaty
rt of the committee of conf
This fundamental human righ
repo
rs.
a
othe
and
ee
ons, and
ate con- mitt
su
has been ratified by 83 nati
S. 428 and ask for its immedi
But this has been a highly unu
ected it on
on.
yet the United States has negl
rati
side
y ways. It was preceded 1
man
in
year
to
up
live
relly
R. The
suppl
for 30 years. We must fina
The PRESIDING OFFICE
a rather long but important
Senate to
our responsibility. I urge the
be stated.
fiscal 1979, that coi
for
will
bill
port
tal
men
as follows: tributed somewhat to the delay.
ratify the Genocide Convention.
The legislative clerk read
nce
t!
Mr. President, I suggest the abse
her conference on
furt
of
e
After the House bill was passed,
itte
comm
The
ions, dud:
sess
of a quorum.
six
s of the two Houses on
for
vote
met
ing
s
gree
eree
disa
conf
the
clerk
di
House to the bill
The PRESIDING OFFICER. The
the amendments of the
more than a month, to work out the
ns for fisU
and
ate
to authorize appropriatio
will call the roll.
Sen
the
428)
een
IS.
betw
nces
fere
prourement of aircraft.
pass
are
The assistant legislative clerk
gs
cal year 1980 for proc
thin
se
The
.
ions
veat
vers
se
Hou
tracked comb
w
missiles, naval vessels,
ceeded to call the roll.
and for
by readily sometimes: but there are
t, hicles, torpedoes, and other weapons
iden
Pres
Mr.
D.
on
BYR
C.
uati
eval
ERT
items in this bill as
line
Mr. ROB
0
test, and
1,00
ent,
over
lopm
deve
,
arch
rese
order
to prescribe the auI ask unanimous consent that the
sorted language items—far too MflI
for the Armed Forces,
for each active
for the quorum call be rescinded.
Many times we had 200 or more diff(
thorized personnel stren6th
hout duty component and the Selected Re-erve ences in conference that had to be iron
The PRESIDING OFFICER. Wit
t of the Armed
of each Reserve componen
out.
objection, it is so ordered.
onnel of the DeForces and for civilian pers
I express the hope—and I believe it
authorize the milito
nse,
Defe
of
ment
i
part
e
oriz
auth
to
s,
the hope of all the other Members—t
tary training student load
RECESS FOR 15 MINUTES
nse, and for other
we can reduce the number of tb.
appropriations for civil defe
t, purposes, having met, after full and free amendments in some way. That apt)]
Mr. ROBERT C. BYRD. Mr. Presiden
te conference, have agreed to recommend and with even more insistence with respect
Sena
the
that
ent
cons
ous
nim
I ask una
respective Houses
items which carry (
do recommend to their
stand in recess for 15 minutes.
rity of the appropriations
report, signed by a majo
this
use they really are
beca
m,
gra
te,
pro
this
Sena
There being no objection, the
conferees.
erly framed in a 1:
prop
ss
r
unle
orde
;
of
R. Without
at 3:59 p.m., recessed until 4:14 p.m.
The PRESIDING OFFICE
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Dear Joe:
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Just to let you know where ABC and Bob Clark stand . . in
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1979.
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_A
LEON M. COLE is Chief of the Economics Division of the Congressional
Research Service at The Library of Congress and has held that post since
October of 1975.
Before joining the Service in 1973 as senior specialist in transportation,
Dr. Cole was professor and director of the graduate program in planning
at the University of Texas at Austin from 1969 to 1973. While in Texas
he was appointed a commissioner of the State of Texas Urban Development
Commission, and also served as the chairman of the City of Austin Board
of Environmental Quality. For several years he was a member and chairman
of the Group I Council of the National Academy of Sciences, Transportation
Research Board.
From 1967 to 1969, Dr. Cole was first Director of Program Analysis and
Evaluation then Director of the Division of Systems Research and Development at the U.S. Department of Housing and Urban Development. Before the
service at HUD he was instructor, assistant,and associate professor at
Harvard University, a research associate of the Harvard Transportation
Research Program, and associate director of the Harvard Center for Urban
Studies.
Dr. Cole has contributed books, monographs, reports
tation and economic development issues and policies
He earned a B.S.C.E. degree from Southern Methodist
1961 f•rom the University of Washington,
in 1963 and 1965 from Harvard University.
and articles on transporand related subjects.
University in 1955,
and a M.C.P. and Ph.D.
12/30/82
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