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MONTHLY REVIEW SEP TEM B ER 1960 Contents The Emerging Common Markets in Latin A m e rica ...................................... 154 International Developments .................... 160 The Business Situation.............................. 163 Money Market in A u g u st........................ 165 V o lu m e ^ Ho. 9 MONTHLY REVIEW, SEPTEMBER 1960 154 The E m e r g in g C o m m o n M a r k e ts in L atin A m e r ic a The drive toward regional economic integration, already a major force in Western Europe, has in recent years also made itself felt in Latin America. Ineffective attempts at partial economic union dot Latin American history, but the current integration movement is based on discussions of a union embracing all Latin America which began shortly after World War II. While it was not until 1958 that some of the countries of the area moved from discus sion to treaty making, events have progressed swiftly since then. In the past two years treaties have been signed estab lishing two regional groupings, together encompassing twelve of the twenty Latin American republics (see map). Regionalism has advanced farthest in Central America, where five countries—Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua—have agreed to eliminate bar riers to trade among themselves, establish a common tariff vis-a-vis third countries, and take measures to co ordinate their industrial development. But, in terms of the size of the nations involved, a more far-reaching step was the signing last February of the Montevideo Treaty, in which seven countries — Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay— agreed to free their trade with each other. MOTIVES FOR INTEGRATION The formation of the six-country European Common Market undoubtedly set an example for the Latin American countries. However, integration by under developed countries, whether in Latin America or else where, obviously entails problems that are in many ways both very different from and more difficult than those faced by the European nations. In Europe, integration in volves essentially the sweeping-away of artificial barriers to an increase in trade for which there is already a natural basis in the existing economic structure. The European Common Market is geographically compact and possesses a superb transportation and communication network; the six nations are highly industrialized, and trade between them has long comprised a significant part of their total trade. Moreover, a strong interest in closer political ties in Western Europe has greatly facilitated the formation of a common market. The conditions that favor economic integration in West ern Europe do not, by and large, exist today in Latin America. There is little basis for intraregional trade in the present economic structure of the Latin American countries. They are largely self-sufficient in foodstuffs and export chiefly agricultural products and minerals. The trade of these countries has therefore been directed to the industrial nations that need Latin America’s primary products and can supply Latin America with the manu factured goods it requires. While manufacturing has ex panded rapidly in some Latin American countries in the postwar period, it is generally on a scale at most sufficient only to meet domestic requirements and characterized by high production costs. Moreover, the limited opportuni ties for trade between the Latin American countries has provided little incentive for bridging the region’s great expanses and rugged terrain with adequate transport facili ties, with the result that freight costs within the region are often prohibitively high. Trade between the twenty Latin American republics grew faster than their total trade during World War II, but since 1948 intra-Latin American trade has not increased FEDERAL RESERVE BANK OF NEW YORK Chxirt I INTRAREGIONAL EXPORTS AS PERCENTAGE OF TOTAL EXPORTS MONTEVIDEO TREATY COUNTRIES Average 1957-59 Regional average Argentina Brazil Chile Mexico 39.3 Paraguay Peru Uruguay CENTRAL AMERICAN COUNTRIES A ve ra g e 1957-58 Regional average Costa Rica El Salvador Guatemala Honduras Nicaragua 12 Sources.* 14 16 United Nations, Direction of International Tra d e ; a nd national foreign trade statistics. in relative importance and has accounted on the average for only about 9 per cent (about $700 million in 1959) of total Latin American exports. (By contrast, even in 1948, before the liberalization of intra-European trade had be gun, the European Common Market countries did more than 25 per cent of their total trade with each other.) Within the two groups seeking integration there are sub stantial differences in the relative importance of intraregional trade to individual countries, but such trade is not large for any of them except Paraguay (see Chart I). More over, intra-Latin American trade has been concentrated on a few commodities; Venezuelan petroleum has in recent years accounted for as much as one third of trade within Latin America, and the rest has been made up mostly of a relatively small number of foodstuffs and raw materials. Trade in manufactured goods has been very small. In these circumstances, integration is looked upon by its advocates primarily as a framework for the future development of the region’s production and trade, and is based on the belief that a sweeping reorientation of the Latin American economy is necessary for an adequate 155 rate of growth. Indeed, a slowing-down in Latin Ameri ca’s economic growth in the past several years accounts in large measure for the accelerated pace of the integra tion movement. The United Nations Economic Commis sion for Latin America—which has played a major role in the integration movement—estimates that in the first postwar decade real income per capita in the area as a whole expanded at an estimated average annual rate of some 3.3 per cent. But in recent years, as many inter national commodity prices have declined and Latin Ameri ca’s foreign exchange earnings have fallen sharply, eco nomic expansion has little more than kept pace with the very rapid population increase. Since commodity prices cannot be expected to recover to the abnormally high levels of the earlier postwar years, many Latin American countries fear that in the future they will find themselves chronically short of the foreign exchange necessary for maintaining an adequate rate of development. Most Latin American countries have been seeking to end their overdependence on exports of primary prod ucts and to stimulate the growth of national industries to produce substitutes for imports. These infant industries have generally been established behind high tariff walls, and their vulnerability to competition from the more ad vanced industrial nations means that the Latin American countries do not regard the freeing of trade on an over-all basis as a realistic alternative to national protectionism. However, the proponents of integration argue that even in the larger countries national markets are too small to support production on an economic scale in many indus trial lines, and that market limitations are likely to make industrialization behind national tariff walls far too costly a way of establishing the more complex capital goods industries. They therefore believe that the only alternative is the creation of broader regional markets which, it is hoped, will enable Latin America to allocate its scarce resources more rationally through intraregional specializa tion and by establishing large-scale, low-cost industries. Regional economic integration, its proponents argue, is also needed to enhance the bargaining power of the Latin American countries vis-a-vis third areas. The Latin American countries fear that they may lose important European markets because of the preferential position of some African countries in the European Common Market, and believe that they must band together in order to deal on a basis of equality with other regional groups. CENTRAL AMERICAN INTEGRATION The twin problems of overdependence on one or two agricultural exports, and of national markets too small 156 MONTHLY REVIEW, SEPTEMBER 1960 to support industrialization, are especially pressing in Central America. The countries of this region are small and poor; they have a combined population of less than 11 million, a total area not very much larger than that of California, and an average per capita national income es timated at less than $200 per year. Agriculture is of course the predominant industry, with bananas, coffee, and cotton accounting for more than 80 per cent of the region’s total exports. Trade has therefore been directed preponderantly toward the United States and Western Europe. Intraregional trade, while tending to increase in relative importance during the postwar period, still accounted for only about 4 per cent of the countries’ exports on the average in 195758 (see Chart I). Adequate transportation has been par ticularly lacking, but with the construction of the Pan American Highway an important breakthrough has been made toward linking up the five countries. The Central American countries took their first specific steps toward regional integration in June 1958 when they signed an “Agreement on the Regime for Central American Integrated Industries” and a “Multilateral Treaty on Central American Free Trade and Economic Integration”. Under the first agreement, which provides for an industry-by-industry approach to economic integration, manufacturing plants that require access to the full Central American market may be jointly planned and established as “integrated industries”. The products of these plants are to be granted immediate free entry to the markets of all five countries; if any plants in the same in dustries are established independently of the integration program, their products will initially be fully dutiable and will receive free entry only gradually. In order that the benefits of the “integrated industries” may be distributed more equitably among the five countries, it is provided that a second “integrated industry” may not be established in any of the countries until at least one “integrated in dustry” has been established in every country. This pro gram is to go into effect when the treaty is ratified by all five countries; so far, it has been ratified by El Salvador, Guatemala, Honduras, and Nicaragua, but not by Costa Rica. The trade treaty provides for the immediate elimina tion of intraregional tariffs and other charges on 200 com modity groups, and calls for the removal of all other barriers to mutual trade within ten years and for the even tual establishment of a common external tariff. This treaty is already in effect for all the signatories except Costa Rica, which has not yet ratified. The five-nation common market was spelled out in greater detail in September 1959, when a treaty was signed setting a five-year deadline for the establishment of the comruon external tariff; so far, El Salvador and Guatemala have ratified this treaty. At the same time, a protocol providing for an immediate 20 per cent reduction in tariffs on all goods produced within the region was also signed, but it has not yet been ratified by any of the five countries. Finally, this year three of the Central American countries—El Salvador, Guatemala, and Honduras—acted to move more rapidly toward a common market by sign ing and ratifying a “Tripartite Treaty of Economic Asso ciation”. This treaty, which commits the signatories to work toward the free circulation of goods, persons, and capital within Central America, provides specifically for the immediate freeing of intra-area trade in all commodi ties (except about fifty specified items on most of which tariffs are to be eliminated gradually over a five-year pe riod) and the establishment of a common external tariff within five years. The treaty also provides for the creation of a Development and Assistance Fund to assist in fi nancing development projects and in facilitating any re adjustments that the opening of the common market might necessitate. In June, the Tripartite Treaty coun tries reportedly decided to contribute an initial capi tal of $5.5 million to this fund and also agreed to the creation of a permanent secretariat to administer the treaty. The Economic Commission for Latin America has been requested by the Economics Ministers of the five countries to prepare a draft treaty that would bring Costa Rica and Nicaragua together with the other three coun tries in a joint program to create a common market along the lines laid down in the Tripartite Treaty. THE MONTEVIDEO TREATY The signing of the Montevideo Treaty early this year was an outgrowth of studies, initiated by the Economic Commission for Latin America in 1956, that looked toward the creation of a common market embracing all Latin America. In April 1959 Argentina, Brazil, Chile, and Uruguay began to discuss the immediate creation of a free-trade area among themselves, and negotiations pro gressed rapidly thereafter. Bolivia, Paraguay, and Peru joined in negotiating the project, Mexico was invited to become a charter member, and last February a treaty was signed by Mexico and six of the South American coun tries (Bolivia decided not to adhere immediately). When the treaty is ratified by three signatories, it is to come into effect for them, and for the other countries after their rati fication. There is apparently no major organized opposi tion, and it is expected that all the participating countries will have ratified by the end of this year. FEDERAL RESERVE BANK OF NEW YORK The interest of the six South American countries in economic integration reflects in part the desire to preserve their existing trade with each other. Intraregional trade has generally been more important between these countries than elsewhere in Latin America, although it has been limited to a few primary commodities, principally wheat from Argentina, coffee and fresh fruits from Brazil, metals and petroleum from Chile, cotton from Peru, and lumber from Brazil and Paraguay (see Chart II). Until recently this trade, because of inconvertibility and rigid import re strictions, was conducted largely through bilateral clearing arrangements in which the countries granted preferential treatment to each other’s products. However, in recent years all of these countries except Brazil and Uruguay have, with the assistance of the International Monetary Fund, undertaken stabilization programs, aimed at estab lishing more realistic exchange rates, removing exchange and quantitative trade controls, and placing their trade on a multilateral basis. When Argentina, which accounts for a large part of the trade between the six countries, made its currency convertible in January 1959, these countries were impelled to search for a new framework that would preserve the trade that they had built up among them selves on a bilateral basis. But the adherence of Mexico to the Montevideo Treaty, despite the negligible size of its trade with the South Ameri can countries, shows that these seven Latin American countries were brought together by the desire not only to maintain existing trade, but also to develop new trade. Mexico, as well as Argentina, Brazil, and Chile, has been a leader in industrial progress among the Latin American countries. While manufactured products have not so far entered significantly into their mutual trade, these coun tries are now able, or expect shortly to be able, to export to each other an increasing number of manufactured prod ucts if they eliminate tariffs and other restrictions on each other’s goods while maintaining protection against the products of the older industrial nations. The ultimate goal of the seven countries, as the pre amble to the Montevideo Treaty makes clear, is to achieve “complementarity and the integration of their national economies” in the fullest sense. However, the treaty itself actually seeks only the more limited goal of a free-trade area. The heart of the treaty is the agreement by the signa tories that over the next twelve years “they will eliminate gradually, for substantially all their reciprocal trade, charges and restrictions of all types that bear upon the importation of goods originating in the territory of any contracting party”. There is no provision in the treaty for the formation of a full customs union through unifica tion of the external tariffs of the seven countries. The 157 Chart II TRAM BETWEEN MONTEVIDEO TREATY COUNTRIES Exports, 1957-58 average COUNTRY SHARES COM M ODITY COMPOSITION Sources; Estimated from United Nations. Direction of International Trade and Yearbook of International Trade Statistics, a n d national foreign trade statistics. re-export within the region of goods imported from out side countries is prohibited, except by special agreement or where the goods have undergone some processing by the importing country. The actual reduction of tariffs, quotas, and other restric tions is to be achieved through annual negotiations in which the seven countries will draw up national lists of tariff reductions for each country, together with a common list of products upon which all the countries must elimi nate their tariffs. On the national lists each country must show successive annual reductions of 8 per cent in the weighted over-all average of its tariffs on the goods that it actually imported from other treaty countries in the pre ceding three years. In addition, under the common-Hst MONTHLY REVIEW, SEPTEMBER 1960 158 procedure each country will be required by the end of the twelve-year period to eliminate tariffs on goods that have been traded anywhere in the region, even if they have not entered into its own intraregional trade. At the end of three years the common list must include goods that account for 25 per cent of all intra-area trade; 50 per cent must be included after six years, 75 per cent after nine years, and substantially all trade by the end of the twelfth year. It should be noted that the Montevideo Treaty coun tries’ obligation to reduce tariffs and other trade barriers under this procedure is limited in two important respects. In the first place, the seven countries are apparently specifically committed to include on the national and common lists only goods actually traded within the region. Secondly, the rate at which tariffs on individual commodi ties are to be reduced is, in effect, left up to each country. The 8 per cent annual reductions that must be shown on the national lists apply only to the average tariff level, and presumably a country may meet this requirement in any given year during the transition period by substantially reducing some duties while leaving other products fully protected. In addition, the placing of a commodity on the common list will apparently mean only that duties on it must be eliminated by the end of the twelve-year period. Escape clauses in the treaty authorize the temporary withdrawal of concessions on a nondiscriminatory basis where imports “threaten to cause serious damage to speci fied productive activities of significant importance” or when restrictive measures are necessary for over-all balance-of-payments reasons. The Montevideo Treaty establishes a Latin American Free Trade Association with two principal organs—an annual Conference of the Contracting Parties and a Per manent Executive Committee. The conference will be the association’s supreme authority, empowered to take all actions requiring joint decisions. A two-thirds vote is re quired for action by the conference and, during the first two years at least, all countries will have the power of veto. The Permanent Executive Committee, composed of one representative from each country, will exercise continuous supervision over the implementation of the treaty with the aid of a permanent secretariat. PROSPECTS AND PROBLEMS The Central American and Montevideo Treaty countries are thus about to embark on the enormously difficult task of putting economic integration into practice. The agree ments that have been signed provide frameworks for deal ing with the practical problems of integration, but much will depend on the actual implementation of the treaties. However, certain basic considerations about economic in tegration provide bench marks for estimating both the po tentialities and the problems that the Latin American countries face. Economic integration may be presumed to offer the greatest possibilities where it results in the establishment of a market large enough and sufficiently well endowed with a variety of natural resources to permit significant economies through specialization and large-scale produc tion. Integration in Central America will not bring to gether important natural resources, and even a common market of all the five countries would be smaller, for example, than that of Colombia. Nevertheless, the Central American common market appears large enough to make possible the establishment of m;my lighter industries that could not function within the sheltered national markets of the participating countries. Moreover, many of the proponents of Central American integration view it pri marily as a means of strengthening the economies of the five countries so that they may eventually join in a wider Latin American common market, just as the Benelux union preceded the entry into the European Common Market of the latter’s smallest members. On the other hand, there can be little doubt about the potential advantages over national protectionism of the formation of so large a single market as that contemplated in the Montevideo Treaty. The seven countries’ huge and diverse natural resources offer ample scope for the division of labor; and the opportunity of serving a combined mar ket of some 140 million persons should make it possible for even the more complex and capital-intensive modem industries to operate in the region on an efficient scale. The extent to which the possible economic gains will be realized in practice is likely to depend on the completeness of the integration of the Latin American markets. Produc tion can be fully rationalized only where all sectors of the economies of the participating countries are opened to competition so that the allocation of resources can be determined in a genuinely free market. Partial economic integration is likely to exclude just those hard-core pro tected products from whose liberalization the most impor tant benefits can be obtained. Substantially complete free intraregional trade is, as noted above, the avowed goal of both groups of countries, but its achievement will de pend upon the actual effectiveness of the procedures adopted for freeing trade. The Montevideo Treaty, in particular, leaves much to future negotiations. In this treaty the seven member gov ernments sought to establish a procedure for tariff reduc tion that would allow them a maximum of flexibility when exposing their highly protected industries to competition. FEDERAL RESERVE BANK OF NEW YORK 159 This is clearly reflected in the treaty’s important special exacerbating the unevenness of economic development in provisions for the agricultural products that account for a region. Much of the discussion leading up to the the bulk of the existing trade between the seven countries. Montevideo Treaty was concerned with the need to secure During the twelve-year transition period, the treaty coun balanced economic development, and the treaty calls for tries will be permitted to restrict agricultural imports the conducting of the annual negotiations on the basis of to the amount needed to cover deficits in national pro a “reciprocity of concessions” that will offer each of the duction and to take measures to equalize the prices seven countries the opportunity to expand its trade. In of imported and domestic agricultural products. The particular, special concessions are granted to Paraguay, by treaty urges that intraregional trade in agricultural prod far the least developed of the seven countries. Progress toward Latin American economic integration ucts be expanded by the negotiation of agreements in which the seven countries will give priority to each other’s may depend increasingly on the ability of the participating countries to pursue the internal financial policies necessary products in meeting their import requirements. The completeness of the free-trade area may also be for maintaining balance-of-payments equilibrium. Contro prejudiced by the two limitations to the Montevideo versy over the necessity of measures to insure balance in Treaty’s tariff-reduction mechanism previously noted. The intraregional trade (as well as over the need for a pay fact that the treaty countries are free to determine the rate ments union) was for a time a major stumbling block to at which they will reduce their tariffs on individual prod agreement among the Montevideo Treaty countries. The ucts contrasts with the European Common Market coun treaty actually does not mention this subject, the par tries’ agreement to make a fixed minimum reduction on ticipating countries having agreed only to continue dis all tariffs at each stage in their program for creating a cussing the payments question. Imbalances in the Monte common market. The danger in the flexibility permitted video Treaty countries’ trade with each other cannot cause under the treaty is that it may in practice make the gov difficulties so long as they maintain over-all balanceernments of the seven countries more susceptible to do of-payments equilibrium and are able to cover their intra mestic protectionist pressure, and thus compound the prob regional deficits with surpluses earned elsewhere. And lem of reducing hard-core tariffs. There may be a tendency initially, while intraregional trade remains small, deficits to put off the most difficult tariff reductions to the latter in intraregional payments may not be large enough to part of the twelve-year period, when there will no longer deter even countries whose over-all payments are not in be time under the treaty to make them gradually enough balance from reducing their barriers to intraregional trade. to cushion the impact on national industries. However, if trade between the Montevideo Treaty coun The fact that goods that are not actually traded be tries should increase in the future relative to their total tween the seven countries need not enter into the annual trade, countries with over-all balance-of-payments deficits negotiations may permit the exclusion from the free-trade might well become reluctant to move toward complete area of the most highly protected products—those on free trade within the area. which existing tariffs are so high as to shut out imports completely—and of goods that have not entered into trade CONCLUDING COMMENTS by the end of the twelve-year period because they are The short-run impact of a reduction of trade barriers still not being manufactured in sufficient quantity in the region. The participating countries’ intention of includ among the Latin American countries is likely to be no ing products not already traded within the area in the more than marginal in view of the existing low level of liberalization program is stated in the treaty, but since intraregional trade. Over the longer run, however, the the implementation of this goal is left entirely to future broadening of Latin American markets can serve to stimu negotiations, the Montevideo Treaty could fall short of late industrialization and give it a more rational basis than the limited national markets. But the pace of economic its major goal of clearing the way for new trade. While a complete freeing of intraregional trade is most development cannot be stepped up without a sharp rise likely to realize the potential benefits of economic integra in investment, not only in manufacturing itself, but also tion for the region as a whole, there is no guarantee that in such essential supporting activities as power production each of the seven countries will receive benefits sufficient and transportation. Common markets could contribute to make its participation appear worthwhile. Indeed, the to increasing investment by opening up profitable new more underdeveloped countries may be the least able to business opportunities in manufacturing that might attract compete for the benefits of free trade, and the reduction of Latin American capital away from investment in real tariffs might grind to a halt if it should appear to be estate and construction and that might induce Latin Ameri 160 MONTHLY REVIEW, SEPTEMBER 1960 can investors to repatriate some of the very substantial amounts of capital they now hold abroad. In addition, its proponents hope that the possibilities of investment in in dustries serving Latin American common markets will stimulate the inflow of foreign capital into the region, just as the formation of the European Common Market has led to stepped-up United States and other outside invest ment in the six Common Market countries. However, the low incomes of the Latin American coun tries limit domestic savings, while in many instances fundamental fiscal and other changes are needed in order both to improve savings and investment habits and to attract a larger inflow of foreign capital. The extent to which Latin American countries will be able to take ad vantage of the opportunities offered by economic integra tion is, moreover, linked to the solution of other basic economic problems, such as the maintenance of internal and external economic balance, as well as to the develop ment of an adequate regional transportation network. The gains from economic integration will also depend on the ability of the participating countries, when im plementing their respective treaties, to make the difficult transition from national protectionism to an economic environment in which the nature and direction of indus trial growth and trade expansion are determined by the forces of competition. In te r n a tio n a l D e v e lo p m e n ts BUSINESS TRENDS ABROAD After a year of rapid economic growth in the major industrial countries abroad, the advance tended to mod erate in the first half of 1960. The expansion appears to have leveled off in Canada and Japan, and in Western Europe it has slowed down slightly. In much of Western Europe, the earlier rapid rise in export demand and inventory accumulation seems to be abating. Although in a number of countries anti-inflationary policies have tempered domestic demand pressures, consumer demand on the whole still remains quite buoyant and fixed invest ment shows a rising tendency. In several countries, nota bly West Germany, Britain, and Sweden, the slightly reduced tempo of this year’s expansion also reflects grow ing labor shortages and strains on productive capacity. To date, however, although persisting domestic inflation ary pressures have contributed to a deterioration in the foreign trade position of many of these countries, the expansion has proceeded against a background of price stability and ample foreign exchange reserves. Industrial production in Western Europe as a whole rose by 2 to 3 per cent over the preceding quarter in both the first and second quarters of 1960, somewhat less than the 4 per cent rise recorded in the last quarter of 1959. While vigorous advances continued to be scored in Italy, Austria, and the Netherlands, the expansion in Germany and particularly in Britain lagged somewhat be hind last year’s (see Chart I). In France, although the firstquarter decline in industrial production was reversed in April and May, the upswing brought industrial output for the second quarter only slightly above the record fourth-quarter 1959 level. In Japan, on the other hand, there are indications that the industrial expansion may have leveled off: following a 56 per cent advance from the May 1958 low through March 1960, Japanese indus trial output rose only 1 per cent during the second quarter. In Canada, industrial production has continued to fluctuate below its January peak. Consumer demand, which provided a major stimulus to the 1959 boom, showed some signs of tapering off in the early months of 1960 but generally has remained at high levels. Moreover, in several countries, particularly France, Germany, and the United Kingdom, consumer spending is expected to climb in coming months as a re sult of continuing wage and salary increases. In Britain there are indications that this process has already largely offset the impact of the instalment credit controls intro duced last April; although sales of consumer durables continued to weaken, by July total retail sales (seasonally adjusted) had regained their April peak. In Germany, too, consumer spending has recently shown more strength. In Canada, on the other hand, although the first-quarter de cline in retail sales (seasonally adjusted) was reversed in April-June, total sales for the three months were only 1 per cent above their corresponding 1959 level. While the winter spurt in inventory accumulation may have begun to subside in a number of countries, a major expansionary push has been coming from the investment outlays induced in most countries by dwindling reserves of physical capacity and labor and by increased inter national competition. The investment booms continued FEDERAL RESERVE BANK OF NEW YORK Chart I INDUSTRIAL PRODUCTION IN SELECTED COUNTRIES Seasonally adjusted; 1953=T00 Per cent Note: Per cent Latest 1960 data partia lly estimated. Sources: Organization for European Economic Cooperation, General Statistics; national statistics. throughout the first hall of the year in Italy and Germany. In Britain, real fixed investment in the first quarter of the year rose 3 per cent (seasonally adjusted) over the fourth quarter of 1959; while public sector investment is leveling off, business plant and equipment expenditures and private housing outlays are continuing to rise rapidly. In Japan, plant and equipment outlays are estimated to have risen about 16 per cent over the previous three months in the first quarter of 1960 and at an even higher rate in the second quarter. Although export demand has remained generally firm, in some major trading nations exports no longer seem to be rising at their spectacular 1959 rate. Seasonally adjusted exports from several countries—notably Austria, Italy, and Switzerland—it is true, continued to rise rapidly in recent months. On the other hand, on the same basis, the expansion of French, German, and Japanese exports slowed down somewhat, and British exports in May-July 161 actually fell 5 per cent below their February-April levels. Seasonally adjusted Canadian exports also continued to decline through June, reflecting primarily a reduction in sales to the United States. Perhaps the most important check on further rapid expansion of output in Western Europe in the near future will prove to be spreading shortages of skilled—and in some cases even unskilled—labor. In West Germany un employment continued to fall rapidly to a new postwar low in July of 0.6 per cent of the labor force, while vacancies rose to over four times the number of people seeking work. In Britain, also, labor scarcities have spread in recent months, although the labor market eased slightly more than seasonally in August. A similar pattern ap plied in the Netherlands, Sweden, Switzerland, Austria, and Denmark where labor shortages, already severe in the construction sector, intensified in other sectors of indus try as well. In Canada, in contrast, unemployment has remained high; in July it rose contraseasonally to 4.7 per cent of the labor force, the highest July level in many years. In Western Europe the tightening of labor markets against a background of buoyant corporate profits has touched off a steady rise in salaries and wages this year. Significant wage increases have been granted in Germany, Austria, and Denmark. In the United Kingdom wage rates rose 1 per cent in both the first and second quarters, and substantial new pay demands are expected during the autumn round of wage negotiations. In France wage rates are estimated to have risen about 1.5 per cent in each quarter, and the high incidence of strikes and labor dis turbances before the summer holidays suggests that here, too, labor may press vigorously for further wage increases in the fall. Civil servants, in particular, have asked for changes in the salary structure involving sizable pay in creases. Moreover, due to the recent rise in the cost of living induced by government price measures, the mini mum wage is to be raised 2-3 per cent on October 1. Despite this upward pressure of wages, however, with few exceptions, the price stability achieved in the major industrial countries abroad has been maintained in 1960. This price stability reflects in part the steadiness of world commodity prices. In several countries, also, productivity has continued to rise very rapidly, and earlier measures of trade liberalization have permitted rising domestic demand to be met to an increased extent by imports. MONETARY TRENDS AND POLICIES The monetary restraint policies that have been adopted in most Western European countries since last autumn were strengthened further in the past three months. On MONTHLY REVIEW, SEPTEMBER 1960 162 the other hand, in Japan, the authorities took their first easing measure in August, and in Canada credit conditions continued relatively easy. In many Continental European countries, where the current economic expansion is being accompanied by balance-of-payments surpluses, general liquidity remained high and interest rates were stable or tilted slightly down ward (see Chart II)—although generally at higher levels than in this country. The monetary authorities of these countries are lacing the problem of having to deal with additions to bank liquidity resulting from inflows of funds from abroad, as restraint measures have led both to the repatriation of funds held abroad by domestic commercial banks and to an influx of foreign capital at- Chart II INTEREST RATES IN SELECTED COUNTRIES THREE-MONTH TREASURY B U IS * — ^ ( .. .. .... ^ ! i i 1 i i.I i i l i t 1 i .. United Kingdom .^ ........ hi _ Canada ■ t l i i i 1 I 1 t ! 1 I I 1 i 1958 1 \i t - i .. l — i t Li . i_ 1 1 ) 1 1 1 1 1 \ 1 1 1 1 1 1 » 1 t t l.l A r .t .4— : | . 1 ..jl. L i ._l J I 1 i l l Note: | Belgium i i**) i i i i i n 1 11 rni 1959 i i t i T960 f August 1960 data partially estimated. * Treasury bills'. Canada and United Kingdom , average tender rates lo r three-month bills; West Germ any, central bank selling rates for 60 - to 90 -d a y bills; Netherlands, market rates far three-month bills. + Rates on mortgage bo«ds. Sources: International Monetary Fund, International Financial Statistics: national statistics. tracted by higher interest rates. In addition, German and Swiss official international reserves were swelled during the summer months by other capital flows—in the case of Germany the result of Deutsche-mark appreciation ru mors, and in the case of Switzerland the result of inter national political disturbances. In Germany, where the problem of liquidity-increasing capital inflows has been particularly serious, the Federal Bank continued to move energetically to restrain the do mestic boom and slow the inflow of funds. On June 3, the bank raised its discount rate for the third time since the beginning of the current business expansion—to 5 per cent from 4. Effective July 1, it raised to the legal maxima the reserve requirements for increases in deposits of residents above their March-May average, sharply cut back the commercial banks’ rediscount ceilings, and took other steps to tighten reserve requirements. At the same time, German credit institutions were prohibited from paying interest on foreign-owned deposits and from sell ing money market paper to nonresidents. The inflow of foreign exchange continued, however, and bank liquidity remained high. In August, therefore, the Federal Bank reached an agreement with the commercial banks under which the latter agreed to purchase DM 1 billion of nonnegotiable two-year 5Vi per cent government notes, thus in effect raising required reserves while keeping that instrument available for future use. Later in the month, in a further effort to stem the inflow of funds, the bank announced its willingness to enter into dollar swap trans actions with German banks—under which it will buy for ward dollars at a 1 per cent premium—for periods up to six months. In Switzerland, where the expansionary strains seem to have been somewhat less pronounced and where the au thorities have fewer monetary instruments at their dis posal, the central bank acted forcefully to discourage the inflow of capital from abroad. In August, the Swiss National Bank announced an agreement with the com mercial banks under which no new nonresident Swiss franc sight deposits are to be accepted, a 1 per cent annual charge is to be made on all foreign franc deposits of six months or less (except for specified working balances and certain other accounts) that have been established since July 1, and no interest is to be paid on new foreign franc holdings except in small savings deposits. In addi tion, the banks agreed to do their utmost to see that foreign funds are not invested in Swiss securities, real estate, or mortgages. In the Netherlands, the central bank, which earlier had warned the commercial banks against the re patriation of funds held abroad, on July 22 raised reserve requirements from 7 to 8 per cent in an effort to prevent FEDERAL RESERVE BANK OF NEW YORK too rapid an expansion of domestic credit, and in Finland, where credit also has been expanding rapidly, the central bank in August increased its penalty rate to 3 per cent above the discount rate on rediscounts for commercial banks. In the United Kingdom, the authorities have not had to contend with similar difficulties—partly because the institutional framework is more suitable for dealing with the liquidity effects of foreign exchange flows, and partly because the inflow of short-term funds seems to have as sumed sizable proportions only recently. Thus, they have been able to concentrate on curbing the domestic factors in the expansion. On June 23, in the third of a series of restraint measures begun early this year, the Bank of England raised its discount rate to 6 per cent from 5 and also doubled its original April call for “special deposits” from the London clearing banks and Scottish banks (to 2 and 1 per cent of gross deposits, respectively). At the same time, the Chancellor of the Exchequer announced the government’s intention to hold public capital expenditures in fiscal year 1961-62 to the current year’s level. The severity of the new measures had not been anticipated by the market in view of the strength of the pound and of the sharp drop in the expansion of clearing bank advances in May and the first part of June. Bank advances again rose sharply in the following five-week period, but dropped —for the first time since August 1958—in the statement period ended August 17. The classic problem of falling foreign exchange re serves accompanying inflationary pressures has been faced in Sweden, where the government acted to tighten bank liquidity by raising the statutory liquidity reserve require ments against sight liabilities and by authorizing the cen tral bank to negotiate with the commercial banks for an increase in the voluntary variable liquidity reserves ap plicable to total deposits. An increase in the latter re quirements would be especially important since time de 163 posits in Sweden account for the bulk of bank deposits. Another country under pressure was Belgium, where the effect of the Congo situation in weakening the franc was a major factor behind the increase in the central bank’s discount rate to 5 per cent from 4 on August 4. In contrast to these credit tightening measures, the Bank of Japan on August 24 lowered its discount rate to 6.935 per cent from 7.3 (reversing its December increase), as domestic business conditions showed weakening tend encies following two years of very rapid economic ex pansion. In Canada, meanwhile, where business condi tions continued hesitant, the government relaxed its terms for low-income housing loans and increased its grants for public works. In spite of the general uncertainty, how ever, the chartered banks’ business loans have continued to expand somewhat more than seasonally. Although there was some tightness in the money market in early July, interest rates have since declined further. EXCHANGE RATES In the New York foreign exchange market, spot sterling gradually advanced during the first part of August as short-term funds continued to flow to London. Following the August 11 announcement of the reduction to 3 per cent in the discount rate of certain Federal Reserve Banks, the quotation moved abruptly to $2.8123, the highest in over a year. It then turned lower, reflecting substantial offerings from the Continent and a reduced movement of capital to London as the result of the rising interest yields on United States Treasury bills. At the month end it closed at $2.8114. In the forward market the discounts on three and six months’ sterling moved somewhat er ratically, in a relatively narrow range. The Canadian dollar, principally as the result of move ments of long-term capital to Canada, appreciated ap proximately one cent, to reach $1.031 /32 by August 15. By 7 the end of the month, however, it had eased to $1.026%4. T h e B u s in e s s S itu a tio n The economy apparently has continued to edge sidewise in recent weeks. Comprehensive measures of economic activity such as employment and industrial production remained in July at or near the high June levels, and per sonal income advanced a bit. Private nonresidential con struction outlays showed a small gain in August, after vir tual stability in July, but outlays for residential construction declined further. Some weakness appeared in consumer demand during July, principally in sales of new automo biles, and incomplete auto and department store data suggest that consumer demand did not improve in August. The hesitant business atmosphere has been reflected in a MONTHLY REVIEW, SEPTEMBER 1960 164 further decrease in manufacturers’ new orders and also in price declines for certain industrial commodities. On the other hand, efforts to hold back inventory accumu lation, and to effect actual reductions in durable goods lines, are meeting with a measure of success. Such efforts have been a prime factor hindering expansion in output, and their easing could add strength to employment and to economic activity generally. Over all, the summer months, traditionally a sluggish period, have thus far done little to clarify the business situation. THE DIVERGENT INDICATORS In July, the Federal Reserve index of industrial pro duction remained, after allowing for the usual seasonal dip, at the June level of 109 (1957=100). The manufac turing component of the index was also unchanged in July, as sharp cutbacks in automobile assemblies and a slightly more-than-seasonal decline in iron and steel output were offset by small increases throughout a wide range of prod ucts, both durable and nondurable. In terms of “market” classification, some strength was shown in (nondefense) business equipment output, which rose to a record level. Consumer goods output, however, slipped a little—a result of the deep cut in automobile assemblies and of a small reduction, for the second consecutive month, in the “home goods and apparel” group. Production of materials was stable, as a rise in the output of nondurable materials compensated for a continued, although more gradual, decline in durables. Steel production, which had dropped to 50 per cent of capacity in July, was close to 55 per cent of capacity throughout August, despite two railroad strikes in the sons. The increase was entirely a result of the employ ment of young people newly out of school; the number of adults employed actually declined. The total was sus tained, moreover, by farm employment, which usually falls in July but this year remained at about the June level because of a late planting season. Still, after seasonal adjustment, total employment was down 300,000 from the June peak. The Bureau of Labor Statistics payroll survey of nonfarm employment (which differs in some significant respects from the household survey) showed a seasonal decline of almost 400,000, so that after adjustment this series was about equal to the previous month’s 53.4 million total (see chart). More-than-seasonal contractions in employment in automobile and steel manufacturing and— because of the reduced pace of steel output—in the coal mining and transportation industries were offset by gains in construction, trade, finance, and services. Unemploy ment as a proportion of the civilian labor force was down in July by a scant %0 of a point to 5.4 per cent, seasonally adjusted. The maintenance of high levels of employment helped push up personal income in J uly to a record annual rate CURRENT ECONOMIC MEASURES Seasonally adjusted Billions of dollars for some time. Industry sources continued to express dis appointment with the level of incoming orders, and it was reported that the industry did not anticipate a significant improvement before October. Most steel orders during August were for “quick” delivery, suggesting that steel users had worked down their inventories and were now operating hand to mouth. But there were also reports that other steel users had not yet reduced inventories as much as intended. The principal source of disappoint ment for steel producers has been the automobile industry. Although auto assembly plants were closed for model change-over earlier than usual this year, the expected large-scale orders for steel for the new models have not yet materialized. Total employment (as measured by the Census Bureau household survey) inched up in July to 68.7 million per- 410 400 390 380 370 — Billions of dollars - 410 —400 Persortal income Annual rates f 390 380 _ 1 1 1.1 1 1 l-1— . l-l.-l-j | | 1 I | 360 Bi Ilions of dollars Billions of dollars 230 ---------------- < ------ 230 220 \ . ■ A n ^ — V 21Q 220 210 Retail sal<r* V A nnual ratos 200 190 370 360 200 1.,1 1 1 I — 1958 1 1- I - 1 1 1 J I I I 1 1959 J - L -i- l l - L l- l- t. I. 190 1960 N ote : Alaska and H a w a ii included in u onagri cultural employment »uice N ovem ber 1959 and in retail sates since Jan u ary I9 60 . * Bureau of la b o r Statistics payroll m v « y k Sources: Beard -of Governors of the fed«rol Reserve System; United States Departments of Coafcneece end lotbor. FEDERAL RESERVE BANK OF NEW YORK of $407.1 billion, seasonally adjusted. This was, however, just $1 billion more than in June, and with a single exception was the smallest monthly advance since last year’s steel strike. About half of the gain was in wages and salaries; increased payments in the construction in dustry plus the effects of the recently enacted pay rise for Federal Government employees more than offset a reduc tion in the manufacturing sector. Interest income also rose. However, about one quarter of the month’s total income gain resulted from an increase in unemployment insurance benefits. Meanwhile, farmers’ income dropped for the first time in four months as a result of a decline in meat prices. At the same time that personal income has been post ing new records, retail sales have been sluggish. In July, sales slipped for the second time in three months— falling, according to the advance report, IV 2 per cent below the June total and 3 per cent under the April peak, seasonally adjusted. Most of the July decline reflected slower auto mobile sales, but purchases of nondurables also decreased somewhat. The data so far available for August on auto mobile and department store sales do not suggest an upturn in consumer expenditures. These developments may possibly reflect some lessening of consumer optimism regarding the business and employment outlook. Probably as the combined result of the lack of spark in consumer demand and the absence of increased strength in investment demand, new orders received by manufac turers, which had risen slightly in April and May, season ally adjusted, declined in June and again in July, falling back close to the November 1959 level. The June de crease was entirely in durables and covered several impor 165 tant industries. In July, durables declined somewhat further but nondurables accounted for almost three fourths of the total drop. New domestic orders for machine tools, which had risen in June after two months of decline, fell sharply in July to mid-1958 levels, although industry sources continued hopeful that orders would pick up after the Machine Tool Exposition in Chicago this month. Order backlogs, which had declined in June to the lowest level since December 1958, increased a bit in July, principally as a result of a small growth in unfilled orders in the durable goods industries. Data for unfilled orders are not seasonally adjusted, however, and an in crease in backlogs is normal for July—but this time it was unusually small. Backlogs in nondurable goods industries fell, meanwhile, to early 1959 levels. Manufacturers’ in ventories, seasonally adjusted, fell slightly in July after rising for eight successive months, although recently at a declining pace. Stocks held by producers of durable goods declined from the record level reached the previous month, while stocks in the hands of nondurable goods producers remained unchanged from the high June total. The inventory-sales ratio of all manufacturers was at its highest point since November 1958—although not so high as it had been during most of the 1956-58 period. Data on construction activity have been mixed. Outlays for private nonresidential construction, which had fallen for four consecutive months through June, seasonally adjusted, remained almost unchanged in July and advanced in August. Moreover, nonresidential contract awards rose in July. Private residential construction outlays, however, declined in both July and August, and July residential contract awards were also down. M o n e y M a rk et in A u g u st The Board of Governors of the Federal Reserve Sys tem on August 8 announced several actions liberalizing member bank reserve requirements. From August 25 country banks may include in their reserves vault cash in excess of 2Vi per cent (instead of 4 per cent) of their net demand deposits, and effective September 1 reserve city and central reserve city banks may count as reserves vault cash in excess of 1 per cent (rather than 2 per cent) of their net demand deposits. Also effective September 1, the reserve requirement against net demand deposits of central reserve city banks was reduced from 18 to 17V^ per cent. After the close of business on August 11, this Bank and three other Reserve Banks announced a re duction in the discount rate from 3 V2 to 3 per cent effec tive the following day. During the remainder of the month six other Reserve Banks followed suit. Bank reserve positions eased somewhat further in August. While New York City and Chicago banks con tinued to be net purchasers of Federal funds on most days, the effective rate prior to the August 12 discount rate reduction was often below the 3 Vi per cent “ceiling”. After August 12 the effective rate for Federal funds traded by New York City banks on most days stood at or close to the new 3 per cent “ceiling”, although some trading 166 MONTHLY REVIEW, SEPTEMBER 1960 occurred at higher rates in centers where the discount rate had not yet been reduced. Rates posted by major New York City banks on loans to Government securities deal ers varied generally within a range of 3% to AVa per cent. On August 22-23 leading commercial banks announced cuts in their prime lending rates from 5 to AV2 per cent. MEMBER BANK RESERVES Reserve positions of member banks, which had come under gradually lessening pressure during the first seven months of this year, eased further in August. While op erating factors, on balance, absorbed a substantial amount of reserves during the month, decreases in required re serves released funds to the member banks. At the same time, reserves were augmented by System open market operations and, toward the close odt the month, by a large increase in allowable vault cash. In the five statement weeks ended in August, the average level of excess re serves was $22 million higher than in July and average free reserves rose by $115 million to $225 million. Changes ia Factors Tending to Increase or Decrease Member Bank Reserves, A ugust 1960 la millions of dollars; ( + ) denotes increase, (-— decrease in excess reserves ) Daily averages— week ended Factor Aug. 3 Aug. 10 Aug. 17 Aug. 24 Aug. 31 Net changes Operating transactions Treasury operations*.............. Federal Reserve float................... Curreney in circulation................ Gold and foreign account ......... Other deposits, etc....................... + 17 — 197 — 3 — 63 + 2 -f — — — + 22 68 85 20 8 — 104 + 154 — 55 — 57 - 43 + 82 + 38 + 97 — 18 - 106 + 6 — 226 + 107 — 50 — 2 + 23 — 299 + 61 — 208 - 141 Total......................... - 244 - 142 - 105 + 94 - 166 - 563 - + 160 Direct Federal Reserve credit trans actions Government securities: Direct market purchases or sales Held under repurchase agree ments .................................. Loans, discounts, and advanees: Member bank borrowings... . . . Other................................. . Bankers’ acceptances: Bought outright....................... Under repurchase agreements... + 238 + 46 + 6 - 40 + 93 + 123 - 64 - 9 - 36 - 22 + 123 + 1 + + 2 1 90 - 114 + 29 - 223 + 80 - 78 +~ 3 + + - 2 12 + + 4 1 + 149 + 69 - 262 - 137 + 116 53 13 + - 7 74 + 36 75 - 168 + 8 + 307 + 303 - 303 - 447 Total reservesf.............................. 4- 40 Effect of change in required reserves f - 27 + 67 86 + + 39 36 - 160 + 43 + 4 + 105 - 144 + 243 Excess reservesf............................ + 19 + 75 - 117 -f 109 + 416 582 166 193 465 272 273 574 301 Total......................... + 297 Member bank reserves With Federal Reserve Banka___ + Cash allowed as reserves t ............ - Daily average level of member bank: Borrowings from Reserve Banks.. Excess reservesf.......................... Free reserves f ............................. + 13 315 488 173 293 507 214 Note: Because of rounding, figures do not necessarily add to totals. * Includes changes in Treasury currency and cash, t These figures are estimated. t Average for five weekB ended August 31,1960. 3 9 90 2981 5231 2251 The effect of these developments upon the reserve situation was, however, moderate on the whole, and the atmosphere in the money market tended to be somewhat tighter than might have been expected. The different dis count rates prevailing at the various Federal Reserve Banks during the middle weeks of the month tended to interfere with the flow of reserves through the Federal funds market, and the shifts of funds arising from the settlement of the Treasury’s financing on August 15 pro duced additional reserve pressures on the banks in the New York money market. From July 27 to August 31, System Account holdings of Government securities increased by $78 million. The purchases were concentrated ia the first part of the month, offsetting the absorption of reserves by operating factors and permitting member banks to reduce somewhat their borrowings at the Reserve Banks. GOVERNMENT SECURITIES MARKET The market for Government securities began the month on a tone of firm confidence based on several factors: (1) the expectation of a substantial reinvestment demand resulting from a net Treasury debt redemption of $1.5 billion during the month, (2) the absence of a long ma turity issue in the Treasury’s! new offerings, (3) the re duction in stock margin requirements in late July, and (4) widespread expectations of somewhat easier credit conditions—associated with uncertainty about near-term business prospects. As the month progressed, however, market confidence gave way to caution in spite of some general encouragement provided by the easing in reserve requirements and the reduction in the discount rate. Broad reinvestment demand did not develop as expected, and dealer inventories reportedly had to be carried at relatively high interest costs. Another dampening influ ence affecting longer issues was the market expectation that advance refunding would put more issues in the long-term area. The August refinancing operation was generally con sidered successful. The refunding offer, which did not give pre-emptive rights to the holders of the maturing securities, was heavily oversubscribed. Allotments of the new 3 Vs per cent certificates were only 13 per cent of subscriptions, except for certain types of subscribers who were allotted 100 per cent. Allotments of the new 3% per cent bonds ranged from 15 to 25 per cent for the various types of subscribers. For the month as a whole, prices of notes and inter mediate bonds were generally %2 higher to 1%2 lower and longer term bonds declined by V\ point to 12%2 FEDERAL RESERVE BANK OF NEW YORK points. The average yield on three- to five-year issues closed at 3.50 per cent on August 31, up 4 basis points from July 29, while the average yield on issues due in ten years or more rose by 9 basis points to 3.83 per cent. The atmosphere in the Treasury bill market also changed from one of strong confidence to somewhat more caution during August. Following the Treasury announce ment in late July of its August debt operations, bill rates declined sharply in view of the prospective reduction in the outstanding short-term debt. In the regular Monday auctions on August 1 the average issuing rate of 2.131 per cent for 91-day bills was the lowest since August 1958, while the 2.409 per cent rate for 182-day bills was the lowest in the history of this series. Issuing rates rose steadily in the next four auctions, reaching 2.550 and 2.825 per cent for the 91-day and 182-day bills, respec tively, in the final auction of the month (August 29). OTHER SECURITIES MARKETS In the markets for corporate and tax-exempt bonds the month opened on a firm tone, largely reflecting influences similar to those that affected the Treasury bond market. While this early enthusiasm faded to some extent in re spect to some corporate issues, price gains of tax-exempts generally were fairly well retained during the month. The announcements of liberalization in reserve requirements and reductions in discount rates gave further strength to these markets, particularly in the tax-exempt sector. Moody’s series of average yields for seasoned high-grade tax-exempt and corporate bonds both declined to new lows for the year. The average yield on Aaa-rated taxexempt bonds fell from 3.28 per cent on July 27 to 2,99 per cent on August 31, and the average yield on similarly rated corporates declined from 4.35 per cent at the end of July to 4.23 per cent at the end of August. New corporate bond flotations in August amounted to $587 million, an increase over both the July total of $422 million and the August 1959 total of $411 million. Most corporate issues were well received, but the response to some utility offerings was slow. Offerings of new taxexempt bonds aggregated $554 million (including one offering of $200 million), compared with $462 million in July and $454 million in August 1959. Tax-exempt issues generally were well received. 167 The cut in prime loan rates was followed on August 24 by a Vs per cent reduction of rates on bankers’ accept ances, which brought the bid rate on 90-day unendorsed acceptances to 3 Vs per cent, Earlier in the month, dealers had lowered their rates on acceptances by Va per cent, but the cut had been restored a week later. On August 23, the New York City banks reduced from 5 per cent to 416 per cent the rate on loans secured by customers’ stock exchange collateral. On August 25, dealers in commer cial paper reduced rates on all maturities by V per cent, & setting the new offered rate on prime 4- to 6-month paper at 3 Va per cent. Sales finance companies increased vari ous rates by Vs to Va per cent, effective August 31, bring ing the rate on 60- to 89-day paper to 234 per cent. SELECTED PUBLICATIONS OF THE FEDERAL RESERVE BANK OF NEW YORK The following selected Federal Reserve Bank of New York publications may be of particular interest to educational institutions. These booklets are avail* able from the Publications Division of the Federal Reserve Bank of New York, New York 45, N. Y. Where a charge is indicated, remittance should in clude New York City sales tax, if applicable. Deposit Velocity and Its Significance by George Garvy. 60 cents per copy; 30 cents per copy on orders from educational institutions. Federal Reserve Operations in the Money and Got* eminent Securities Markets by Robert V. Roo#a. Foreign Central Bankings The Instruments of Mgimv tary Policy by Peter G. Fousek. Monetary Policy Under the International Gold Standi aid: 1880-1914 by Arthur I. Bloomfield. 50 cents per copy; 25 cents per copy on orders from educational institutions. Hie Mosiey Side of “The Street” by Carl H. Madden. 70 cents per copy; 35 cents per copy on order* from educational institutions. The New York Foreign Exchange Market by Alan R Holmes. 50 cents per copy; 25 cents per copy . on orders from educational institutions.
