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Business Review ... ........ . ".f . '1 -";" > • The Economics Of Instability -An Address by Philip E. Coldwell October 1971 ... -.~ This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) The Economy That Went Astray- The Economics Of Instability - An Address by Philip E. Coldwell President Federal Reserve Bank of Dallas to the San Antonio Rotary Club - September 15, 1971 ~ Popu~ar song of my generation d lYrICS which included the h beWIldered." r~se "bewitched, bothered, and To a limited extent 'ht use this as a characteri-' z~ .mIg atlO n of the American economic eene . We have been bewitched or edeviled by a whole series of neg t' economic news and we halve baVe be~n bothered and bewildered e~ ~he International monetary f SIS and by long-range consideraIOns regarding the President's new program. q Pe~haps the most frequent t~estIon is ,"How did we get into t s mess and what went wrong to o~rn OUr economy from its posture p tynamic growth into the current fa tern of stagnation, high infla~on, high unemployment, and a Pl:ak.ened currency?" In the comU ~ Industrial economy of the eu~~ted S~ates, the answer is diffiu and 111 many ways highly o~eertain, but I shall attempt my n explanation. You, of course, b n\ts·Iness Review I October 1971 will recognize that I speak only for myself, not the Federal Reserve Bank of Dallas, the Federal Reserve System, or any of my associates. What is presented is my interpretation of the economic and financial developments, policies, roadblocks, and alluring primrose paths we have followed over the postwar period. In a nutshell, my analysis shows that the prime factors causing our present difficulties were a disregard of fundamental economic principles, a failure to act decisively and promptly, and the growing structural and social changes which have inhibited normal market processes, economic stabilization efforts, and responses to wage, price, and competitive factors. I suspect that much of what I have to say on the developing problems of our American economy will strike a familiar chord, but perhaps the context and some of the interpretations may be differ- ent from those presented elsewhere. The causal factors of our economic and financial problems of today have roots which go back ~a-?y year~, but.I shall attempt to lImIt my diSCUSSIOn to their recent impact. No special priorities are implied by the order in which these factors are presented. One good starting point seems to be the familiar business cycle for in a relatively free enterpris; system there are multitudes of decisions which, if suddenly made in a concerted direction, can shift the balance of the economy and require strong offsetting actions to maintain stability. Over the past five years, we have witnessed just such a change, as Government sought to finance an underestimated war cost without compensating taxes. This cost was superimposed on an economy growing at a remarkable rate, with the not unusual result of creating heavy inflationary pressures. Businessmen began the all-too-familiar mass decision-making process of overextending capital investment hoarding labor, and building inve~ tories. These added fire to the brightly glowing boom and turned it into an incipient inferno of inflation. For many years, economists have recognized the inherent instabilities of a free enterprise freedom-of-choice economy and the problems of ov~rstimulation by Government spending, especially 1 I j for nonconsumer production goods. It has been amply demonstrated that capital goods and inventory booms threaten the basic balance and are a source of instability largely generated by the mass reaction of business. Similarly, we recognize the sheep like following by many corporations of the policy decisions of the leaders. In the consumer field, the expectations of the American consumer seem to ebb. and flow in waves almost as if by command. This instability, too, is one recognized by many as a cost of the economic freedoms we enjoy. One other element inherent in our system needs comment. While we talk frequently about the public interest and self-discipline requirements of our economic system, the fact remains that most of us act in very self-centered, short-range ways. If we can see an immediate advantage to our own positions, we will act; but if the gains are long-range, and especially if there are short-run disadvantages, we are likely to reject an appeal for action. Similarly, for many, only a patriotic motive of a compelling nature will shift our sights from self-interest to the nation's good. Most of the time, the nation's objectives coincide with the selfinterest of individuals (especially in the long run) but, on occasion, there is a dichotomy and, especially in a timing sense, the two diverge. If our inherent system problems were the only ones causing our present crisis, we could act with confidence that recovery in a sustainable, generally noninflationary environment could be achieved. Unfortunately, there are other matters which seem to have 2 changed the underlying responses of the economy. Some of these changes have been the growing concentration of business, the development of conglomerates and multinational corporate concepts, and the heavy debt structures created to finance such ventures. The high degree of corporate financing expertise and the leverage employed almost assured problems if the rate of growth in the economy ever slowed. In a way, this development was a part of the excesses of speculation normally seen at boom times, but the concentration also reflected a structural shift which national stabilization policies were not adjusted to nor policy-makers equipped to handle. Concurrent with this concentration of economic and financial power came a defense production boom which centered upon many of these same companies. Excessive expansion was stimulated to meet the defense requirements, but then the massive corporate superstructures erected had to be severely trimmed as defense contract momentum began to falter. Unfortunately, the impact of this yoyolike change was concentrated both corporately and geographically. Moreover, it was accompanied by some very large speculative endeavors containing the seeds of their own destruction. As industry concentrated, so did union power. And with this power, a steady diet of rising wages and costs fueled the price increase efforts of business, which further stimulated the large capital goods boom and brought faster introduction of laborsaving devices. The high cost of doing business domestically turned more business eyes on foreign fields, where labor costs were more moderate. This chain of events was reinforced by another shift in American life which had been underway since the thirties-to increased welfare, Social Security, retirement, and fringe benefits. These and other social efforts, including the newer ones in ecology and pollUtion, brought business costs to a critical level and further supported business decisions to raise prices and to produce abroad for export to the U.S. market. These trends converged in the late 1960's, causing a massive increase in imports, a growing lack of competitiveness for U.S. exports, and a serious acceleration of the deterioration in our balance of payments. An overemphasis on cyclicaIl~ sensitive durable goods productlOn, both for domestic use and for export, brought renewed instability to the U.S. economy in the past two years. The shifting consumer I 1 - I r ( I preferences toward small, low-cost autos, the cutback in airline travel a~d too rapid obsolescence of al rli.~e equipment, the foreign comPetItIOn in basic steel and in autolllated, microminiaturized, and ~olid-state consumer goods, and ~e growing independence of foreIgn nations from many American brod~cts were all facets of the cuteack In U.S. production growth. oncOmitantly, the wave of con~Ull1er and business sentiment urned to pessimism, and the nor:al ~?vances in sales shifted to abIlity and even recession. The causal factors of this wavelike shift are too numerous to cover but inc uded the disenchantments with ~Ingl prolonged '. and costly war, a seemf Y flgId Government position of Urther involvement, the slow r·rogress in correcting racial injusIC~, and the glacial change in Clal priorities and progress. f1ese-accompanied by the fears o ayoff, the uncertainties of war T I I , r and draft-induced career interrup- the limitation on the unemploytions, the rising costs of living, and ment rate has caused a wider the unknowns of international political tolerance of the rate of financial crises-brought the coninflation. To a considerable extent sumer to a wait-and-see attitude, this political tolerance has been ' if not one of positive retrenchment. matched, if not exceeded by a Personal savings rose to record ~i?espr~ad, popular acce~tance of levels as consumers, in a normal nsmg pnces, especially where unresponse, shifted toward liquidity. employment is the alternative. On top of these changes, the This fundamental shift in attitude economic recovery and boom of coupled with a growing intoleranc~ nearly eight years had bred its of conditions thought susceptible own inefficiencies and instabilito governmental correction has ties which cried for correction, had important implications' for the cost-control moves followed the use of traditional aggregate stabiliconsumer restraint,.and business zation efforts. On the other hand sought new ways of doing busipublic irritation at the steadily , ness without additional labor rising price level has created a inputs. The years of relatively growing support for direct intervention measures. cost-free restraints had built an overhead which could be sustained A~ong ~ith the developing ecoonly if sales advanced in an nomIC shIfts, there were important accelerating fashion and only if changes in the financial area which credit were freely available at low also bear some measure of responcost to meet the interest burden of sibility for the current problems. excessive debt positions. One of the significant shifts ties Paralleling the development of directly into the attitude change social and welfare concerns has which brought new and enlarged responsibilities to all levels of been a fundamental Government policy commitment to full employ- government to correct social, serment. While the definition of full vice, and educational problems. At the local level, the massive employment has varied over the postwar period, the political trends pro,hlems of urbanization, crime, tended to deepen the commitment. raCIal concentration and discrimiIn consequence, by the midsixties, nati?n, and growing municipal the practical margin of tolerance servIces brought financial pressures leading to sharply higher levels of for the oversensitized unemployment rate had been reduced to less debt and taxes. Pressures on the Federal Government were accenthan two points, or from 4 percent tuated by public demand for serto 6 percent unemployed, despite vices not available or attainable the fact that major changes ocfrom local or state governments. curred in the labor force reflecting Th~ net result of these intense growing female and teen-age ~~r ticipation. Although the publiCIzed pressures over the past decade was trade-off of unemployment and in- a sharply growing level of public expenditures on welfare and serflation has not been proved in a strictly proportionate sense, there vices and rising budget deficits. is a sufficiently practical offset that The implications of these deficits r llu' Slness Review / October 1971 3 can scarcely be overemphasized in terms of their importance to debt management and fiscal policy, money market conditions, and monetary policies. With an effective bond interest rate ceiling of 4* percent, the Treasury had to finance the deficits by short and intermediate-term issues. The average maturity of the public debt shortened dramatically, and short-dated issues flooded the market. Because of their wide marketability and transferability, such issues formed an important secondary liquidity reserve from which banks could rapidly obtain funds for lending purposes. Perhaps more important, the financing of such issues often involved credit to Treasury tax and loan accounts and was ultimately supported by central bank reserve creation. The pressure of large short-term issues also had important rate effects, with rapidly rising short-term rates causing a sharp distortion in the normal yield curve. The large budget deficits also created fiscal policy problems in the attempt to raise tax revenues and minimize shortfalls against expenditures. Perhaps the most important problem created by the large budget deficits has been the interference with monetary policy efforts toward stabilization. As already indicated, large deficits must be eventually financed by reserve creation by the central bank. This injects new supplies of high-powered reserve credits, which can then be used for bank credit expansion. At a time when the Federal Reserve was seeking credit restraint, such deficitinduced reserve injections limited 4 opportunities to pursue a restraining monetary policy. Another element of instability has been the foreign official purchases and sales of short-dated Treasury issues. At times, these have been in such massive amounts as to interfere with the orderly conduct of open market operations. Concurrent with these developments was a major shift in depositor attitudes at commercial banks. Leading the way had been the corporate treasurers' efforts to maximize returns from idle cash balances. This policy brought a new element of instability as funds shifted in massive quantities between domestic financial institutions, between new and older forms of debt instruments, and even between domestic and international institutions and investments. Such shifts, often on very thin margins and short notice, caused uncertainties in the availability of funds at depositary institutions and excessive rate competition, both domestically and with foreign nations. As interest rates advanced, individual depositors became interest-conscious and a large disintermediation of funds from depositary institutions developed. To take advantage of the growth of competing investments where rates were not restricted by Federal Reserve regulation, many individuals withdrew funds for direct investment. To some extent, these corporate and individual depositor moves were offset by strongly competitive banks and their innovative efforts to obtain funds for loan extensions. Thus, there developed new nondeposit sources of funds, among which were bank issues of capital debentures, issues in the commercial paper market, and heavy sales of assets to nonbank institutions, both financial and otherwise. An even more important neW source of funds was the borrowing of Eurodollars. The Eurodollar market developed as dollars piled up abroad as a partial result of the continuous deficits in the U.S. balance of payments. As competition for Eurodollars forced higher interest rates abroad, the market pulled more and more dollars from the United States, from both corporate and individual holders. The instabilities developing from this huge unregulated financial market were matters of great concern to the United States and foreign nations. If nothing else, the U.S. deficit was strongly influenced by the ebb and flow of these borroWings abroad. For the foreign nations, the large inflows created problems in effectuating their domestic monetary policies. - r [ I I Of course, the sharp growth of the Eurodollar market was only one result of our failure to correct t?e U.S. balance-of-payments defiCItS. Of equal significance in our catalog of the causes of crisis were ~he ~rowing levels of official dollar oldIngs and their actual and Potential drain on U.S. reserves. l?espite recurring crises, the crea~Ion of the swap network, the I~terest equalization tax, the foreIgn credit restraint programs the ~o-ti~r gold market, and the iarge . ancIngs by special Treasury ~sues to foreign nations, the dollar 9ard continued to grow and fe~al?ations depreciated the dolar s International stalJ.ding. As pres~ures built up, there were re~urrIng crises precipitated by large und shifts into the stronger cur~:n?ies .. Fina~y, with nearly $10 dil~on In foreIgn accumulations unng JUly and early August, pressures forced the United States to suspend convertibility from dol- ) [ lars to gold and float the dollar on the foreign exchange market. This action also forced attention to the need to restructure the financial mechanism for international settlements. As I have indicated, the primary source of the developing international instability was the continuing and growing American deficits, which, in turn, partly reflected the persistence of inflation in the U.S. economy. Despite the long-term nature of the balance-of-payments problem, there has been a noticeable lack of effective action to reduce these deficits by fundamental policy shifts. The causes of the deficits have changed in emphasis but have generally included capital outflows for investment abroad, Government grants and loans, Government purchases abroad, and military support for troops stationed abroad. On several occasions, the repayment of Eurodollar borrowings and foreign sales of U.S. securities were important sources of deficits. Throughout the postwar period, trade barriers materially limited American exports. Still other sources of instability in the past few years have been the lessening impact of monetary policy and the occasional errors or insufficiencies in policy. The latter were unfortunate but, as a longstanding problem, were relatively insignificant until 1968. A relaxation of restraint at that time has since proved to be a major error. Similarly, in early 1969, the Federal Reserve acquiesced in a national policy of "gradualism" and agreed to a moderate level of restraint in the face of the strongest inflationary pressures of the decade. This policy of gradualism permitted a continuation of inflation to the point where employee demands for compensatory wage increases be?ame.a new stimulant to price mflatIOn. The overall policy of gradualism, of course, reflected the public attitude on the overriding importance of limiting unemployment and other costs of stabilization. It is abundantly clear to me that the costs have been even greater than under the older policies of concentrated stabilization efforts. A part of the apparent lack of full effectiveness of monetary policies has stemmed from the financial and structural shifts already noted. The growth of Eurodollars and the commercial paper market as sources of funds for banks diluted the impact of system restraining actions. Similarly, the growth of nonbank financial institutions and of direct investments by former bank depositors has shifted a sizable volume of financial transactions away from commercial banks, where the initial impact of monetary policy is centered. The result of these and a myriad of other changes and shifts in the U.S. position has been a buildup of inflation and inflationary expectations. As these permeated our economic structure, business and consumer decisions began to give heavy weight to future price increases. In turn, these decisions accelerated the price advances, and inflation furthered its toll on the competitiveness of American products in both domestic and foreign markets. As price increases became more visible and prolonged, labor rates were adjusted for cost-of- ( llUs·lhess Review I October 1971 5 living increases. Such wage changes It seems to me that our experipushed up business costs and were ence just reemphasizes the validity themselves the cause of new rounds of some fundamental economic maxims. of price advances. The cycle then repeated and repeated until last • Excessive money creation month, when it became abundantly reduces the value of money and clear that this vicious circle must fuels inflation. be interrupted. • Bad or depreciating money Concurrently, all the frustradrives good money out of circulation. tions, ineffectiveness, implicit depreciation, and forced absorption • Confidence in value retention of dollars converged in a massive is mandatory for a continuously international financial crisis. In acceptable currency. May, the market pressures forced • Consumers still look for Germany to float its mark, and quality at the cheapest price rethree other countries either floated gardless of place of production. or revalued their currencies. The • Confidence is a prime requipressures continued, however, and site for economic recovery. by early August were again accel• Retribution for economic or financial excesses and errors is erating to the point that market inevitable. participants were looking for a dollar devaluation. Further drains • Procrastination in taking needed forceful action is likely to on the U.S. gold stock, heavy use breed crisis. of the Federal Reserve swap Perhaps someday we will learn transactions, and large sales of enough about the complex actual special Treasury issues still failed and motivational processes of our to stem the tide. Very large moveeconomy to anticipate its reactions ments of funds by multinational by timely stabilization moves. corporations to protect against a Until then, however, we had better dollar devaluation or depreciation pay closer attention to the proved added to the speculative flows in economic fundamentals and strive the exchange markets, and foreign nations were simply swamped with for policies tuned toward a balance between real and monetary growth, dollar inflows. resisting the temporarily alluring In this setting, President Nixon features of excessive growth and moved boldly to suspend dollar convertibility, place a surcharge on stimulation. A central feature of this balance must be an assurance imports, and freeze wages and of effective monetary and fiscal prices. I will not appraise these authority and control, or we are moves nor speculate on their evenlikely to continue down the primtual outcome. Instead, having painted the broad outlines of some rose path of direct intervention and the subsequent inevitable loss of the causal factors, I turn to the of some of our most cherished lessons we might learn, hopefully to avoid a recurrence of such crises. freedoms. 6 New par banks The Keller State Bank, Keller, Texas, an insured nonmember bank located in the territory served by the Head Office of the Federal Reserve Bank of Dallas, was added to the Par List on its opening date, August 26, 1971. The officers are: Nick H. Theodore, President, and Jay C. Sharp, Vice President and Cashier. r I [ i ( I I ( ( - The First State Bank, Denison, Texas, an insured nonmember bank located in the territory served by the Head Office of the Federal Reserve Bank of Dallas, was added to the Par List on its opening date, September 1, 1971. The officers are: Donald L. Hopkins, President; Tom Winters, Vice President and Cashier; and John Belzer, Vice President (Inactive). r r I I ( ( I I I ( I nUs·Uless Review I October 1971 7 Research Department Federal Reserve Bank of Dallas Station K, Dallas, Texas 75222 Federal Reserve Bank of Dallas October 1971 Statistical Supplement to the Business Review -- Credit . at' weekly reporting com~~rclal banks in the Eleventh Disrlct rose considerably in the four ~eeks ended September 22. The Ulcrease, Pa . . in line with a sizable exf nSlOn In deposits, was accounted tort mainly by a substantial gain in o alloans. The rise in loans resulted pri~arilY from a marked increase in emand for business loans which IIIay have reflected some improve' ~ent in general economic condi.10ns. But real estate loans also ~ncreased substantially in response ~ the.continued high level of con!urucbon in the District. And conmer loans were considerably St ronger. Total investments expanded juch less than usual for this time ? Year. There was only a slight rise ~~ holdings of Government securis~es, ~~d holdings of municipal cUflbes rose slightly less than UsUal. d Alt~ough the expansion in total abPoslts was significant, it was only Pe o.ut half that of comparable ThflOds of other recent years. ti ere Were substantial inflows of ri lll~ and savings deposits, but the Se In demand deposits was com~~~ativel~ small. Both large CD's Sa ~tanding and other time and u 'lIngs deposits rose more than i;ual. On balance, reporting banks n creased their borrowings from thndeposit sources-particularly in e EUrodollar market. ;~tal nonagricultural wage and ~ ary employment in the five Sl·uthwe~tern states was up c 19htly In August, rising 0.1 per- oe;t above the level for July and b' f Percent above the level a year s~ ore. The monthly change was aU due to offsetting movements in manufacturing and nonmanufacturing. Manufacturing employment dropped for the second consecutive month, falling to a level 3.9 percent below a year ago. However, it remained above the three-year low registered in March. N onmanufacturing employment rose 0.1 percent over July, continuing its fairly flat trend of the past five months. The major contributor to this upward movement was a 3.2-percent increase in mining employment. The number of jobs in transportation and public utilities also rose, advancing 0.6 percent. Employment in trade was up 0.4 percent. However, substantial drops of 0.8 percent in construction employment and 0.7 percent in government employment prevented any significant overall gain. Finance and services showed essentially no changes. Because of drouth in the first part of the year, crop production in states of the Eleventh District will probably total slightly less this year than last. The slight decline in crop production, however, is expected to be more than offset by a moderate increase in livestock production. As in other recent years, the prospects for a gain in livestock production are due mainly to the increased production of beef cattle. This expansion, in turn, results primarily from growth of the cattle feeding industry in Texas and the increase in beef herds in the eastern part of the District. Of major crops in the District, only cotton and rjce are expected to show gains over last year. Although grain sorghum acreage for harvest is about 5 percent greater than last year, dry weather in some a~eas has reduced the expected YIelds to a total slightly less than last year. The impact of the drouth on winter wheat was severe, cutting production about a third from the 1970 crop. Both Texas and Louisiana cut their oil allowables for October. In Texas, the allowable was reduced f~om 65.1 percent of maximum effiCIent production in September to 63.2 percent, following reports that crude inventories were greater than needed and that a refinery processing Texas oil had shut down. In Louisiana, where indications were that purchasers would also need less crude, the allowable was cut from 73 percent to 70 percent. The seasonally adjusted Texas industrial production index continued to hover in August around 180 percent of its 1957-59 base. Although the level of output was high, it had shown little change for the.pa~t year. Mining was the only major mdustry group to register a significant month-to-month change in output, a gain of 1.4 percent. Although production of durable goods increased only 0.4 percent over July, there were significant increases in two areas. Production of 'nonelectrical machinery rose 3.8 percent, and production of lumber and wood products rose 3.3 percent. Compared with a year before, the strongest durable goods production was in furniture and fixtures, up 7.3 percent. The weakest was in transportation equipment, down 24.2 percent. Total production of nondurable goods was essentially unchanged from July. The output of paper (Continued on back page) CONDITION STATISTICS OF WEEKLY REPORTING COMMERCIAL BANKS Eleventh Federal Reserve District -- (Thousand dollars) ASSETS Sept. 22, 1971 Aug . 25, 1971 Sept. 23, 1970 Federal funds sold and securities purchased under agreeme nts to resell . .... .. .....•..... Other loans and discounts, gross .. .•........ ... . 1,214,238 7,011,139 904,189 6,881,874 428,155 6,130,042 Comm ercial and indu strial loan s . ............ . Agricultural loan s, excluding CCC cer tincates of interest . • •.. ....... .. ....... loans to brokers and deal ers for purc ha sing or carrying: U.S. Government sec uritie s... ............. . Other securities .. •• ... ....... ... . . . ... .. . Oth er loan s for purcha sing or carrying : U .S. Government securities ... ... ..... ..... . Oth er se curities .. • . ......... ... .. .. ...... loans to nonbank flnancial institution s: Sales flnance, personal flnance, factors, and oth er business credit compani es • . .... . Oth.r •. •.••.•••. ••••..• • ••..••. .. •..•. Real estate loans . ..... .. .. .. . ......... ... . loans to dom es tic comm ercial banks• ...... .. .. loans to foreign banks.• .•. ... ....... ...•... Consumer instalment loans . .. . .. .....•....... loons to foreign governments, offlcial institutions, central banks, and international institutions .•.. ....•..•............•.•... Other loons .... . .•.... ...•.•••...•.. ...... Totol investments ~ .•••.....•.............•... Total U.S. Government se curities ... ... . . . .. . . . Treasury bill s . ...•........••.•.......... Treasury certi ficates of indebtedness . . .•.... Treas ury notes and U.S. Govern ment bonds maturing: 1 yeor to 5 years . ••• ......•... •. . . .. .• After 5 years . .. Obligations of states ond political subdivisions: Ta x warrants and short· term notes and bills . . . ••••• 0 ••••••• 0 0 ••• 0 • • All other •.••••••.••..•••.•••••••.•.•• • • Other bond s, corporat e stocks, and sec urities : Certiflcates representing participations In Federal ag ency loans . .. .. • 0 0 •••• 0 Ca sh it ems in process of coll ection .••• Reserves with Federal Reserve Bank .. Currency and coin . .• Balanc es with banks in the United States Balances with banks in foreign countri es . . Other ass ets (including investments in subsidiaries 0 0 ••• 0 •••• 0 •••• 0 • • 0 0 0 •••• 0 • •••••••• •••••• 0 •• • •• 0 0 •• •• •• 0 122,227 98,297 512 54,019 519 47,891 507 34,281 5,682 429,785 5,306 434,259 2,296 413,748 137,143 484,769 855,208 16,467 31,259 792,040 149,626 485,089 828,412 13,559 29,321 783,7 49 169,931 373,379 623,733 5,943 9,845 739,740 0 830,004 3,094,553 0 817,628 3,103,B15 0 717,320 2,703,703 108,301 0 1,003,884 128,298 0 923,165 82,684 0 156,875 589,651 129,964 135,9B2 602,817 136,787 187,170 563,142 90,169 57,138 1,904,233 49,768 1,895,453 47,257 1,546,896 15,834 132,557 1,243,645 837,268 94,789 414,904 9,302 15,810 138,900 1,170,977 981,346 96,403 408,938 8,328 110,079 76,306 1,101,929 964,483 91,737 562,312 8,498 477,515 470,912 486,335 ---- Sept. 23, 1970 Total deposits ... .......................... . . 11,033,079 10,929,399 !!!!!'.!- 6,274,815 4,386,249 257,209 236,306 1,270,532 6,266,575 4,269,215 321,685 186,393 1,359,886 5793,333 3'907,473 , 293,008 235,247 1,250,145 2,137 33,241 89,141 4,758,264 6,293 31,897 91,206 4,662,824 4,235 22,492 80,733 4,003,342 1,065,072 2,572,961 1,021,053 26,140 56,638 1,060,334 2,510,922 987,836 29,786 56,546 922,383 2 153,709 '795,115 45,93 4 66,716 15,300 1,100 16,300 1,100 18,385 1,100 1,685,217 77,746 376,073 119,899 34,639 1,070,700 1,482,104 41,656 354,183 132,556 21,589 1,065,295 99B,60 7 98,8 44 421,13 1 130,560 16,360 1 015,017 ~ TOTAL LIABILITIES, RESERVES, AND CAPITAL ACCOUNTS ................... 14,397,353 14,026.7 82 ~ Total d e mand d e posits . . . . .......... . .... ... Individuals, partn erships, and corporations .. . . States and politica l subdivisions . ... ....... . U.S. Gove rnm e nt . .. . .................... Bonks in th e Un ite d States . .. . . .. . .. . ...... Foreign: Govern ments, offlcial institutions, centra l bonks, and international institutions•• .... Commercial banks . •. . ... ..•........... CertiAed and offic ers! checks, etc .•. . . .. .. ... Total time and saving s deposits ..... ... ....... Individuals, partnerships, and corporation s: Savings d e posits ... .. ........... . .... .. Other time d eposits ............ ••....•. Stat es and political subdivisions . .... . .. ... . U.S. Government (including posta l savings) •. . • Banks in the United States . ..•....•.•.. ••.. Foreign: Governments, ofncial institutions, central banks, and internationa l institutions • • .... Commercial banks • •.. ........••••.•.•. Fed eral fund s purcha se d and securities sold under agreem ents to repurcha se • •.•• . . ....... Other liabilities for borrowed money . •...•••.... Other liabilities . . • . . ........•..............•. Reserves on loans•• •••...•..•....••••..•..... Rese rves on securities .. .. . ........ •• ..•.•.• .. . Total capital accounts . •. . • . •..... " ••.. ..... . •• • 0 • •• 0 not consolidated) •••.••••••.•• ••••••• •• .. • . TOTAL ASSETS .......................... 14,397,353 ---14,026.782 ---12,477,194 Eleventh Federal Reserve District (Million dollars) July 28, 1971 Aug. 26, 1970 loan s and discounts, gross . •. . UoS. Government obligations .... Other securities • ••• Reserves with Federal Reserve Bank • .•••.•. Cash in vault . .• •• . .... •... Ba lance s with bonks in the United States •• .. Balances with bonks in foreign counlriese • •. . Cash Items in process of collection • • •••. ... . Other o ssets e . .... •• . . .•••. . .. • • . • . .••• 13,648 2,347 4,291 1,562 291 1,185 11 1,360 959 13,482 2,370 4,356 1,375 285 1,262 12 1,444 929 11,976 2,048 3,466 14 48 '279 1 2B4 ' 10 1 234 '902 TOTAL ASSETSe • • • ...•••.••••.••••••• LIABILITIES AND CAPITAL ACCOUNTS 25,654 25,5 15 1,749 9,695 9,610 1,715 9,669 9,609 21,054 1,574 1,139 1,887 20,993 1,544 1,098 1,880 25,654 25,515 ASSETS 0 •• • •• 0 • 0 Total reserves held •.• .... .•.... With Federal Res erve Bank. Currency and coin . .• .•. Required reserves •••• .. Excess reserves . • Borrowing s . . .. .. .. .... Free reserves •. 0 0 0 0 ••• 0 •• 0 •••••••••• 0 •• 0 •• • ••••••••••• 0 TOla l reserves held .... ....... 0 0 0 0 0 • •• •• • 0 0 0 With Federol Reserve Bank .•.. Currency and coin . .•.. Required reserves •.. . . Excess reserves .• .. .. Borrowing s . .. Free reserves . . 0 0 0 0 • 0 0 0 0 •••••• •• 0 • 0 •• 0 •• • 0 0 0 • 0 0 •• 0 0 ••• 0 • 0 0 ••• 0 ••••• • ••• 4 weeks onded Aug. 4,1971 4 weeks ended Sept. 2, 1970 829,401 772,374 57,027 829,497 -96 29,411 -29,507 757,363 700,022 57,341 778,310 -20,947 13,157 -34,104 885,831 685,758 200,073 860,128 25,703 7,350 18,353 876,924 675,974 200,950 852,623 24,301 7,974 16,327 794,567 605,534 1B9,033 773,478 21,089 8,395 12,694 1,717,457 1,459,760 257,697 1,704,142 13,315 11,618 1,697 1,706,325 1,448,348 257,977 1,6B2,120 24,205 37,385 -13,180 1,551,930 1,305,556 246,374 1,551,788 142 21,552 -21,410 All MEMBER BANKS Total re se rves held ... With Federal Reserve Bank ••.. Curr en cy and coin . ..... Required reserves .. •• ... Excess rese rves . .. Borrowing s • •• ... Free reserves. 0 0 •• 0 0 • 0 0 0 0 • • 0 •• 0 ••• •• •• •••• 0 0 • •••• • 0 0 0 0 ••• 0 0 0 0 0 • 0 ••• 0 • 0 0 ••• 0 ••• 0 0 ••••••• ••••••• ••••••••• • • 0 • • • •• ••• • 0 0 0 ••• 00 •••••• • • • • • ••• Total deposits . . .•.... ....• • • Borrowings . ... . ... ..••. 831,626 774,002 57,624 844,014 -12,388 4,268 -16,656 COUNTRY 8ANKS • 0 ••••••••••••••• 0 RESERVE CITY 8ANKS •• 0 (Averages of dally figures. Thousand dollars) Sept. I, 1971 • Demand deposits of banks .• •. •. . ..• Other demand deposits . . Time deposits • . .•••• .••••.. • Eleventh Federal Reserve District 4 weeks en ded 0 ••••••••••••• 0 RESERVE POSITIONS OF MEMBER BANKS - Aug. 25, 1971 Item 0 Item - CONDITION STATISTICS OF ALL MEMBER BANKS ••• All other (Including corporate stocks) ••••..•.. 0 121,493 ---984,791 Within 1 year ••• • • •••• .••• •• ..•. •... .• 0 3,164,2B8 ---2,941,022 ---3,252,758 Aug. 25, 1971 Sept. 22, 1971 LIABILITIES 0 •••• •• • •• Other lIabllities e •• ••• ••• • . • ••• • • • •• •••• • Total capital occounts e . ••••.. .. 0 •••• TOTAL LIABIlITIES AND CAPITAL ACCOUNTSe •••••••.••• .• ••••.• •• • - ~ - 1,591 8,989 7,889 18,469 1,22 4 1,1 44 I,Bl0 ~ ~ e -Estimated CONDITION OF THE FEDERAL RESERVE BANK OF DALLAS (Thousand dollars) Item Sept . 22, 1971 Aug. 25, 1971 I ----~------~----~------------------~- !I I ! BANK DEBITS, END-OF-MONTH DEPOSITS, AND DEPOSIT TURNOVER SMSA's in Eleventh Federal Reserve District - (DOllar amounts In thousands, seasonally adjusted) DEBITS TO DEMAND DEPOSIT ACCO UNTS' DEMAND DEPOSITS' Percent change --- I I 1971 (Annual.rat. bosis) Standard metropolitan statistical area ~~ONA' Tucson •••••••••• • • •• •• • •• ••.• • • • ••... ..•• :~~i~~I~:::::::::::::::::::::::: : :::::::::: : \ I Beaumont· Port Arthur· Orange . ••• ••. . . .....• . ... C,ownsville-Harlingen.San Benito .... . ... ....... . . C~~~~~nC~risti • • • • • ••• • • ••• ••• • • • . •• •• .••• ••• • I ~0f::~~:~: ~ ~ ~ ~ ;~ ~ ;~ ~ ~ ~ ~ ~ ~ ~ ;~; ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ tr~}~~~·:·::::::::::::::::::::::::::::::::::: I Ii a ve ston· Texes City •••..•• . .. • • •.....•.•.... . M~,~~':/horr-Edinburg ••• • • • • • ••.... • ••.••••• • r ~rg~~~~:LJ}} II;;;;;; I; II; I;;;;;; I; iii ii I I Tej a rkana (T.xa s-Arkansas) . •• • • • •.•••••••• • • • • r ~ c.nters...... . .. ............. ... ... .. . . . . . :i~ii~:~~,is:. ::::: ::::: :::::: :::::::: :::::: :: 8 months, 7,B99,34B 3,726,540 13,177,416 1,063,968 2,511,564 6,682,488 11 ,806,872 6,945,864 1,698,612 6,518,532 491,352 135,625,908 8,648,904 29,777,56B 2,942,256 121,273,200 1,076,676 6,1 69,284 1,728,228 2,166,876 1,753,632 1,537,296 22,004,904 1,189,704 1,591,848 2,494,956 3,744,576 2,8 15,188 $ lSIANA, Monro • • • • • • • •• • •• • •• •• • • ••• ..•... • • .... NEW Shrev. port •• •• ••• ••• • •• •• ••... • ••..•.••• TEXA MEXICO, Rosw.II' • • •• •• •• •• • • • • • • • ...• •.•• .... S, Abil. ne Annual rate of turnover August 1971 from August July 1971 August 1970 1971 from 1970 2% 10 20 4 12 7 14 2 -18 5 2 1 8 10 - 1 4 6 18 -4 l B% 26 54 21 15 17 34 17 37 42 0 15 16 31 9 18 8 15 21 16 7 26 21 13 12 10 23 20 21% 20 21 7 9 9 21 9 16 29 11 11 16 22 6 12 12 13 14 7 4 20 18 7 7 7 9 14 I 2 11 6 7 7 7 12 8 13% 20% $409,063,560 4% De , C posits of In d ividuals partnerships a nd c o rporati ons a nd of states and political s ubdivisions OUnty basis ' , August 31, 1971 August 283,242 102,642 284,170 41,798 110,007 178,953 337,118 260,236 82,034 266,747 33,347 2,470,649 284,129 706,8Bl 11 6,012 2,827,778 43,656 187,576 107,133 143,048 99,706 75,731 763,575 71, 11 2 75,312 105,218 136,697 126,908 $1 0,321,4 15 1971 Jul y 1971 28.6 36.5 47.7 25.0 23.0 38.3 32 .8 26.6 20.5 23.8 14.7 56.6 31.8 42.3 25.6 43.4 24.3 34.2 15.8 15.4 17.5 20.4 29.5 16.9 21.0 23.8 27.8 22.4 28.0 34.6 40.6 24.2 20.9 37.1 28.7 26.7 24.4 22.2 14.4 57.2 31.3 38.4 25.9 41.9 22 .6 29.7 16.4 15.4 17.1 18.4 28.6 16.0 19.7 22.1 25.1 21.4 28.9 32.0 35.4 22.7 21.4 35.3 26.9 24.6 17.7 21.2 15.3 56.5 31.8 35.2 24.0 41.2 25.1 30.2 14.9 14.2 17.8 18.4 27.7 16.4 19.8 24.2 25.5 20.5 40.2 38.9 37.8 August 1970 1 TOTAL OIL WELLS DRILLED S.cond BUILDING PERMITS ---- Area VALU ATION (Dollar amounts in thousa nds) Percent change August 1971 from NUMBER ~ August 8 mos. 1971 1971 August 1971 8 mos. 1971 July 1971 Aug. 1970 Louisiana ••••. . . .• •• .•.• • Offshor • • . •• •••• • •.••• O nshore ••••. • ... • •• . . New Mexico •.•.••••. . ••• 8 months, 1971 from 1970 "'RIZONA Oklahomo • • • •••••••• • ..• Texas . • • • •••• .••••• • • • . Offshore . •• • •••.•• •.• • O nshore • • •..•••...•• • UNITED STATES •••.•.•• • • . • TUcson lOlJISI AN~· • • • . • FOUR SOUTHWESTERN STATES • • . •••• •••. . .•••• 401 5,1 65 93 525 15562 443 160 126 682 1,629 41 4 14 423 69 4,084 65 176 73 83 120 53 1,692 58 45 $ 4, 167 $ 62,284 810 4,269 1,527 7,903 13,76 1 43,238 425 1, 138 4,103 1,2BI 848 6,634 14,896 288 3,887 3,398 562 30,906 423 1,652 563 690 620 528 13,050 480 329 2,430 631 547 1,338 9,747 1,246 2, 107 4,673 41, 11 2 217 9, 180 7,944 3 17 59,75 1 320 4,429 59 1 946 474 628 9,095 288 482 922 1,746 -19%-51% 64% quarter First quarter 1971 Perc ent chang e 1971 Percent change 1971 from 1970 cumulatlvo cumulativo 1,622 276 68 208 11 1 3 15 920 1,780 255 88 167 104 293 1,128 -8.9% 8.2 -22.7 24.6 6.7 7.5 - 18.4 3,402 531 156 375 215 608 2,048 -2.3% 1.3 - 16.1 10.9 11.4 -17.5 1.0 920 2,849 1,128 2,971 - 18.4 -4.1% 2,048 5,820 1.2 -9.6% o o o SOU RCE : American Petro leum Institute Monroe·West Sh Monro. .. . .. TEX ...~·v.port. • • • r I I ; } I "'bll.n• "'''' a rlll~ • • • • • • "'usl" •••• • • B. o In. • • • • • • • Bro~;::~m • • • • • Corpus Ch·: .: • Doll rlSh . . D."I~~·· ··· · . . EI Pas::·· · ··. Fort W •• . •• • Gal orth. • • • Hau:t"ston • • • • • lar.d~n. . . • • •• lubbock · • • • • • Midland · • • • . • Odessa··· ··. Part A • •• • • •• San / thur . • . • Son Ang. ,o.. .. Sherm~tonlo . • • T. xa k Wa c~ ana.. .. n...... Wlchil~ ·F~lis::: 3Z~ rOtal -- ~I.s •• • 12,090 100,006 128 208 30 92 8,072 -25 321 18,495 -53 - 12 101,282 -31 -32 12,059 -73 11 0 6,603 64 30 15 359 42,662 204,619 100 152 36 2,313 -29 77,064 27 96 82,055 -3 55 8,549 -52 -50 453,394 25 71 5,757 -56 -71 53,403 18 -38 8,05 1 18 77 5,740 68 250 4, 132 8 206 8,627 -73 142 81,375 -16 - 13 4249 10 -40 6:563 10 338 17, 164 -409 -658 14,450 15 33 22 -24 16 72 42 134 - 13 -21 33 44 90 53 5 32 149 - 12 -39 1 17 -60 22 -385 52 $17 1,697 $ 1,345,961 119 22 16% 46% 26% GROSS DEMAND AND TIME DEPOSITS OF MEMBER BANKS Eleventh Federal Reserve Distri ct (Averages of da ll y fig ures. Mil lion dollars) G ROSS DEMAND DEPOSITS Dote Total city banks Country banks 1969. August • •• •• 1970. Aug ust • •• •• 1971 , March ••••• April ••.••. Moy • •. •• . 10,250 10,530 11,219 11 ,555 11 ,348 11 ,354 11,507 11,468 4,746 4,816 5,117 5,274 5,2 16 5,224 5,314 5,246 5,504 5,714 6, 102 6,28 1 6, 132 6,130 6, 193 6,222 Reserve June •. •. •. July • • .... . Aug ust •••.• TIME DEPOSITS Reserve Total city banks Country banks 7,353 7,783 9,548 9,575 9,516 9,573 9,588 9,615 2,741 2,926 3,78B 3,736 3,688 3,69 1 3,696 3,714 4,612 4,857 5,760 5,839 5,828 5,882 5,892 5,901 VALUE OF CONSTRUCTION CONTRACTS NONAGRICULTURAL EMPLOYMENT (Million dollars) Five Southwestern States' - January-August 1971 July 1971 1971 1971 1970r 790 390 226 173 7,7 12 3,255 2,120 2,337 932 445 236 250 7,670 3,357 2,621 1,691 922 464 276 182 8,077 3,485 2,800 1,792 6,074 2,994 1,885 1,195 54,291 22,750 17,354 14,188 5,451 2,015 1,792 1,643 46,932 16,322 17,225 13,385 August Area and type FIVE SOUTHWESTERN STATES' •.• •.. ••. •..•... Res id ential building . . . . ... Nonresidential building . ... Nonbuilding construction .... UNITED STATES •..••••.••.• Res id ential building . .... .. Nonresidential building • ••. Nonbuilding constr uction .... Percent change June ~ Number of person. Type of employment Total nonagricultural wage and salary workers •• Manufacturing . .•...•. . . . Nonmanufacturing • •• •. • .. Mining . • . ••.••... . • • . . Construction •••• ••••••• Transportation and public utilitie s ... ... .. , Ari z ona, Louisiana, New Mexico, Oklahoma, and Texas r - Revised NOTE.-Details may not add to totals because of rounding. SOURCE: F. W. Dodge, McGraw-Hili, Inc. Trade •••• •••••••••••• Finance . .....•.•..•. . • Service ..•.•••• ••••••• Government ••...... . •. Augu.t 1971p July 1971 Augu.t 1970r July 1971 6,320,900 1,119,100 5,201,800 228,400 386,000 6,317,200 1,120,000 5,197,200 221,300 389,000 6,297,700 1,164,700 5,133,000 235,400 402,000 0.1% 0.4% _. 1 _3.9 J.3 .1 3.2 _3.0 _.8 _4.0 456,000 1,497,900 335,000 1,036,200 1,262,300 453,300 1,491,600 335,200 1,035,500 1,271,300 457,700 1,466,000 324,200 1,022,000 1,225,700 _.4 .6 2.2 .4 3.3 _.1 .1 _.7% - ~:~% Arizona, Louisiana, New Mexico, Oklahoma, and Texas p - Preliminary r - Revised SOURCE: State employment agencies 1 INDUSTRIAL PRODUCTION DAILY AVERAGE PRODUCTION OF CRUDE OIL (Seasonally adjusted Indexes) (Thousand barrels) July 1971 June August 1971p 1971 1970 180.0 196.8 195.5 197.7 136.2 291.7 179.2 196.7 194.8 198.0 134.2 291.7 179.4r 197.1r 197.2 197.0r 134.0r 291.7r 178.5r 196.7r 208.5r 188.9r 135.1r 274.0r 105.1 103.4 97.2 112.4 106.6 134.0 106.0 104.7 99.2 112.8 106.1 135.8 107.0 105.3 100.0 113.0 109.0 134.1 107.5 105.5 103.5 108.6 108.9 130.5 August Area and type of index Totol industrial production .• •• .. Manufacturing .....•..... ... . .. Durabl••••••••••••• • •• • ••••. Nondurabl • • •••• • • • • •••••••. • Mining • .......... .•• ....... •.. Utilities •• ••••• •• • ••••••••• ••. • UNITED STATES (1967 = 100) Total Industrial production .•••.. Manufacturing . .. .....• • ....... Durabl•••••• • • •• ••••••• ••••• Nondurable •. .....•.•..•..... Mining ••••.•••. • . .••••.•. 00 Utilities •••.• •••• • p- o ••••••••••• • Percent Augu.t 197 1 Jul y 1971 Augu. t 1970r 6,928.9 2,629.6 6,888.8 2,557.0 6,809.4 2,494.6 ~~t:~ -1 :~ Texas ....•••... . ...••• . Gulf Coast .... . ...... . West Texas •.. ........ 3,363.3 3,394.0 3,368.8 -.9 Ea.t Texa. (proper) ••••• 221.2 71.9 782.0 9,615.0 226.0 72.0 791.0 9,628.3 194.4 76.4 791.1 9,556.4 Area TEXAS (1957- 59 = 100) ••• Preliminary SOu~~V~~~d Board of Governors of the Federal Reserve System Federal Reserve Bank of Dallas and allied products increased 3.8 percent, and petroleum refining increased 1.8 percent. But the output of leather and leather products dropped 11.1 percent. Running 16.1 percent less than a year before, production of leather goods made up the state's second weakest manufacturing industry. The increase in mining was due to a 2.2-percent increase in the production of crude oil. And even Aug. ~ - chan~ July 1971 Augu,t 1970 -------------------------------------------------------FOUR SOUTHWESTERN STATES ••• • •.••••••.•••• Louisiana ••• ••••....••••• New Mexico • . ....•••.... Oklahoma • •• ••• .• • ••••.• Panhand le . ••• . .•.. .... Rest of state •...•• •. . .. UNITED STATES • ••• ••.••••• ~~~} l,m:~ ~~~:~ 1,~6~:g 1,~~=:6 0.6% 2.8 -~:~ -2.1 - .1 -1.1 -.1% 1':% _4:1 .7 -:~ _1.5 13.8 -g - • .6% ------------------------------------------------ ---r - Revised SOURCES : American Petroleum Institute U.S. Bureau of Mines Federal Reserve Bank of Dallas here, output was only 0.7 percent higher than a year before. Utilities remained unchanged. eight months of 1971 were 10 percent greater than for the same period a year earlier. Registrations of new passenger automobiles in Dallas, Fort Worth, Houston, and San Antonio were 8 percent lower in August than in July. Despite this decline, registrations were 17 percent higher than in August 1970 and cumulative registrations for the first Department store sales in the Eleventh District were 9 percent greater in the four weeks ended September 25 than in the corresponding period a year before. Cumulative sales through that date were 8 percent greater than a year before.
@FedFRASER