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For release on delivery

Remarks hy
G. William Miller
Chairman, Board of Governors of the Federal Reserve System
before the
National Urban League Conference
Los Angeles, California
August 7, 1978

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Thank you very much Andy.
guests, ladies and gentlemen.
to be with you today.

President Jordan, distinguished

For me, it is a special pleasure

When Vernon Jordan invited me to participate

in this conference, it took me only a micro-second -- responding
quickly before he changed his mind -- to accept.

I consider it an

honor to be a part of any Urban League meeting, and a very special
honor to have the opportunity to talk with you at this National
In the past, as Andrew Brimmer has pointed out or perhaps
hinted, my activities with the National Urban League have been in
my capacity as a private business executive.
new and unexpected role.

Now, I appear in a

It was only last December, as the then

new Chairman of the National Alliance of Business, that I persuaded Vernon and others to join the NAB Board in forging a new
partnership to intensify efforts to . provide jobs for the hard-toemploy.

My personal involvement was short-lived, because right

after Christmas, President Carter tapped me to be Chairman of the
Federal Reserve.

The rumor is that when I was able to get Vernon

to come to the White House the President decided I should take
over the central bank.

I never aspired or expected to be a

banker and certainly not a central banker, so I'm as surprised
as you are to find myself standing here in this role.

- 2 -

In checking back, it seems that only one other central
banker has ever addressed the Urban League -- that's Andy Brirrnner,
when he was a Governor of the Federal Reserve.

I'm proud to fol-

low his footsteps and to make this occasion perhaps another
first -- by being the first central bank Chairman to share this
It's timely and appropriate.

It is increasingly urgent

that you in the National Urban League understand and help to shape
the economic policies of our nation -- monetary and fiscal -which may well determine the prospects for achieving the National
Urban League's own agenda.

Indeed, economic policy may well be a

critical factor in breaking the grip of poverty on the lives of
millions of Americans and in paving the way toward the universal
social justice which must be the essence of our national purpose.
The theme of your conference is well chosen:


Cities for a Better Nation."
The role of the city has changed over the centuries from
a place of physical security, to a seat of government, to a trading market, to a religious and social hub, to an industrial base,
and to a center for transactional business.

The time is right

for a re-emergence of the city as a vital force in our society.

- 3 -

The new city needs to be less specialized and more balanced -encompassing all the functions of government, education, culture
activities, religion, transactional business, production, transportation, health care, marketing and family life.

There are

compelling reasons to move in this direction.
One is energy.

The rising cost of energy makes it impera-

tive to seek a higher and better use of available resources.
Because of its geographical concentration, a city makes it possible to carry out society's activities with less total energy

Transportation needs are greatly reduced.

Inflation is another factor.

The cost of operating in

spreadout ,. scattered communities becomes even higher as inflation
drives up all costs.

Environment is another consideration since

urban sprawl carries a high environmental cost.
changes also favor cities.


Longer life expectancy means a rela-

tively older population with more need for the services a city
can supply.
There are social considerations too, including the changing
role of women in society.

With more women pursuing independent

careers -- an encouraging trend -- the city becomes a more convenient family base.

- 4 -

Then there is the human factor.

Willie Sutton, when

asked why he robbed banks, replied, "Because that's where the
money is."

To paraphrase, we need to be committed to assuring

that America has better cities because that's where the people
All Americans have ·an obligation to help revitalize the
cities we have too long neglected.

We need to turn that neglect

and the resultant decay -- and in some cases the wasteland -- of
the central city into a vibrant metropolis, with bustling neighborhoods where people can live and work and play -- and pray -in harmony.
And we must do so without misplacing the poor whom we have
left to inherit the blighted cities", but rather involving them as
a dynamic element in a re-energized urban society.
None of this is, as you know, the primary task of the
Federal Re.serve System.

But the Federal Reserve does have the

principal responsibility for the nation's monetary policy -- the
control of the supply a_ d cost of money and credit that in turn
influences the course of all economic activity.

In exercising

its responsibilities, the Federal Reserve can affect the prospects for realizing many of your own aspirations.

- 5 -

So let me talk to you for a few minutes as your central

commenting on inflation, employment, and the choices

between economic growth and recession.
We have - come to our current· difficult economic climate
as the results of many years of ineffective economic management.
The past dozen years have been characterized by dramatic shocks
and discontinuities.

The war in Vietnam was divisive.


state of domestic tranquility was interrupted by civil disorders.
Failure to pay for that war planted the seeds of inflation.


threat of inflation lead to imposition of wage and price controls
which proved to be unworkable, inequitable and ineffective.
international monetary system broke down.


With wage and price

controls holding down the lid, the U.S. economy was re.flated and
allowed to build up a high-pressure head of steam.

When the

controls were lifted, the steam blew off, contributing to doubledigit inflation and double-digit interest rates.
To compound the difficulties, America, in a weakened state,
provided the opportunity for the oil boycott to usher in a fivefold increase in world petroleum prices.
incident, and its aftermath,

Then the Watergate

led to a general _
public disaffec-

tion with all institutions, public and private.

Finally there

- 6 was the great recession of 1974-1975, with nine per cent unemployment and the greatest economic distress since the Depression of
the 1930's.

A very dismal record.

We are now in the fourth year ·of economic recovery from
those troubled times ·.

The level of prosperity has advanced con-

Social and economic and political conditions have

become more stable.

Yet, in the face .of progress, there remains

nagging uncertainty.

This is not because of any lack of agree-

ment on economic goals.

There is a universal accord that our

objectives should be full employment and price stability.
The uncertainty arises because we have not yet found
agreement on the means to attain these goals.

We have not yet

had a clear vision of the new directions we must take to free
ourselves from the mistakes of the past.
I am convinced that America's economic goals can be achieved.
The means to do so are at our disposal.
the will.

All that is required is

We should realize that there is a confluence of individ-

ual self-interests that compels us to join together in a common

Divided, we shall realize none of our goals.

shall accomplish them all.

United, we

- 7 Inflation is now a clear and present danger.

It is a

matter of priority, not because it has precedent over the quest
for full employment, but because under present circumstances it
is the primary obstacle to achieving full employment.

I person-

ally reject the proposition that full employment causes inflation.
Quite the contrary:

inflation causes . unemployment, and the only

chance we have for full employment with price stability is to curb
the inflationary forces that threaten to destroy us.
Inflation destroys values and incomes.

It dries up job-

creating investments, impairs the prospects for new housing and
other construction, and breeds recessions.

It creates financial

strains on individuals, businesses, and government, accelerates
government spending, causes higher interest rates, and disrupts
international trade and the stability of the dollar.

It is

especially hard on the poor, the elderly, and those who live
on fixed incomes.

In short, inflation is the most destructive

force in our economy today.

It is the cruelest tax of all.

is a serious obstacle to human progress.


It destroys values;

it destroys jobs; it destroys people.
The Federal Reserve System has limited resources to combat

Monetary policy, which is our role, has its limitations.

- 8 -

We are stuck with a dilemma.

On the one hand, if the Federal

Reserve acts alone to curb inflation -- by tightening up credit
through monetary policy ·-- then the consequence will be a shortage of credit, a slowdown of the economy, and the prospect of a
·recession within a relatively short time.

But, if the Federal

Reserve fails to act to curb inflation and prints the money to
allow inflation to continue, then surely within a very short
time we will again see double-digit inflation, double-digit
interest ·r ates, and a complete breakdown of opportunities for
investment in jobs and continuing growth.

In that case, the

result will be, not a recession, but a serious economic downturn of even greater magnitude then we experienced in 1974 and

So the F'e deral Reserve, for its part, must walk . a very
narrow path, and it is for that reason that we have called upon
other participants in government eco.nomic planning to do their

to relieve some of the burden -- so that we can work

together to curb inflation without bringing on a recession.
The Federal Reserve -- or at least I personally -- reject
the idea that a recession will contribute to solving our problems.
A recession will not do enough to curb inflation and moreover

- 9 will do a great deal of damage to people throughout our country.
For this reason, we are endeavoring -- to the best of our
ability -- to walk this narrow tight rope, restraining inflation
yet not allowing the economy to spin into a recession.
Let me share with you one of our other dilemmas.


present circumstances, macro-economic policies -- the monetary
and fiscal policies determined at the Federal level -- cannot
assure us of full employment.

And the reason is simple:


today's conditions, if we should stimulate the economy enough
to provide a job for all those who need and should have one, the
inflationary pressure we build up by doing so would produce the


It would result in credit abundance and uncer-

tainty as to future markets, prices, and interest rates that
would dry up investment, dry up economic activity, and create
a serious recession.
And it is for that reason that monetary policy and fiscal
policy need to be coupled with programs that are targeted, specifically, to the needs of the unemployed

the needs of the

blacks and other minorities, the needs of teenagers, the needs
of those in the core center of cities who have been left in the
backwater 0£ our economic misfortune.

It is for this reason

- 10 -

that the National Alliance of Businessmen continues to work with
President Carter and the Administration to seek a new program of
private sector initiative to create jobs -- jobs targeted on the
unemployed, jobs in the private
for continuing upward mobility


with the highest prospect

employment that will lead to

Let me turn for a moment from these difficult problems of
monetary policy to comment for a moment on the role of the
Federal Reserve as a regulatory agency.

We know today that you

are concerned with needs that involve not just opening the doors
for 'employment -- not just the quantity of employment -- but
beyond that, the quality of employment.

We know that these needs

involve the development of enterprise.

We know that they involve

access to the economic resources that are essential if blacks and
other minorities are to have their full share in our economic
The Federal Reserve -- as Andrew Brimmer pointed out -does have a role in this activity through writing and enforcing

I merely want to assure you that we will continue

and improve our emphasis on fair access to credit for all
Americans, on assuring that housing credit and funds are available without discrimination -- in any place or for any reason.

- 11 -

What is it that I would like you to remember from these
brief remarks today?

I would like for you to remember only a

few things.
One, that inflation is a clear and present danger which
can upset your own aspirations.

It is a threat to achieving the

full employment and economic progress which you seek individually
and collectively.
Second, I would like you to remember that full employment
is compatible with the fight against inflation; do not be misled
by those who claim the contrary.

Only by bringing inflation

under control can we assure full employment.

And, I would like

you to remember, as a part of that message on employment, that
in the meantime

while we're waiting to find new directions

for t .he economy

we must concentrate anew on the poverty pro-

grams which offer the best chance for providing sound employment
opportunities for those who are disadvantaged.
The third thing I would like you to remember is that we
must all reject the solution of recession.

It is not an accept-

able way out of our problem, and we must not allow anyone to
convince us that it is.

- 12 The fourth thing I would like you to remember is that the
Federal Reserve will do its best to be a positive force by assuring equal credit -- and equal housing opportunity, as represented
by credit availability -- · to every American.
And the fifth thing I would like you to remember is something that I have mentioned only in passing, but I would like to
emphasize it and hope that you .will follow up in the near future.
The National Urban League needs to have a stronger voice in
economic affairs.

With economic policies so critical to the


ress you seek to achieve, it is essential that you not abdicate
in this area, but rather that you move as quickly as possible to
assemble the talent and the respected voices, and that your presence heard -- in Washington and throughout the land -- on those
economic policies that can assure the progress we all desire and
we all seek.

Fourteen years since the passage of the Civil Rights Act
is a short time, and it is a long time.
but not enough.

The issues have changed.

There has been progress,
The issues have become

more sophisticated; the barriers, more subtle.

It is time for

the civil rights movement to move into a new stage II, with new
confidence, new profess.i onalism, and new directions of its own.

- 13 Last night, Vernon Jordan said a number of important things to
you, and I'd like to just quote one paragraph.

He said, "Two

hundred years ago Americans made a revolution, but they didn't
complete it.

They stood at the forked road to the future and

took the wrong path; a path that led

to slavery, to racism,

and to denying freedom and liberty to black people.
at another crossing in the road.

Now we're

Another path to choose.


we of the Urban League are telling America not to go down the
same old road.

We of the Urban League are telling our Nation

to take the path of righteousness, of justice, of freedom and
Yes, we are at a very important crossroad.

We must reject

the path of negativism which Vernon expressed concern about last
evening, and we must select the road that shows positive opportunity for progress.

That is the only sure way for any of us to

find satisfaction in our individual and collective lives.
path is one that will test our worth.


We are trying to prove

that a puralistic society on the face of this earth can work,
can survive, can achieve equality of opportunity and equality
of result.

It will test our moral fiber to see whether we can

take the right path, rejecting the escapism of drugs and alcohol

- 14 and depravity and selecting the hard course of application and
work and commitment and faith and love.

Each of you and all

of you should support such great leaders as Vernon .Jordan,
because when you support him you support the choice of the
right path.

And if we march down that right path together,

we shall indeed achieve the goals that will make this a great
land once again.

Thank you very much.