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An Address before the
Georgia Retail Jewelers Association
Callaway Gardens
March 23, 1970
Monroe Kimbrel, President
Federal Reserve Bank of Atlanta

Ten years ago, as all of us remember, a great many people were talk­
ing about how Americans could Look forward to the soaring and scintillating

We were then reviewing our progress during the '50s, and most of

us were concluding that the advances of the '50s were only a prelude to
a much greater advance during the '60s.
We were told in glowing terms of the new and better life to which
all of us could look forward.

Our economy had demonstrated its capability

for producing more and more not only of the necessities but of w?hat some
persons call the good things of life.

We had been witnessing major sci­

entific and technological breakthroughs.

Partly as a result of this,

productivity was increasing, and there were those who even thought that
not only would poverty disappear but that the primary problem in the future
might be too much affluence.

With more and more goods and services avail­

able, some people suggested that most of our social problems arising from
poverty and related matters would disappear.
When we look back to see what actually happened during the 1960s,
we can indeed point to some remarkable economic progress.

I might take,

for example, a projection made in our Bank's pub lieat ion in 1960 about
income growth in the part of the South served by the Federal Reserve Bank
of Atlanta.

It was suggested that the 1960s would witness further progress



toward attaining a level of income for the people of the area more nearly
equal to that of the rest of the United States.

If all went well, it was

concluded that by the end of the decade per capita income in the Sixth
Federal Reserve District should reach 77.5 percent of the national average.
In terms of 1959 dollars, this would mean an increase in per capita in­
come of around $650.
Last year, according to preliminary estimates, income in the Sixth
District had expanded to a point where per capita income was about 78 per­
cent o - the national figure.
income increased by $672.

In terms of 1959 dollars, per capita income

Thus, the aspiration for higher income for

Southerners was, to a major extent, realized.
In the last ten years personal income in Georgia has increased on a
per capita basis by 87 percent and last year was probably about 81 percent
of the national average, compared with 79 percent in 1959.
The substantial growth of income in the South reflects the economic
developments taking place throughout the nation.

The Gross National Product,

a measure of the nation's total output of goods and services, last year
measured in dollars of constant purchasing power was about 50 percent
greater than ten years earlier.

On a per capita basis, after payment of

taxes and measured in dollars of constant purchasing power, disposable
income was about a third greater last year than in 1959.

Somehow or other,

we have been able to produce enough not only to take care of the popula­
tion's growth from 178 million in 1959 to around 203 million last year
but also to improve the economic condition of the average person.

To do

this, 13 million new civilian jobs were provided.
This economic growth was in turn made possible by a massive program
of capital investment that increased the ability of the nation's manufacturing



industries to produce by almost 60 percent and raised the output per man­
hour in all types of occupations by about one-third.
Along with this capital investment have come major and revolutionary
changes in science and the application of science.

The most dramatic

of these has been the development of the space program.

It was not so

long ago on May 5, 1961, that Alan Shepard made the first suborbital flight
launched from the United States.

John Glenn followed with an orbital

flight in February of the next year.

Our astronauts first circled the

moon in Apollo 8 on December 24-25, 1968, and then landed on the moon only
a little over eight months ago.

If our scientists and technicians could

accomplish this, could we not reasonably expect equally fantastic social
and economic improvements?
Yes, indeed, there were many economic advances during the ’60s to
which we can point with pride.

Nevertheless, it sometimes seems that all

this scientific and economic progress has left us with more rather than
fewer problems.

For example, it takes most of us longer to get to and from

where we work.. Housing needs remain unmet.

Not only do we have the prob­

lems of the ghetto but the cost of housing has risen so. much that the
aspiration of being a homeowner cannot be satisfied for many of those with
moderate incomes.

Lately, we have been told that we are creating a physical

environment that will destroy us through pollution.

Civil disturbances

have become so commonplace that we seem to be able to find a story about
such an event in our paper every day, and most of them no longer command

We are going through trying times in respect to our moral

values, and there seems to be a growing lack of understanding between the
young and the old, the rich and the poor, the blacks and the whites, and
other groups.



On the economic front, the American people have demonstrated an in­
ability to manage our economic affairs by having gone through five or
more years of inflation.

This is the longest period of rising prices

that we have had in this country since the beginning of the century.
As the result of this inflation, we find that our dollars today are
worth only 79 cents in terms of purchasing power in 1959.

These infla­

tionary developments have disorganized our financial markets.

They have

diminished the incentive to save and invest in fixed-income securities.
As a result, they have weakened the ability of our financial intermediaries
to supply funds to the purchaser of a home and have squeezed out the small

The inflationary developments and the financial changes that

have gone along with them have distorted our capital investment structure
toward those projects that in the estimation of some persons are likely
to profit most from inflation.

All of this has set the stage for what

could be a serious period of economic adjustment.
Why did this happen?

Why, in spite of the tremendous advances this

country has made in production, did we manage to get into all this trouble?
It would take a man far wiser than I to give a complete and valid

Nevertheless, it seems to me that a great deal of our troubles

stem from the failure of Americans generally to establish and follow
Perhaps we have been misled by the very real increase in our ability
to produce into believing that all problems of the world would be solved
by having more and more goods and services.

If we can just produce enough,

it has been argued, everyone will be happy.

There will be no basic con­

flicts and none of the stresses and strains of civil rights.

Crime will

disappear, and we shall have domestic and international tranquillity.



I should think that the experience of the ’60s should have taught
us that having more and more goods and services does not automatically
cure our social problems nor insure complete happiness.

Our experience

of the '60s should have demonstrated that economic progress may be desirable
but that it should not be given absolute priority over things that cannot
be measured in dollars and cents.

If we give sole priority to economic

matters, we are likely to compound our troubles.
Perhaps we ought to give more attention to deciding whether or not
we should devote more of our energies to solving our social and moral
problems rather than concentrating solely on economic needs.


the day will come when we shall measure progress in terms of how well
we have learned to live peaceably together rather than in terms of economic

Today, however, I am going to stress the difficulties we have

got into and may face in the future in dealing with economic priorities.
Another big mistake we made during the past decade was failing to
recognize that there was a limit to what our economy could produce.


reasonably full employment our economy could produce about 4 percent more
each year because of an increase in the number of workers and improved

This increase alone could have provided us with enough to

have taken care of many of what we considered our needs.

It was not enough,

however, to provide the resources to carry on what turned out to be almost
a major war, to provide each one of us with more consumer goods, to expand
public programs, to provide for an unprecedented major plant and equipment
expansion, and to take care of growing demands for better housing.
Somehow or other, we collectively believed that, if we were to provide
enough money by creating credit, we could by magic produce the goods and
services to meet all our demands.

You will recall that as early as 1966



it was being pointed out by many persons that, if the Federal government
was going to carry on its program, it would need to raise taxes.
would be one way of limiting demand to what could be produced.

We were

faced with the need to establish priorities.
By and large, the American people refused to choose by establishing

Thus, our Congressmen, reflecting what I believe were the

desires of their constituents, postponed enacting the surtax package until
early 1968.

-The $25~billion Federal deficit in 1968, of course, created

major demands on the financial markets as the Treasury had to borrow heavily.
More importantly, it was striking evidence of the inability of the American
people to choose one thing at the expense of another.
Somehow or other, some persons thought that, if only enough credit
were provided, they would not have to choose.

They forgot that in the

long run the nation's credit demands must be provided primarily out of
the savings of individuals and businesses.

When it is provided through

the banking system at a greater rate than the ability of the economy to
produce, the increased purchasing power merely pushes up prices.
Priorities, of course, were established, but they were established
for us through inflation and high interest rates.
not always good.

These priorities were

In 1968 the nation spent a great deal more.

The Gross

National Product in current dollars increased about 9.1 percent.
merely spending more did not create goods and services.


Capacity limita­

tions kept the real growth--that is, growth measured in terms of constant
purchasing power--down to 4.9 percent.

In 1969 real growth fell to 2.8

percent compared with the 7.7-percent increase in the Gross National Product
measured in inflated dollars.

Inflation misallocated resources and reduced

the overall productivity of the economy.
productivity during 1969.

There was no improvement in



Since the credit demands were far greater than could be supplied
through the normal savings of the economy, the competition for funds forced
interest rates to unprecedentedly high levels.

In the process, the normal

flow of funds through nonbanking financial institutions was disrupted.
In the system of priorities established by inflation, housing suffered,
with a major part of the funds going to a capital expansion program by
All that is history, even if only recent history.
escape from history.

But we cannot

We are still suffering from our failure as a nation

to make a choice between possible alternatives.

Indeed, we shall probably

suffer from this failure for some time to come.

At the moment, however,

the question is what order of priority do we contemplate establishing.
We can look forward to a growth in the nation's output of about 4.3
percent a year if the projection made by the Council of Economic Advisers
turns out to be correct.

This would imply a growth in the labor force

of 1.75 percent a year, an unemployment rate of 3.8 percent, a decline
in annual average hours of work by one-quarter of 1 percent a year, and
an increase in output per man-hour of around 2.8 percent per year.
How will we Americans choose to utilize the potential increase?
We can compile an almost endless list of needs that we think should
be satisfied.

As consumers, we think we need more and more goods and

We want better cars, better houses, color TV sets, and trips

to Europe, for example.

What is more, we want our government to provide

many things for us and others.
We have been hearing a lot lately about environmental control, in­
cluding the elimination of pollution and a better management of our natural

We tell our government that we want better education; we need



to improve our methods of controlling crime; we need better care of the

Our cities cry out for urban redevelopment, rapid transit, new

airports, and better housing.

We need to provide for adequate defense;

we need to eliminate poverty.

With increasing leisure, we need more fa­

cilities for recreation.

If we are to assure the peace of the world, we

need to give help to developing nations.
I am sure

that each one of you could

that you could

add to this list, and I am sure

give good reasons for each


Butyou are going

to find it very difficult to choose among them.

as it is, at some point we

order of priorities.


as a nation must

must determinean appropriate
accept that weshall have to

forego some gains, benefits, and advantages in order to reap others.
The task of establishing priorities is difficult under any circum­

But we do have in the American economic system, when it is func­

tioning properly, a very great help.

This guide is the market system

that can, when functioning properly, reflect the desires of consumers for
the kinds of goods and services they prefer.

Consumers through the market can

tell businessmen which of the many choices they favor.

But the market

cannot function efficiently under continuing inflationary conditions.
One of the first priorities we should establish, therefore, is bring­
ing inflation under control.

When that is done, we shall find that estab­

lishing priorities is a much less complex job.

We shall still have to

face the fact that, if we want more from our government, we shall have .
to be willing to tax ourselves and consume less unless we want inflation
to establish priorities for us.

We shall have to assist our elected rep­

resentatives in choosing among the most worthwhile projects.

We shall

have to be as eager to commend them when they have made difficult choices
as when they announce to us the initiation of a local project.



I am not sure that we the American people have really learned our
lesson about the necessity of establishing priorities.

Apparently many

persons believe that somehow or other we may be relieved of the inevitable
coi3.sequences of the inflationary period we have been going through.
theless, it is my opinion the nation is close to acting responsibly.
is time to ask ourselves what do we really want as a nation.