Full text of Statements and Speeches of William McChesney Martin, Jr. : Statement at the Joint Meeting of the Directors of the Federal Reserve Bank of Kansas City and Its Denver Branch

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Statement at the joint meeting of the directors
of the Federal Reserve Bank of Kansas City and i t s Denver
Branch, Denver, Colorado, July 15, 1961.

July 11, 1961.
Clay - Kansas City
Suggested statement for Chairman Martin follows:
Although we have barely entered upon the second half
of 1961, most major measures of American economic activity have
already regained or exceeded their pre-recession highs. In just
three months time, industrial production has recovered all the
decline that had occurred since July 1960. In the second quarter
of this year, gross national product reached a new record high.
Personal incomes have expanded further to a level well above
last autumn's peak and the total number of persons with jobs is
the highest in our history.
In retrospect, it is clear that the recent recession
was the mildest of the four that we have experienced since the
end of World War II. Its genesis was traceable at least in part
to the unsettling effect of inventory accumulation both before
and after the 1959 steel strike. Similarly, a major reason for the
recovery in gross national product during the second quarter of
this year was the switch from net liquidation to some restocking
of inventory positions.




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Against this background of recession and recovery,
Federal Reserve System operations have been directed toward providing an ample supply of money and credit to meet the rising
need for funds resulting from the resumption of business activity.
The active money supply increased at an annual rate of about 2 per
cent in the first half of this year and now stands approximately
$2 billion above year-age levels. Near-money sources such as time
deposits at commercial banks and other liquid assets in the hands
of the public have risen at a rapid rate.
Total credit extended by commercial banks increased
during the first half of 1961, in contrast to reductions in the
corresponding periods of the 2 preceding years. While business
demand for credit at banks has been somewhat sluggish, the volume
of new funds raised by private corporations and by municipalities
in the market reached a historic high during the April-June period
of this year. Despite the pressure of these heavy demands, the
gradually rising need of the Federal Government for additional
funds, and the substantial improvement in business sentiment,
interest rates generally have shown little change from those
prevailing at the beginning of 1961.
Of considerable importance among recent economic
developments has been the continued general stability of prices.
Wholesale prices have undergone little or no over-all change for
more than 3 years. Consumer prices have remained almost steady
over the last year.




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The vigorous character of the recovery thus far provides the basis for considerable encouragement, although it must be
recognized that the pace will ultimately slow to a more sustainable
rate for the long-pull. At the same time, the number of unemployed
workers remains stubbornly high and a substantial amount of
existing plant capacity lies idle. Bringing these resources into
full utilization presents a formidable challenge to management,
to labor, and to government.
Fauver.

CLF:rem