[ Pobierz całość w formacie PDF ]
.The federal government s deficit rose sharplybecause of high continuing defense spending and the operation of auto-matic stabilizers.As can be seen in Table 7 market interest rates began to rise in early1971.The increase was unusually rapid; it began in March when the nomi-nal federal funds, t-bill, and 10-year rates were respectively 3.71%, 3.38%,and 5.70%.By July they were respectively 5.31%, 5.40%, and 6.73%.Inpart, the Federal Reserve pushed interest rates higher to counter rising in-flation, but its main concern was trying to deter huge and ultimately highlyprofitable speculations that the dollar would be devalued against strongforeign currencies, such as the West German mark and Japanese yen.Off-shore dollar-denominated assets were matched by large increases in for-eign official holdings of U.S.Treasury securities as central banks at-tempted to protect the fixed exchange rate system that had been established 42 Arthur F.Burns and G.William Miller: 1970 1979Table 6.Substantive Measures of Economic Activity: 1970:2 1979:3unem- civilian nominal GDP annual real federal balancequarter ployment participa- GDP deflator % rate fed funds budget on currentrate tion rate inflation rate surplus account1970:2 4.8 60.4 1033.2 28.94 4.31 3.57 - 15.8 5.51970:3 5.2 60.3 1050.7 29.18 4.17 2.54 - 19.4 3.81970:4 5.8 60.4 1052.9 29.56 5.56 0.01 - 23.1 2.71971:1 5.9 60.2 1098.3 30.00 5.59 - 1.73 - 23.6 4.61971:2 5.9 60.0 1119.1 30.40 4.61 - 0.05 - 30.1 0.31971:3 6.0 60.1 1139.3 30.71 3.60 1.87 - 29.1 - 0.11971:4 5.9 60.3 1151.7 30.96 4.72 0.03 - 30.6 - 2.51972:1 5.8 60.3 1190.6 31.41 4.28 - 0.74 - 22.6 - 4.71972:2 5.7 60.4 1225.9 31.61 3.13 1.17 - 27.7 - 4.31972:3 5.6 60.5 1249.7 31.92 4.58 0.16 - 16.6 - 3.11972:4 5.4 60.4 1287.0 32.32 5.02 0.12 - 30.7 - 2.31973:1 4.9 60.4 1335.5 32.71 5.47 1.07 - 14.7 2.61973:2 4.9 60.8 1371.9 33.25 6.95 0.87 - 14.7 5.91973:3 4.8 60.8 1391.2 33.86 7.78 2.78 - 10.1 13.01973:4 4.8 61.1 1432.3 34.58 7.71 2.29 - 5.7 15.81974:1 5.1 61.3 1447.0 35.20 8.46 0.86 - 8.3 17.01974:2 5.2 61.2 1485.3 36.02 10.48 0.77 - 10.8 3.21974:3 5.6 61.3 1514.2 37.09 11.69 0.40 - 10.5 1.01974:4 6.6 61.3 1553.4 38.20 10.40 - 1.06 - 25.4 5.31975:1 8.3 61.2 1570.0 39.08 7.54 - 1.23 - 47.2 19.21975:2 8.9 61.3 1605.6 39.63 6.72 - 1.30 - 104.2 23.01975:3 8.5 61.3 1663.1 40.33 7.17 - 1.01 - 62.0 20.01975:4 8.3 61.1 1714.6 41.05 5.67 - 0.26 - 62.8 23.31976:1 7.7 61.3 1772.6 41.50 4.33 0.50 - 52.4 14.91976:2 7.6 61.5 1804.9 41.92 4.85 0.34 - 48.1 10.81976:3 7.7 61.7 1838.3 42.50 6.35 - 1.07 - 51.7 4.21976:4 7.8 61.8 1885.3 43.27 6.86 - 1.99 - 54.8 5.61977:1 7.5 61.8 1939.3 43.97 6.12 - 1.46 - 45.3 - 6.31977:2 7.1 62.2 2006.0 44.69 5.29 - 0.13 - 39.4 - 7.01977:3 6.9 62.2 2066.8 45.23 6.76 - 0.94 - 45.2 - 5.91977:4 6.7 62.6 2111.6 46.16 7.24 - 0.73 - 46.5 - 16.91978:1 6.3 62.8 2150.0 46.86 6.60 0.15 - 46.3 - 23.01978:2 6.0 63.1 2275.6 47.77 6.92 0.37 - 25.5 - 10.71978:3 6.0 63.2 2336.2 48.60 7.49 0.61 - 19.4 - 9.21978:4 5.9 63.5 2417.0 49.59 7.67 1.91 - 14.7 1.11979:1 5.9 63.7 2464.4 50.55 8.40 1.67 - 6.1 0.61979:2 5.7 63.4 2527.6 51.71 9.13 1.05 - 6.2 - 0.11979:3 5.9 63.7 2600.7 52.81 8.22 2.73 - 11.9 5.1 Arthur F.Burns and G.William Miller: 1970 1979 43at the Bretton Woods conference in 1944.1 The Federal Reserve was againtrying unsuccessfully to hit several targets, inflation, unemployment, andthe exchange rate, with essentially one instrument, open-market opera-tions.Its actions were leading to increasing instability in short-term inter-est rates.2This seriously deteriorating situation would be temporarily halted by aspectacular intervention by the Nixon administration that was described ina presidential speech on August 15, 1971.The intervention was designedwith the help of Chairman Burns and, thus, represented a serious lapse inthe continuing struggle to preserve Federal Reserve independence.It wasintended, in part, to aid the Federal Reserve by adding policy instrumentsto the government s arsenal and included the following drastic actions:1.Introduced a 90-day freeze on wages and prices.2.Established a Cost-of-Living Council that would administer thefreeze and devise post-freeze policy.(Chairman Burns served asadviser to the council.)3.Abandoned the Bretton Woods commitment of the United States toconvert dollars into gold at $35 per ounce.4.Imposed a 10% surcharge on most imports.5.Proposed a new one-year investment tax credit of 10%, to befollowed by a permanent credit of 5%, if investments were inAmerican-made equipment.The implementation of this program was extremely complex and re-quired many actions that are well described in Council of Economic Advi-sors Economic Reports of the President, (1972 75).The initial wage andprice freezes were followed by three subsequent phases that included manyunavoidably arbitrary decisions that determined allowable rates of priceand wage increase, exemptions, compliance orders, subsequent temporaryfreezes, situations where prior notification of increases were required, etc.The Cost-of-Living Council was terminated at the end of 1974.In addition1Numerous newspaper and magazine reports at the time clearly exposed the ex-tent of speculation.See, for example, Pressure by Speculators Forced Action onDollar, New York Times, August 16, 1971, p.15.The transactions themselveswere not transparent in summaries of U.S.international transactions because theywere occurring overseas, but changes in foreign official assets in these summariesjumped from $6.9 billion in 1970 to $26.9 billion in 1971 and then fell to $10.5billion in 1972.There is a large statistical discrepancy of $9.8 billion in the bal-ance of payments accounts in 1971, which surely is associated with this overseasspeculation.See Board of Governors of the Federal Reserve System (1981, pp338 339).2See Table 17 below. 44 Arthur F.Burns and G.William Miller: 1970 1979Table 7.Monetary Instruments and Indicators: 1970:2 1979:3net federal M1 dis- treasury dis- repur- currency reserve 10-yr.free funds count bill count chase out- bank ratequarterreserves rate rate rate borrow- agree- standing crediting ments1970:2 - 0.7 7.88 207.2 6.00 6.68 0.9 4.3 53.4 62.7 7.711970:3 - 0.7 6.70 209.9 6.00 6.33 0.9 2.8 54.7 64.2 7.461970:4 - 0.2 5.57 213.6 5.79 5.35 0.4 2.8 55.9 65.5 6.851971:1 - 0.1 3.86 217.2 4.96 3.84 0.3 3.0 56.0 66.9 6.021971:2 - 0.1 4.56 221.8 4.75 4.25 0.3 4.1 57.2 68.5 6.251971:3 - 0.5 5.47 225.6 4.96 5.01 0.7 4.1 58.9 71.1 6.481971:4 - 0.1 4.75 227.7 4.84 4.23 0.3 4.9 60.0 73.0 5.891972:1 0.1 3.54 232.2 4.50 3.44 0.1 4.8 60.0 74.1 6.031972:2 0.1 4.30 236.0 4.50 3.77 0.1 6.0 61.2 75.6 6.141972:3 - 0.2 4.74 241.0 4.50 4.22 0.4 6.5 62.7 76.3 6.291972:4 - 0.5 5.14 246.9 4.50 4.86 0.4 6.4 64.6 76.7 6.371973:1 - 1.3 6.54 251.8 5.11 5.70 1.5 7.5 64.9 78.2 6.601973:2 - 1.6 7.82 254.8 5.91 6.60 1.8 8.1 66.8 80.9 6.811973:3 - 1.7 10.56 257.7 7.26 8.32 2.0 11.3 68.4 82.7 7.211973:4 - 1.1 10.00 261.0 7.50 7.50 1.4 12.8 70.1 84.3 6.751974:1 - 1.0 9.32 265.2 7.50 7.62 1.2 13.2 70.8 85.6 7.051974:2 - 1.6 11.25 267.7 7.87 8.15 2.4 14.9 72.9 88.5 7
[ Pobierz całość w formacie PDF ]