Regional President Speech

Knrl R. Bopp INVESTMENTS V MAJOR Graduate School of Banking Rutgers University, New Brunsvick, N.J. June 17-18, 1952 Grasshopper - beetle Don’t keep track of details I’m a policy man myself Scroll on Archives Building Past is Prologue You ain't seen nutbin’ yet One man’s opinion Prejudiced though not defend always Purpose of this discussion is only incidentally to give you information. It is to show how you can train yourself to analyze develop­ ments of great importance to you - and vhere to jet the necessary information. to understand recent developments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 2 - Public Debt. Management from the Federal Reserve Standpoint A* Powers, objectives, and operations of Federal Open Market Cfwnrnittee 1, Wny should the investment manager be interested. a. An illustration: Prices of long-term bonds before March 1951 Never below par + after March 1951 Dec. 27, 1951 95N# Jan. 11, 1952 95\^> Why? F.O.M.C. operations b. Extent of System authority to deal in Governments (1) Sales = total holdings = $22j billion Balance sheet implications must balance meaning of "free" market (2) Purchases until gold reserves = 25% of Notes & Deposits or roughly 3 x gold - present holdings Gold = $22 billion 3 x 22 = 66 billion max. 22 n present AA " to go implications on reserves and currency 2. Development of Open Market operations Original purposes in granting authority (See quote) 0 ^ a. Early history: purchases in spring of 1922 \ (^ v to increase earnings effectm discounts V New York vs. hinterland Res. Banks x\^ b. 1922 - 1933 Integrating open-maiket and discount policy Reserve note collateral Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - ? - c. 1937 - June 194-9 Open-market and reserve requirements Pegged Governments Balance sheet again Relation to bal. sheets 01 com. tanks Reconsideration of principles June 1949 d. July 1949 - March 1951 August 1950 statement Role of Monetary Policy in a Market Economy Centralized vs. Decentralized Control Functioning of a market economy in allocating resources Pegged markets and loss of control over supply of liquidity Direct controls: Prices, Verges, Allocations, Rationing Problems of administration resources allocation Flexible monetary policy Korean outbreak 3. Evolution of control over Open Market operations B. Systematic Interpretation of Open Market Operations Consistent Policy and flexible program of action 1. Policy Statements a. Why seldom unconditional 2. System operates in a gold fish bowl Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - u - Some basic questions: A. Who should control monetary policy? B. Hov can you tell what F.O.M.C. is doing? Portfolio Size Maturity distribution Interest rates in market Also discounts Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 3. rtfrUc Ifrbt mmfmmx trm th» T **n a Umm standpoint Pew«» cbj*ctiv*s «ad operette» of thi Federal Open Serket Coswlttee 1• ^ 7 aheold «a ln y» twiii ænafer b« iattw ttd? («) An lllustretloat Prie«« of long-ter» bond« before «ad after fercfe 1951 (b) Extent of Syst«« «eÜMrlty to deal la Oovamnest eocttrltleo (c) Parpo««« or objectl'nee of Qpaa tterket operations 2. Demlopaent of Qp m Kerfeet optrttlani («) Early history (b) Leaaone of th« period 1923-33 (c) L««soa« of th« portad 1937-Jvaa 19t9 (d) Th« period M y l*9-ltaeh 1951 (e) Exparlance trader the Treirary Toderel ftaaarra 3y«tem •accori* of Kerch U9 1951 3* Hrolutioc of control «ear Oj>en ifarfaet oparetlane fynt>notlc Interpretation of Opm Hutot oparatlona 1, Policy «tat«— nt« («) Wbj aacoadltioiJel stateaente «re rere ln « chenging, anfredlctAle vorld (b) niuotretian* of pollay «tat m int i ?• dung«! in the Syatea portfolio («) Arel lability of laforwtlon (b) Ounce« la natarity distribution (c) O M f ee la total perifollo má related factors (1) Other Maral fleoenu «ccoonU (2) Otter *on«y Hartaet factor* (3) Other cenerei factors Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - î - C. Ab *4**r o f iaaa«ta#y poXtcy mai inm ëtmat wm^winf Sôt#t Btmp&tarns&Ê&fcm Virtgfct PttfeMto* Chair«« of tb« &c$$r0«tÌttBtl $BÍ3eo«*lit«« on duMil £*«dlt Qm&v&X m& Debt *aa*ç*mmt, appropriately in- <5laá«á te folXoirtBf. ^*r»gr«ï>fe (p*¿* XV) la M« r«T9vosri to U» two ToltMM of w«t*rlal* p®>«|s*«id: for M# ®ste©OE»#ttt««i •Two aida «r d*ü*» of «âsj^ct *«tt«r •tant! cnat lmjtIj a# feçal f©int* lu te T*rlrtj of l*#0*s btarlisf @® gaswr«! w ü t control œd d*H aaaa^awwa^ ^îlch the Bdbcotmltte ha« to coo»id*r. qmtâAmm mr #f te ©ter b* ciwifi^d <J±i*©t- ly or Is^l^tly saâ*r teto te «ala b»ad«. Tfc*## tstt auUr claeelf icatlc*« ar* (1) the proper raacMiw» «ry for t e fmt(ä*&£«& <*£ noaaitty policy, «ad (2) te ftftgwr «f ■owtary policy uaátr pr«««nt «od ▼aricra» hypctbrticai coodltian«.* Th*## b*» 1 c IgttoM O® wÉLlch IâÜtîAmI • of food «Ul flr*ly holiî MSfmrím Oftó«»* t e ^Iä Iw - as drr«lop*d la «ritte r»ßlij««| «ml «vldcte«? M ¿ (If «T«U«bl«) te nïpart of tí» ‘^boonaltte *111 f«r* te teU of te ôistnwlfli^ ESB 3/a»A? Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Karl R. Bopp (1952, June 17). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19520618_karl_r_bopp

@misc{wtfs_regional_speeche_19520618_karl_r_bopp,
  author = {Karl R. Bopp},
  title = {Regional President Speech},
  year = {1952},
  month = {Jun},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19520618_karl_r_bopp},
  note = {Retrieved via When the Fed Speaks corpus}
}