Speech

FROM Darryl R. Francis Mr. Francis' speech before the Farm Credit group on August 26, 1966 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis National Financial Trends and Agriculture Review of the money situation - As it exists today - How we got here - Where it may go from here - The impact on Agriculture. In context of basic law of supply and demand. How we arrived. Government’s concern with optimum utilization of resources. Production. Plant - Labor. A necessary influence to long-run stability. Accepted doctrine among economic thinkers The doctrine in action - from 196^. Public programs The tax cut - a series over the period The Vietnam war The resulting fiscal pressure. The high employment budget. Reinforcement by monetary policy Normal counteraction absent Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 2 - Rates of growth of money November te M rgfr 6 from June to June a Supply fell in July and August to date. The Fiscal-Monetary Mix - Dual expansionary forces The build-up to excessive demand. Over-taxation of our ability to produce. Plant capacity - 93% (over optimum level) Labor capacity - (4 million vs. 4 million plus) Prices - Wholesale - steady ’58 - 64 Starting rise from mid-1964 (64 to 65 at 2%) Rises have accelerated (so far ’66 about 4%) Industrial component since last year 3% - 1965 year 1. 49j0 Cost of Living - ’58 to 64 - 1. 2% annual rate. Past year at 3% Since Jan. *66-3 1/2%. Money market reactions - supply and demand. Tremendous demand for credit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 3 - Government Business to meet demand Prices. Government Business - for expansion Past 12 months - 18% Jan. to July 22% May to July - 32% annual rate. Other. The resulting tightness in money markets. Despite record growth of money supply. Demand forces rates upward. What do we do ? State of economic intoxication may lead to National economic frustration. Everybody has it so good. Close our eyes to threatening clouds of inflation. We seem unwilling to take chances with our present comfort to do what’s needed to assure long-run well-being. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 4 - How it can be solved - with a lag Fiscal adjustment Reduce spending Increase taxes - while holding spending. Restore the Fiscal-Monetary Mix. Can monetary policy do the trick? Perhaps - if - - but If - economic forces only concern But - social and political issues involved. Restrictive monetary - expansive Fiscal Non-selective in impact. Somebody gets hurt - housing. Social to political issues. Then comes talk of legal control - And the great debate goes on. Prices continue to move - They don’t roll back. Inflation continues to take its toll. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 5 - The solution - Restoration of Fiscal-Monetary Mix. Agriculture - Production assets quadrupled since 1940 A great influx of capital 7 Less than 50 to almost 200. Concern about future I don’t share it. The long-run outlook Additional capital need Individual reinvestment Family cooperation Public Loans Cost of loan funds will vary Supplies will be adequate Credit supplements by equities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Darryl R. Francis (1966, August 25). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_19660826_francis

@misc{wtfs_speech_19660826_francis,
  author = {Darryl R. Francis},
  title = {Speech},
  year = {1966},
  month = {Aug},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_19660826_francis},
  note = {Retrieved via When the Fed Speaks corpus}
}