President Nixon & George Shultz Discuss Economic Trends & Policy 6-1-1971

The economy the President inherited in 1969 had been heating up during the late 1960s under pressures of the Vietnam War. Concerns about inflation led the Federal Reserve to take actions to slow the expansion, hopefully producing a "soft landing," i.e., a growth pause that would not technically be a recession. As it turned out, however, a recession did occur which the National Bureau of Economic Research dates as starting in December 1969 and ending in November 1970. By June 1971, it appeared clear that the economy was expanding again. But the question was how rapid the expansion would be and what would economic conditions be in the coming election year.
At the time, the economics profession was split between monetarists, led by Milton Friedman of the University of Chicago, and Keynesians, led by (among others) Paul Samuelson of MIT. Friedman's position was that the Fed should simply keep the "money supply" growing at around 2% per annum and not attempt to fine tune the economy. I put "money supply" in quotes because there are various definitions of what one might mean by "money" and Friedman focused on a particular narrow definition. When deregulation of the financial sector began to occur (later in the 1970s), and different financial assets became more interchangeable with narrowly-defined money, the definition issue became more important. But in 1971, there was less concern about the definition than subsequently arose.
The Keynesian perspective put more emphasis on fiscal policy than the monetarist and was more inclined to view monetary policy as setting interest rates by the Fed -- which had been the traditional approach. As many observers have pointed out, at any moment the Fed can target the growth of money (somehow defined) or interest rates. But it cannot do both. In any event, Keynesians tended to be activists and did not go along with the idea that the Fed should passively increase the money supply at 2% (or any other pace); rather it should cut interest rates when the economy slowed and raise them when it overheated. Although it was not clear in 1971, the Fed during the 1970s and into the 1980s became monetarist - in the sense of focusing on the money supply - but activist in the sense of varying its monetary targets with the condition of the economy.

Видео President Nixon & George Shultz Discuss Economic Trends & Policy 6-1-1971 канала danieljbmitchell