21 From my conversations with people, increasing millions of American consumers have come to equate an unbalanced budget with more inflation the root of inflation being -- deficit spending --- i.e., people tell me this. They are demanding a change and Congress is the only force of government that can provide this change. In 1971, the government adopted temporary wage and price controls as a quick fix to stop a consumer panic over inflation. In 1977, you can initiate a similar quick fix with a balanced budget. Make it a fact and watch Consumer Confidence do its job and watch capital spending grow. That's why I implore Congress to take over the fight for inflation and start by balancing the budget. The Fed, which is trapped in the flaws of the seasonal adjustment, can't do the job by pouring the gasoline of high interest rates on the flames of inflation whenever they feel like it. Then after the error is clear say, SORRY, we don't know what we are doing. -- Why I want the firehouse moved from Constitution Avenue up to Capitol Hill where are now is because the managers of the nation's money supply cannot even read their own raw counts of money and what the impact of these wrong decisions have on people --- never occurs to them they are Monks isolated in a monastery. -- The Fed erred in two ways. First it chose to make a critical decision on an isolated four-week period when a far more important consideration was the longer range trend of money supply growth over three months, six months, even a year. 94-542 O-77 - 14 22 ·Then the Fed compounded the error by using faulty and artificial seasonally adjusted data whose flaws would have been easily discovered by a quick look at the actual money figures gathered from member banks. But most shocking is that this is the third year in a row that the Fed has been burned by the same combination of shortterm aberration and mistaken data at the same point in time. During 1975, the Fed needlessly raised interest rates and aborted an economic recovery. We warned the Fed on this error before they did it. It committed the same mistake last year in the same week as this year even though we had warned them of a probable error as early as the summer of 1975 --- and they didn't listen then. It is obvious after three such strike outs each year that there is a fundamental error in the seasonal adjustment, the process used to generated "official" figures for every agency of the government. If Congress will not act on that now come next October, as all will read about the seasonally adjusted pause in the economy this summer (now) and as the economy is faltering the second half with seasonally adjusted unemployment rising -Congress will get the message. An unbalanced budget is as much an anathema to the American consumer as high interest rates. It keeps his taxes high, his government wasteful, his confidence down. He and she know the government must borrow to balance the budget, thereby keeping interest rates up and depriving the economic mainstream of job-producing capital. 23 In short, the combination of high interest rates and unbalanced budget reduces the value of everyone's money and destroys confidence. Under these conditions, the consumer cannot and will not lead an economic recovery in the first stage so that capital spending can follow. Looking at the problem from all angles, we also have observed that there is a basic disenchantment by Americans over their inability to share in the profits of the nation's great corporations. About a third of American households, we calculate, have stockholders. We know a lot about these and the non-stock cwning households. But even when this minority gets dividends, it is penalized by double taxation first on the corporate profits themselves, later on the dividends received by individuals. We are convinced there is a better way to allow the nation's citizens to achieve a great and more satisfying return for their own labors --- all of the people. This is to alert your Committee and Congress, Mr. Chairman, that Sindlinger & Company of Media in Pennsylvania is now in the process of conducting extensive objective surveys of the consumers of the nation on their ideas for more constructive monetary policy. One which will restore Confidence in money make capital spending grow by offering the nation's people an opportunity to observe and financially benefit from their nation's free enterprise system which can be made to work better for them. 24 Mr. Chairman, we will keep you informed on this project --as we have on many other occasions over the years. Thank you ... and please get Congress to do two things -- Kill that seasonal adjustment snake. Move the firehouse for inflation fighting up here on Sindlinger & Company, Inc. |