... faulty monetary policy which excludes any understanding of people

first create a man-made recession.

... first stage of any recovery from recessions comes from the consumer sector

... then the capital spending sector takes over.

But, for the past three years the Fed kills off the consumer sector from completing its job and has never given the capital spending sector a chance to start

its function.

Here is where the Fed's last three annual spring-summer exercises in explosive fire fighting under the guise of interest rate futility --- have been damaging by aborting each consumer-inspired recovery.

In each of the past three years as the Fed raised interest rates, the consumer was gaining confidence and beginning to spend while some of his/her inflationary fears were subsiding.

It was a torturous process at best and needed every bit of encouagement.

Instead, the Fed raised interest rates with an error to abort consumer spending and thereby killed each consumer-inspired spending recovery to delay capital spending.

So we can be reminded, what was going on from 1966 through 1974, --- we reproduce this chart from Sindlinger data.

92-201 O-77-22

Summary Edition: Sindlinger's Economic Service For April 27, 1977.

.Issue 1143-44

Page 7

Summary Edition: Sindlinger's Economic Service For April 27, 1977

Issue 1143-44

9 Year Week-By-Week Trend In Sindlinger's Household Money Supply (HM$) Measurement -1966-1974

The Fed refuels inflation --- throws gasoline on it --- by raising the cost of money

on some mystic theory that you control inflation by falsely making the cost of

money go up.

The facts are

raising the cost of the price of money affects people as inflation

the consumers grow fearful again, spending slows down and fear

As this chart shows our Household Money Supply (HMS) a measure of consumer

confidence rebounded with the 1975 tax rebate talk and reality and was on its way to full recovery in July 1975

and, when the Fed overreacted to the seasonally

adjusted growth of the money supply in mid-year threw gasoline on the fire

by raising the price of money and HMS turned down --- Fed strike out #1.

consumers regained from their Fed-inspired shock --- confidence

the stock market with it and by March HMS had us out of recession for

rose

And I have already defined strike out #3 the Fed made last month

three strikes is OUT.

From my continuous daily interviewing of people I have come to the con

clusion that on a national level, there is no longer a real Democrat or Republican

And the common denominator among all these people is the adoption of

unique strategy for bringing down inflation.

For the first time, we have large and growing numbers of people simultaneously

espousing the Democrat

philosophy of low interest rates and the Republican

doctrine of a balanced budget.

In connection with this I include this very unnoticed quote.

We used to think you could just spend your way out of a recession and increase employment by cutting taxes and boosting Government spending. I tell you, in all candour, that that option no longer exists, and insofar as it ever did exist it only worked by injecting a bigger dose of inflation followed by a higher level of unemployment. That is the history of the past 20 years.

That was said on September 28, 1976, by James Callaghan, Prime Minister of England. And HE ought to know.

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.