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 (HM$) a measure of consumer

confidence rebounded with the 1975 tax rebate talk and reality and was on its way

By late 1975 - consumers regained from their Fed-inspired shock confidence

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

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

three strikes is OUT.

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

that on a national level, there is no longer à 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 infla

tion 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 is 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 we 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. 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 short-term 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 generate "official" figures for every agency of the government.

the seasonally adjusted pause in the economy this summer (now) and as the

economy is faltering the second half with seasonally adjusted unemployment rising

An unbalanced budget is as much an anathema to the American consumer as high interest rates. It keeps his taxes high, his government wasteful, is 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.

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.