Prior discussion:
speaker: MS. TEETERS.
text: The other thing that I think is probably going to happen is that with the reduction in the first-quarter GNP we are going to have a quarter--probably the second or third, as Chuck said--in which the inventories will go in the other direction, and we could get a very strong one-quarter [expansion]. If that happens, I hope that we won't panic and then raise the rates in order to offset something which is a perfectly natural development. If anything, I would like to see the borrowings around $200 million rather than $250 million. 
speaker: CHAIRMAN VOLCKER.
text: Governor Partee. 

MR. PARTEE. "And this may be now a world-wide event."

Full utterance: Well, to give my conclusions first, I would lean toward snugging up a bit now. I also think that we are going to have a couple of good quarters in GNP; the dynamics are such that I don't know what might come from that in terms of later on and, therefore, I think a little precautionary snugging would be in order. I would also point out that Ml is very much a fact, whether we want to look at it or not. The only way that we can really deal with this would be to stop publishing Ml--suppress the numbers on the basis that Ml has no information content--and I don't think anybody would propose doing that. It is something that people look at. I am also impressed by this world-wide increase in M1 that has occurred over the last six months and it may be telling us something after all, as Ml was telling us something three or four months ago about a recovery that was stronger than almost anybody expected. Now, it didn't come in anything like as strong as normal relationships would have predicted, but in fact the economy acted more like Ml would have suggested than most judgmental forecasters would have expected three, four, or five months ago. And this may be now a world-wide event. I also have a problem because I don't trust any of the other aggregates. M2, I think, is very much affected by the IRA/Keogh accounts, which are a direct substitution in the short run for tax-exempt savings balances. M3 reflects the pattern of demand on the markets, and I think it is a simple reflection of the fact that corporations are trying to do some restructuring. I have always been more comfortable with total credit but what I am not comfortable with about total credit is our estimates. Just a couple of months ago we were told that, by golly, total credit is running very low--well below the lower end of our range. Now, somehow, in the last six weeks, we learn that no it isn't; it is 9-1/2 percent, which is up in the range. And by the time we get another iteration of that, when the July national income numbers come out, we may find that it is at the top of the range. It is a very unstable figure from the standpoint of estimation even though it is a pretty stable figure from the point of view of its relationship to the economy. So, I don't think we can disregard Ml and I don't think we can disregard the fact that the economy seems to be pretty strong under foot. Therefore, I would snug up without changing operating procedures--which I think is what Ted Roberts was really proposing in taking Ml [into account] as a driver on providing reserves again. I'd snug up to maybe $300 million [on borrowings] and try to come in on the low side of alternative B on the aggregates.

Opinion: yes
About monetary policy: yes