Prior discussion:
speaker: MR. BALLES.
text: But any stimulus one gets from the supply side of the economy, in view of expectations of inflation, gets quickly undone by reactions on the demand side, with consumers saving more as a percent of their income when unanticipated inflation occurs, spending relatively less, and that feeding back on orders and production and business incentives to spend on plant and equipment. So all things considered, in view of the significant overshoots that have already occurred, say, in the third quarter, or even for the past year, [and] that our new ranges will be occurring from a higher base for both M1 and M2, I would come out net net for the specifications of alternative B. But as in the case of Mr. Kimbrel, I think I'd go a little step further as a preference to lower the upper end of the M1 range to 6 percent instead of the present 6-1/2. 
speaker: CHAIRMAN BURNS.
text: Thank you, Mr. [Balles]. Mr. Partee. 

MR. PARTEE. "I look at the economy and I wonder whether it's the kind of an economy in which we want to have a substantial rise in interest rates, a substantial shift in the flow of funds away from the thrifts and the banks into the market, and the characteristics of a tightening in the old terms, a tightening financial environment."

Full utterance: Well, Mr. Chairman, I'm in a real quandary today. I look at the economy and I wonder whether it's the kind of an economy in which we want to have a substantial rise in interest rates, a substantial shift in the flow of funds away from the thrifts and the banks into the market, and the characteristics of a tightening in the old terms, a tightening financial environment. On the other hand, I look at the aggregates and I see that we've clearly been over, and way over in M1, for a couple of quarters. I guess this is the time, or very close to it, when you really have to test [people's] confidence in the guides by which they run, and I have to admit to you that my confidence in the aggregates is very badly shaken. And if I had my preference, I would not specify aggregates because I'm afraid we've gotten ourselves into a trap. I'm particularly concerned, as Governor Wallich is, that what's going to happen, regardless of what we specify in the way of aggregates, is that the demand function for money has shifted. And if we're going to continue to have a fairly rapid--although not as rapid as it has been here over the summer--increase in M1, and I dearly hope that President Willes is wrong, and then we wouldn't, in an environment like that, seek to get down within the target range for M1 regardless of the consequences for the economy. Because the economy simply, in my view, is not strong enough to support a substantial rise in interest rates. I sit here right across from the chart on selected monetary indicators. I find that the third quarter saw an increase of about 150 basis points in Treasury bills, from about 4-1/2 or maybe slightly more, to something over 6 percent. It is true that long-term rates haven't moved much this year on balance, but they have moved since the last meeting. They are tending up a little.

Opinion: yes
About monetary policy: yes
Stance toward easing (NLI): contradiction