Prior discussion:
speaker: MR. WALLICH.
text: I also am asking myself: Why, in an economy in which no single thing seems to be outstandingly strong, is there so little room? Why, when we've got some distinctly weak sectors like housing and automobiles, has the economy been expanding so rapidly? Is it because the saving rate is so low that we're now at a much higher level of consumption than we normally would be so that leaves less room in the economy for other things and is squeezing things out? I find all these things difficult to reconcile, but there seems to be no doubt that the economy is not going down even moderately as much as thought; it may not go down at all and is overall very strong. 
speaker: VICE CHAIRMAN SOLOMON.
text: Chuck. 

MR. PARTEE. "And that's always hard, indeed impossible, to predict or to time."

Full utterance: Well, I don't think there's much downside risk either, except if there should be some unexpected financial difficulty that would lead to it. And that's always hard, indeed impossible, to predict or to time. I would agree with Lyle that the governor on the economy is monetary policy. And with emphasis on the aggregates, what we're really talking about is how high interest rates will go. But, of course, as they go higher, if they should go higher, the small business problem and the problem with housing and with automobiles and so forth will get greater and greater. Indeed, that's the disturbing factor about the economy. There doesn't seem to be too much effect in the soft goods sectors and certainly no effect in the defense area. There is a strength that could end up in a bad crash, I think, in nonresidential construction. I agree with Willis that there are a lot of problems that could develop there because there's an expectation that prices will go higher and that the properties will appreciate. If they don't, then there is no basis for the financing being done on them. So, the concern that I'm beginning to have is that to achieve the 9 percent nominal GNP that Lyle speaks of, we will have no activity to speak of in some sectors and hardly reduced activity in other sectors. The differential impacts are going to be very difficult to deal with. Henry made a good point a month or so ago, in a speech that I guess he didn't deliver, which is that there are two tiers in terms of interest rate effects. Those who don't pay 46 percent tax rates are hurt a lot more than those who do pay 46 percent. That's very consistent with the notion that small business is complaining, because they [don't] pay 46 percent tax rates. And it would be very consistent for any firm that is in a loss position to be badly hurt. It reminds me of the [adage] that the worst thing a bank can have is money--that the bank should get so that it doesn't have taxable income. The same thing is getting to be true of debt burden. The worst thing you could have, if you have any taxable income, is not to have a debt burden because then you don't have any tax write-off. So, I agree that we're in a fairly narrow range with very little chance of a sizable decline in the immediate picture and a good control over the expansion because monetary policy is well along the road toward being restraining. But as to the effect that this will have in the longer run, I'm certainly not prepared to say at this point.

Opinion: yes
About monetary policy: yes