Wall Street Week with Louis Rukeyser; 1017; The Case for Reagan

A. This program is made possible by a grant from the Martin Marietta corporation and by this and other public television stations. Wall Street Week. Produce Friday October 2014. Your host for Wall Street Week is Louis Rukeyser. Our panelists are

Carter Randall Joel Stern at Julius Westheimer. Tonight's special guest is Alan Greenspan president and chairman Townsend Greenspan and company incorporated. Good evening I'm Louis Rukeyser this is was we. Welcome back. Well this was the week when inflation went up stocks went down and the presidential campaign went nowhere. They have to prove that the government was not rigging its economic statistics. Or if you prefer to demean the Labor Department gave President Carter precisely the news he didn't want to hear just before the election. After two months in which Consumer prices rose a total of a mere seven tenths of one percent. Inflation is out of the Get ripping the nation for a full percentage point in September alone meaning that the great dollar robbery is again taking an annual fall in double

digits. Nor was Wall Street cheered by the administration's response to indications that none of its first seven major economic programs seem to be doing the job. Both treasury secretary William Miller and the not go on but pretty much forgotten Alfred Kahn said the next step would be not more restraint in Washington but even more intervention by Washington and in the private wage price process. The stock market heralded this outpouring of economic genius combined with indications in the polls that Jimmy Carter might actually be around to implement programs by staging its most terrifying one day nosedive and its very first weekly decline of the month. Question which way they're voting there and the rest of America however that was very much a question indeed suggesting that the biggest mistake John Anderson made was in not legally changing his name to none of the above in which case he might be leading in the polls and that if they did

if the economic news seemed to be helping Ronald Reagan overseas at least there seemed to be some support for the incumbent China backing one from column A. Signed an agreement committing Pete came to buy between six and eight million tons of U.S. wheat and corn the next four years back the Carter plainly hoped would not go against the grain in the Middle West. And Iran while every bit as confused and confusing as ever there are hopes that the American hostages might in fact be freed at a time that seemed very very coincidental indeed which suggested to some cynics that the Ayatollah might have a favorite candidate to the chief impact of those happy rumors which descend gold crashing to its lowest close in two months at six hundred thirty three dollars an ounce in London apparently amid ferment this concern among gold bugs. The world situation might actually be improving. Heaven forfend. Well fear not the

economy may be mixed or even mixed up. The stock market may be as nervous as a cat on a Hot Tin future and the candidates may be turning mealymouthed the ambiguity into a political art. But Wall Street Week is on the job. Last week we heard from President Carter's chief economic spokesman tells Shots tonight again in advance of the candidates own and probably less forthcoming debate. We will hear from Ronald Reagan's chief economic spokesman Alan Greenspan and next week here if not in Cleveland. John Anderson camp will have its turn. But before we get to the ballot seekers Let's visit the place where they vote with their cash and see what actually did happen this past week in Wall Street. And as the Dow Jones Industrial Average indicates the market continued in a rut. The Dow has spent more than three months between nine hundred eighteen and nine hundred seventy five but slipped down amid a combination of economic and political fear is closing the week with a net

loss of twelve and a half points at nine hundred forty three point six and similar moderate losses would be in the broader composite market indexes of the New York and American stock exchanges and the over-the-counter market. Speaking of ruts the elders who compiled our technical market index report a bearish minus 4 they've been within an octave that read in since July 25th passed out again I suspect. Meanwhile back at the economy the story continued to be an even recovery from recession. Better news on durable goods orders a 15 percent fall off and auto sales in general those who are card read. No boom no depression no relief from inflation. But I wonder what you are reading tonight. From my reading at least on the economy for the next several months is that there is going to be a very sluggish recovery or we're headed into a double dip recession you know mortgage rates going where they are generally speaking

14 percent for home mortgages. Just put the kybosh on homebuilding. People can't qualify for mortgage loans because of the high prices that have you been concerned about this economy for some time. Let's hold with the fact that it's cheap statistically and there's no question it's sickly and I am optimistic about higher prices in the stock market but I'm not really optimistic about a roaring economy. In fact I would be very pessimistic if we had a roaring economy because inflation would zoom in in that case. So I think what we're going to see at best is a sluggish economy with a recovery not coming until really the middle of next year. At worst another double dip recession may be long term that good because maybe with them about something they can do with new money now would you buy the stocks or would you wait for a while. Oh yes I'd buy stocks and would would stick

with the companies that are growing but I also would invest in some of the obvious things like regional bank stocks they're very cheap as a non-regional banker What do you make of this economic and financial situation. I think the fact that the money supply has been growing at unbelievable rates week after week. I understand the figures today from last week were revised up sharply. And on top of that it was up again. What it means is that the governments and central bank is putting too much oil into the machine and the oil is going to continue splattering to the side in the form of inflation. What we need is just enough oil from the machine so that the machine doesn't splatter oil at all. President Carter has been talking about the bet was aboard following what he calls a strictly monetarist approach of the members of the administration have suggested we're heading for a money crunch. When you assessment what the thing I can't imagine where he went to school we're going to soever has been telling him that he must be feeding him some new dogma. You see you know money crunch. I don't only see no money

crunch unless the Fed has got to cut back sharply to bring down this growth of money at just the wrong time. But when I see is say rapid growth in the economy next year because of what's being done this year and the renewed inflationary expectations that's the reason why long term interest rates have moved up so sharply back to higher interest inflation rate next year than this year. Yes I would. There's Westheimer after that cheerful forecast. I think Wall Street is waiting for the debate Tuesday night to find out what the candidates say as a clue to what they might do. And further I think they're certainly waiting for the election. I have a strange feeling in my bones that Wall Street really is looking forward to a Reagan election after all the songs you know about Glee and giggles and to just go work this afternoon. The Dow Jones average the day Carter was inaugurated was about nine hundred fifty nine. And as you just stated it's nine forty three nil. So in three and three quarter very inflationary years we've gone nowhere on the Dow the S&P 500 is only

slightly above where it was on inauguration day although it should be stated the American and the over-the counter are much higher. And we had a clue yesterday Thursday when the polls came out indicating Carter had a slight lead we had a very bad break in the market. If you also just said so I'm not saying who to vote for but I do think the market is looking forward to a Reagan election and possibly also because he has stated he will reduce the capital gains tax very sharply. So they might sell off a lot of weapons that no one knows what's going to happen in Wall Street but I have that feeling in my bones. In any event down it's time now to make sure that our your survival in the event one of those three fellows actually does get elected in November. Got a Randall speaking of the political campaign oratory has a highly appropriate question about pollution control often called it would have Rockford Illinois is looking for good investments in that area either now or after the election. If you clear the air for him. Yes I think investments in pollution control long term and even short term

might be very beneficial. It is a growth industry here to stay. Companies like Browning Farrah's Peabody and national others waste management could be very interesting. They have done well. They're not selling at low prices but I think they're good investment not a stink in the butt not a stick in the door Stern Robert missile in a garrison North Dakota would appreciate an explanation of what is listed in the newspapers as open interest on commodities futures contracts. What does it mean and how is it likely to affect the prices of those. It's a good question. The open interest represents the number of contracts that could be exercised at maturity which means the product has not yet been delivered and there is no offsetting transactions such as if you have a long position that if you own it there's no short position on the other side to cancel it out. In terms of whether or not it makes any difference on the price it does make a difference. If you look at

things one way and it doesn't make any difference if you look at another we believe my group at least believes that the volume of shares traded for example on the New York Stock Exchange and anyone share really does not give you much clue to whether or not the shares are going to rise or fall. The volume might even indicate a high degree of dissatisfaction or degree of disagreement regarding the outlook the same is true about this. This represents in effect the value as opposed to when in fact I'm right. What does your group call them. To America have a positive and I think you're as Westheimer How would you respond to Barbara tide of Houston writes as follows. How could a person with a few thousand dollars to spare go about becoming a backer of a Broadway play. When a producer even be interested in such a small time Angel or theatrical investment really as risky as they appear to be. I will take those in order. Somebody with a few thousand dollars to spare can invest in a Broadway play by keeping his or her eyes and ears open by reading

Variety magazine billboard and also spending some time around regional theaters and Houston and other cities have them. Yes producers are looking for so-called small investors. They're pretty smart they don't want to put much of their own money so they're looking for people who put in eighteen hundred two thousand twenty five hundred dollars is theatrical a risky investment. Well I'll tell you there's a chance one in 50 of getting your money back I'm told. And that type investment makes my doggy growth stocks look like Triple not going up on it's regarded as the third stage investment and it was the west out of advice turns out to be wrong. Just hum a few bars and I'll fake it. OK now if it's been curtains for all your investments up to now and you like some good actors for a change let's kiss and make up. Send your money questions along. It was we always Mills Maryland 2 1 1 1 7. That's Wall Street Week Owings Mills Maryland. 2 1 1 1 7. And now let's go over and meet tonight's special guest Alan Greenspan.

Ellen welcome back with why they have your get it's always in your way. Alan Greenspan has appeared on this program in several different capacities. In fact four years ago he appeared for the defense in his role as chairman of Gerald Ford's Council of Economic Advisors. Now he's here to tell us what a mistake the country made in not taking his A-level advice that we're not nurturing Republican politicians Mr. Greenspan operates as chairman and president of towns and Greenspan one of the country's leading economic consulting firms. Allan Ronald Reagan has long been known as an exponent of free market. Recently he's changed his positions on AIDS in New York City the government bailout of Chrysler. Price supports performance you really feel comfortable defending his new support of these positions but I think that you have to distinguish between somebody who is running for president and economists who

can have the luxury of his own personal views. Ronald Reagan has changed less in a presidential election from the basic overall point of view I've always thought of him as having a number of areas than anyone I know. And the reason is is that he is saying that there are certain issues in which people have convinced him that for certain reasons which he finds convincing that certain alterations are required. And I guess that is the nature of our political process. All I can say to you with respect to that of adjusted for normal political campaigning he's done a good deal less of that than anybody and yet you economists get these fellows to behave a little more consistently. We try that as Governor Reagan can see that it would be inflationary if we just cut federal taxes and didn't cut that was spent.

I don't know whether he does or doesn't but that's not his program his program is in fact to cut taxes significantly 10 percent a year over the next three years each year but also to restrain the growth in federal spending. In other words it is not correct to talk in terms of this program as cut taxes. It's a total package and one should visit your program other than top level. Well Governor Reagan as talked about was very upset was that he hasn't been very specific what he has proposed balancing the budget by 1983 which happens by coincidence to be exactly four years after 1979 when Jimmy Carter first proposed he would balance the budget when he was running four years ago. And these guys are going to balance it but I think they will and I think the reason that I suspect that it's going to happen is that Ronald Reagan actually wants to balance the budget in a way which I'm

not sort of sure that Jimmy Carter does or did. And one way one knows that is that one of the very first acts that Jimmy Carter engaged in upon becoming president was to radically would revise general Ford's last budget and I think that his general view of what the threat of inflation was was. Misguided and listening to Ronald Reagan I'm convinced that he takes inflation very seriously that he will take what ever is necessary to restrain federal spending and I think on like Jimmy Carter we will when it is necessary to use a presidential veto to restrain the growth in our lives and I think since the political climate of this country it's clearly now moving the direction of what I guess I would call fiscal restraint of fiscal conservatism. I suspect you'll have the support of the people the electorate the condoms.

You've just suggested that Ronald Reagan is more sincere about budget balancing the demigod it may have been four years ago. President Carter has been characterized as a fiscal conservative. Number one do you share that view. Number two if not how would you characterize him. And number three How could we expect Governor Reagan to differ on that. Well I think that President Carter is a partial fiscal conservative a prove fiscal conservative would not in my judgment have made the mistakes that he made in the early part of this administration would model with the budget or the way did and he would not have supplants accounts one of the pipes of problem which is subsequent. I don't know how to generally describe. Maybe perhaps a born again fiscal conservative who in the last year or two has been crying to get inflation back in the bottle so to speak. The stream of the zone.

Let's turn to another label. There's no enthusiasm for winning union votes. Governor Reagan appears to have abandoned any call for legislation restraining union monopoly lbs. What happened on that. Well actually he never really called for the application of anti-trust statutes to the union. What he did ask for was a study of what he did was after having studied it. My impression fact I heard him say so is that he concluded that it was not appropriate. So it really is an issue were one trade off in that area took a close look at it and decided that it wasn't the right thing. I've been with him. Alan you're an excellent economic forecaster one of the best in the country. How would your forecast for 1981 and beyond change depending on who wins this election. Well the most important thing.

We need to know about the next two or three years is where long term interest rates in general and mortgage interest rates in specific will be headings I think Carter mentioned the key issue right at this particular stage is whether or not we're going to sort of stagnate or go into some state of Sawgrass. That's what it's critical to long term interest rates. And what is therefore critical to the long run for the economy is inflation expectations or what economists call inflation premiums in the long term interest rates. If Governor Reagan can make himself credible as president will President elect. That he is really going to get inflation on the inflation premiums will fall. Remember the long term expectations long

term interest rates would fall. The housing industry which has been sadly depressed will accelerate its upswing. I believe the passenger cars will always follow housing also and you can get a really significant change which I don't and as a car so that there is for the first time that I recall in the very room a very significant psychological component in economics and I think that the markets do perceive the significant difference between a President Reagan or President. Now it's time for me to consult my own electoral college starting with Professor Randall Allen. We hear about tax reduction but what about tax reform. Is there anything that you or a Reagan administration would foster in encouraging

investors to put capital into the marketplace through changes in our tax system. Well I should certainly think that occurred in 1978. Capital gains stands are surely in retrospect successful moves. Well I cannot specify exactly what Governor Reagan's presidency would recommend there's no doubt that he was favorably disposed in the direction of trying to improve the supply of capital and supply of labor and get the economy going again and I actually think that experience to date is favorable towards him. Many people when they take a look at an economy they look at it as a closed issue. Yet it seems as if foreign policy has a great deal to do with economics too. When I travel overseas I get the impression that the US from the standpoint of foreign

policy is the laughingstock in many countries and that Helmut Schmitz of Germany seems to be the leader of the Western world even though and perhaps it's because their economy has done so well to what extent do you see the economy relating to foreign policy or maybe it feeds back the other way. Well I think it's a question duels of major interaction. The American economy dominated the rest of the world for a very substantial part of the post-World War Two period I should think that we in this country are successful in reducing inflation. Restoring a vital economy getting productivity moving again. Should the United States who again is the major force in the Western industrial world. I want to dig deeper into the inflation problem. Will you please tell our viewers and hopefully voters specifically what Ronald Reagan will do

if he's elected president Tuesday a week in addition to reducing government spending to bring down the cost of living for the average American family. Real specific brought in the most general sense what has to be done is to improve productivity. And that's why his tax focus was to reduce the excess tax burden but also in conjunction. You must also reduce not only the federal deficit and the borrowing that's associated with the federal benefits but the vast amount of so-called off your financing and quoted goods which in turn create a substantial claim on the savings of the society from the federal government. That's the cause of excess money supply in my judgment it's the cause of an inflationary economy. I would suspect that a President Reagan would address himself to reducing overall burdens that the federal government imposes on savings and

investment and very specifically in the regulatory area to give a much greater ability on the part of the business community to produce to people and to get a viable economy in which unemployment is forming and production once again the Soviet. We only have a couple of minutes left. The Federal Reserve Board monetary policy generally are in the midst of controversy and your view is the Federal Reserve Board behaving responsibly. And what kind of message could we expect it to get from the president right. Well first of all I'm say President Reagan and in fact even as a private citizen always view and I think appropriately the Federal Reserve and in the genes and that it does not and should not be subject to jawboning from the executive branch. The Federal Reserve at this particular stage I think is being swamped by excess federal credit in the sense that I've mentioned before and it's having

probably more difficult then you're sure in trying to sustain a stable when it's real. If we can get the budget deficit down in federal credit down I think will make the job of the Federal Reserve a lot easier and they will do a lot better. Charles Schulz said in this chair less than the scouts last week there will be no wage and price controls in the second quarter term. Who caught her aides though this week spoke of an incomes policy which at least suggests greater intervention in the wage price process. What can we expect in that area right now. I would say President Reagan would not. Incomes policy or intervention in the economy as a tool which would have any possibility of being successful in restraining action. It's fighting symptoms not causes. And I would suspect that he wouldn't stoop to that as he would a stupid mandatory drones you know word to be Expect a lot of intervention into the foreign trade area.

How much protectionism we're going to get. I would say it's centrally in that room governor Riggins of free trade. Thanks very much John Greenspan the man who says that Ronald Reagan's roots are with the free market and if they can get back there once the nonsense of this campaign is over with. Thanks to our panelists. I hope you'll be back with us again next week when we will conclude our survey of what this election may mean to our money by talking with Robert Walker chief domestic advisor to candidate John Anderson. And we'll see whether the U.S. can call it a Reagan debate on Tuesday night. That's helped resolve Wall Street's debate about where to jump next. I hope you'll find it best to take it. And while this has been Wall Street Week I'm Louis Rukeyser. Goodnight you. If you would like to obtain a written transcript of one program send $1 to transcript. Wall Street Week Owings Mills Maryland 2 1 1 1 7.

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