'A PLAN FOR SUBDUING INFLATION,' A DIALOGUE WITH ALLAN H. MELTZER, FORTUNE, SEPTEMBER 1974

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01194A000100520001-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 10
• Document Creation Date: November 11, 2016
• Document Release Date: August 6, 1998
• Sequence Number: 1
• Publication Date: September 19, 1974
• Content Type: REPORT

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!'` D V A ('_ I--1 T
Fortune's Wheel
A review of this Issue
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inflation: Ford's Opportunity
tt2 A Plan for Su#~d:iing Inflation (,a Diarogue)
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t22 Every#hing Is Shrinkin~t in Higher Education by Herrin Myer
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e ~ rtcU ies o se Ong on a
national policy for coping. with infla-
tion are compounded by a prolonged
cattle of the Sooks among econo-
mists. Thaw who think of themselves
as fiscalists (or Keynesians or New
Fcanornists) often underestimate the
importance of changes in the rate of
money-supply growth. And those who
think of themselves as monetarists
often overestimate the possibilities of
using changes in the rate of money-
supply growth as an instrument for
controlling inflation. Actually, mone-
tary tightness pushes interest rates
and unemployment up before it has
any discernible effect on inflation.
In this dialogue, economist Allan H.
Meltzer presents a specific plan for
using a combination of monetary and
fiscal restraint to subdue inflation.
Meltzer is Maurice Falk Professor of
Economics and Social Science at
Carnegie-Mellon University in Pitts-
burgh. While unmistakably a mone-
tarist, he recognizes that the federal
budget (fiscal policy) heavily influ-
ences the decisions of the Fed (mon-
etary policy).
The dialogue is a shortened ver-
s?on. of a conversation between Pro-
fessor Meltzer and two members of
th? FOR7U~IE editorial staff. Meltzer's
words are printed in black, and those
of the FbRTUNE staffers in blue.
. c ~t
sr~,rae r,zi~Jtt jr;n~d r~_bit sl~ocTci;a~-ade~?-
il's acTvecate gtsestinn. it'!if ti?~ to e.r~cl
i.i27~Qti01b? ~)tC1271?J iiL}`1QttUn P.ittailS SOi}2P
costs-ea i;rnzrtise fo cud iirflatioze zc~itl~-
otct costs is not c eciij le. l,'Ii~ ~uLt!r
those. costs? b3'1~~ not t~ ~ to lea?r?~a to
live zcitl~ i7z,Rutioza?
yell, it's certainly true that tive can't
stay where we are. Either we have to
adjust to living with inflation or we
have to get rid of inflation. The question
i.s, which, costs less. Is it less costly to
move from where we are to a world in
which there will be permanent inflation,
or is it less costly to move back to a
world-in which there is no inflation?
I believe it is less costly to move back
to the world of no inflation, if we choose
a low-cost route. It is worth something
-it is worth slot-to avoid having to
adjust to a world in which prices keap
changing all the time and fired values no
longer have any meaning. hull adjust-
ntent to inflation means changing all
bond contracts, all interest contracts, all
labor contracts. Every interest rate,
.price, and wage in the society has to
-keep changing. That would be very hard
for the public to get accustomed to. In
countries that have partially made ad-
justments to inflation, people still find
clitliculty in thinlting about prices and
wages that always rise, and even in
making simple shopping comparisons,
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