ago. It is, of course cipated almost a year the $3 billion lee provided for the curserved as a margin for tunately, we did noi er the operating cash 1 that the substantial in our cash flow have ices for brief periods quence of an order balances over pei duling our borrowin r economic objective * any more borrowin le contrary, our fir ng than that which s ly discharge the fins ised on constant_minimi" 0,000 May 15.. June 30.. 1 Adjustment to $4,000,000,000 cash balance places data on basis comparable to es 1964, as shown in col. 2. Senator LONG (presiding). May I ask you, Mr. Se your reaction to this what I call the Martin slump in 1 that was set off after Senator ANDERSON. Still going on. Senator LONG (continuing). After Federal Reserv man Martin said it. I didn't say it wasn't still g people attribute that statement to him. Senator WILLIAMS. Is that the Martin slump 1 market? Laughter.] Secretary FOWLER. Mr. Chairman, I don't think the situation have changed in any appreciable de that I voiced to this committee some days ago, I thin questions from Senator Williams and Senator Smath thorough roundup analysis of the current situation the economy, as was reported in the press last 1 White House, with Chairman Martin and the C Council of Economic Advisers and the Director Under Secretary Deming attended, and another Council-I believe Mr. Okum. As the press reported statement, I think it was the unanimous view of tha present outlook for the economy is a favorable one 49-131-65 ›quirement that must be anticipated almost a year he record is also clear that the $3 billion leeway orary ceiling of $324 billion provided for the curas intended, been properly reserved as a margin for gencies a margin that, fortunately, we did not this year. en that as a practical matter the operating cash een at or below $4 billion, and that the substantial, dictable, monthly variations in our cash flow have 1 in considerably higher balances for brief periods. believe, are a normal consequence of an orderly designed to assure adequate balances over peiods , adequate flexibility in scheduling our borrowing ability to meet the broader economic objectives ment program. it of the Treasury to ask for any more borrowing essary and prudent. To the contrary, our firm tain no more debt outstanding than that which is to effectively and economically discharge the finanof the Government. ublic debt subject to limitation based on constant minimum perating cash balance of $4,000,000,000 [In billio 4444AAAA Allowance to provide flexibility in financing and for contingencies Total public $313.2 317.7 $310.2 313.1 314.3 314.7 315.7 318.7 318.8 321.8 313.1 316.1 316.2 319.2 justment to $4,000,000,000 cash balance places d Senator LONG (presiding). May Senator ANDERSON. Still going Secretary FOWLER. Mr. Chairn 318.2 TABLE II.-Comparison of debt projections of June 23, 1964, with actual results 1 Adjustment to $4,000,000,000 cash balance places data on basis comparable to estimates given on June 23, 1964, as shown in col. 2. Senator LONG (presiding). May I ask you, Mr. Secretary, what is your reaction to this what I call the Martin slump in the stock market that was set off after Senator ANDERSON. Still going on. Senator LONG (continuing). After Federal Reserve Board Chairman Martin said it. I didn't say it wasn't still going on. Most people attribute that statement to him. Senator WILLIAMS. Is that the Martin slump to the Johnson market? Laughter.] Secretary FOWLER. Mr. Chairman, I don't think my reactions to the situation have changed in any appreciable degree from those that I voiced to this committee some days ago, I think in response to questions from Senator Williams and Senator Smathers. We had a thorough roundup analysis of the current situation as it relates to the economy, as was reported in the press last Thursday at the White House, with Chairman Martin and the Chairman of the Council of Economic Advisers and the Director of the Budget. Under Secretary Deming attended, and another member of the Council-I believe Mr. Okum. As the press reported the President's statement, I think it was the unanimous view of that group that the present outlook for the economy is a favorable one. 49-131-65 I think we all recognize that it is too much to expect that the economy will maintain the tremendous pace it had in the first quarter, when the gross national product increased about $14.2 billion due to some nonrecurring factors-the carryover of automobile demand from the fourth quarter when there had been some interruptions due to strike and the steel inventory buildup in anticipation, or in fear of, a steel strike at the time of the May closing of the contract. I think we all expected the second quarter to continue to show a healthy rate of increase but not nearly at the pace that the first quarter had shown. We expect the third and fourth quarters of this calendar year to continue to show a healthy and appreciable expansion. Any forecasting is attended by a good deal of risk, but it is certainly very difficult to see beyond the first of the year in any meaningful way although I must say we were all of the opinion that there is nothing on the horizon in the way of data or trends about the economic situation that indicate any substantial difficulties in 1966. Now, of course, one could say that the stock market break, itself, is an indicator of some possible difficulty ahead. As a matter of fact, I was asked that question after the meeting by the press, and I commented that the stock market is only one of a great number of indicators that the economists and analysts use in predicting psychological changes, and forecasting psychological changes, and that it has no more or less importance than 20 other economic indicators. So, as far as we were able to see the situation, after an hour or so of fairly free and intensive discussion, I see nothing that I can add to the comments I made last week. Senator LONG. Well, now you say you see nothing on the horizon to be a substantial threat, that is to be anything aside from the fact that there is something of a break in the stock market itself at the moment, you see nothing on the horizon to indicate that the economy is in any trouble. Could you put that the other way around in the affirmative and say that all factors indicate that the economy is not in trouble? Secretary FoWLER. Yes, sir. Senator LONG. I am not a speculator and can't afford it but if I had something to speculate on I would assume that this would probably be a good time to buy some stocks at the time some of them went down. Secretary FOWLER. Mr. Chairman, I have never allowed myself to be involved in any advice about the stock market and I don't think I want to begin now. Senator LONG. I don't blame you. As a matter of fact, it is kind of like somebody betting on a horse, you can't guarantee he is going to win. up. But the question of our balance-of-payments question keeps coming Would you mind telling us what is the latest indication with regard to our balance-of-payments problem? Secretary FOWLER. I would like to answer that in two parts, and this is a pattern that I have found it necessary to follow in frequent discussions of this topic. First, insofar as the early returns from the balance-of-payments situation are concerned covering the months since the President's February 10 program was announced and the so-called voluntary program primarily affecting the banks and direct to expect that the eve n the first quarter, we 14.2 billion due to s obile demand from erruptions due to stre on, or in fear of, a se ontract. I think we show a healthy rate. first quarter had sher is calendar year te ansion. of risk, but it is certai year in any mearing e opinion that thes or trends about the e I difficulties in 195 ock market break. ad. ion after the meeting market is only one ists and analysts e recasting psycholo portance than 20 n. after an hour or s thing that I can ad: nothing on the horiz hing aside from the industrial and business operations abroad, our balan picture has shown a very steady and encouraging imp However, I think one must always add to that that t a number of factors at work in the March and April an particularly the March and April figures, which might some reflect action from the situation that existed in t of last year, and the early months of this year. There action from the interruption to exports due to the do this year. There was a reflect action due to the fact th during the last quarter and the first month and a half year, a good deal of money went overseas somewhere or in concern, as to whether or not there would be a complete stoppage of transfers of capital overseas. So the improvement which we have been able to figures for March and April and May to some extent p the so-called voluntary program and to some exten reflect actions. I myself have taken the position consistently that I th much sounder position if we wait until the second qua all available--which would be around August 20, cover of April, May, and June to attempt to appraise wha ments have amounted to as a result of the program extent the improvements in a given sector, such as fore tend to be countered by losses in certain other sectors. In other words, you have to look at this picture in its than taking too much early encouragement and to optimism from the known favorable results that we certain isolated sectors, however important they may be Governor Robertson, of the Federal Reserve Bo ock market itself : administering the bank program-the bank phase of dicate that the ecot n the affirmative and not in trouble? I can't afford it butssume that this at the time some of th never allowed myse program made a speech earlier this week indicat substantial progress is being made there. Secretary Connor, who is in charge of coordinating program as it has to do with direct business operatio indicated that the expectations of the 600-odd major are cooperating with this program promise considerabl in that sector. But we don't know what the impact is going to be, the import sector. We don't know what the impact is some of the additional requirements as a result of inc arket and I don't operations, for example, in South Vietnam. matter of fact, it is guarantee he is goi is question keeps So, I would prefer to reserve any solid comment have this situation in hand until we see these second and then I would like to add a third point which I emphasize in speaking, particularly to industrial and b that coming into a balance or approaching a balance in any one quarter is not going to be an answer to We have been in deficit, and in substantial deficit, i a period since 1958. So we are going to have to get or an equilibrium as it is called, not for just one q two, three, and four. And as long as one can see, v maintain that balance because the dollar, as a key re is going to have to continue to play a major role in ou monetary affairs. st indication with re er that in two parts. ary to follow in freq e early returns fro ed covering the me was announced and ing the banks and d |