New Era for the Capital Markets in the 1970’s?

TLDR: For example, the authors predicts that the U.S. commitment to full employment will prevent adoption of economic policies sufficiently drastic to correct quickly the rapid price inflation underway since early 1966, which is based on an acceptance of the view that structural changes in the economy-particularly the growing relative importance of spending for government and services at the expense of manufacturing-will make the inflation harder to control.

Abstract: URRENT projections of interest rates tend to C assume that the U. S. commitment to full employment will prevent adoption of economic policies sufficiently drastic to correct quickly the rapid price inflation underway since early 1966. They are based on an acceptance of the view that structural changes in the economy-particularly the growing relative importance of spending for government and services at the expense of manufacturing-will make the inflation harder to control. The reasons are: these sectors are less vulnerable to cyclical influences, and since the end of World War IL mild recessions have been the principal forces moderating the upward trend of prices; and they have less potential than manufacturing for increases in productivity needed to offset the seemingly inevitable uptrend in wages if price stability is to be attained. These forecasts generally anticipate that over the next few years the economy will persistently tend towards undesirably rapid price increases. Forecasters believe that monetary policy will be frequently tight, and that interest rates will be high (relative to the levels, prevailing before 1966). On the other hand they expect price inflation to slow somewhat from the present pace (the annual rate was over 6 per cent in the first quarter of 1970), and interest rates to move somewhat lower over the next several months and average below present levels during the next few years. From the standpoint of the capital markets, it is