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Will Nixon listen? He has given no indication that he will. The President has been ideologically and politically opposed to wage-price guidelines or anything similar. White House aides report that he was displeased by Burns' speech. The President's only open comment was: "Well, Arthur is independent, you know." Nixon, however, has respected Burns' advice since they served together in the Eisenhower Administration. In his book, Six Crises, Nixon relates how Burns early in 1960 urged him to propose a loosening of money and budget policies to ward off a recession. Nixon did so, but the proposal was rejected. The recession hit, and Nixon is convinced that it cost him a victory over John F. Kennedy. Burns and Nixon stayed in touch during Nixon's years in political exile in Manhattan. Shortly after Nixon was nominated in 1968, Burns informed him: "Mr. Nixon, your advisers are unanimous in finding that, unfortunately, there will be no recession in November." Well then, asked Nixon, what economic issue could he stress? Burns quickly replied: "Inflation."
Nixon's policies have failed to defeat inflation so far, but have they brought on a recession? Economists argue incessantly about whether the current slowdown qualifies for that maddeningly imprecise term. If this slump is really a recession, however, it is not like any before it. The real output of goods and services has declined for two consecutive quarters−the classic if somewhat misleading measure of a recession. But factory output so far has fallen only 2.4% from its 1969 high, compared with declines ranging from 6% to 14.2% in the four recognized recessions since World War II. Corporate profits are not down as much yet as in past slumps.
On the other hand, recession is too mild a word for the situation in the stock market. The overall market is in worse shape than indicated by the Dow-Jones average of blue chips or Standard & Poor's index of 500 Big Board issues. The decline has been more severe on the American Stock Exchange. In the over-the-counter markets, some unlisted stocks cannot be sold at any price because there are no bids to buy. On the exchange floors, many stock specialists have bought all the shares they can handle and have no money for more; if large blocks of stocks were dumped, the specialists might well be unable to keep an orderly market.
A Private Depression
As a result, brokers are in a depression of their own. Relatively light trading volume and sagging prices have cut into their commission income. "Our switchboard operator is making more money than we are," says Joe Griffith, a Dallas broker. Bache & Co. recently laid off about 500 employees, and the American Stock Exchange dropped 100. Two major firms, McDonnell & Co. and Gregory & Sons, have closed their doors; several others are reported to be in trouble because of insufficient capital. A number of them may be forced into shotgun mergers. The New York Stock Exchange last week began steps to increase the trust fund that it maintains to pay off customers of houses that fail. It intends to build up the fund from $17.3 million now to $55 million. One important balancing factor: though this has been the worst bear market since the Depression, it is not nearly so severe as