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contents Preface ix 1 Introduction 1 2 A New Beginning, 1951–60 41 3 The Early Keynesian Era: A Low-Infl ation Interlude, 1961–65 267 4 The Great Infl ation: Phase I 480 The reference list and the index appear in volume II, book two.
preface The second, and last, volume of this history covers the years 1951 to 1986 in two parts. These include the time of the Federal Reserve’s second ma- jor mistake, the Great Inﬂ ation, and the subsequent disinﬂ ation. The vol- ume summarizes the record of monetary policy during the inﬂ ation and disinﬂ ation.
one Introduction Exact scientiﬁ c reasoning will seldom bring us very far on the way to the conclusion for which we are seeking, yet it would be foolish to not avail ourselves of its aid, so far as it will reach:—just as foolish would be the opposite extreme of supposing that science alone can do all the work, and that nothing will remain to be done by practical instinct and trained common sense.
two A New Beginning, 1951–60 You certainly have the advantage over me of being closer to the market, but it may not be an unmixed advantage. The ticker may loom too large in your perspective and what from the point of view of the national economy are molehills may . . . appear to you as mighty mountains.
three The Early Keynesian Era: A Low-Infl ation Interlude, 1961–65 They don’t really know what the money supply is now, even today. They print some ﬁ gures . . . but a lot of it is just about superstition.
four The Great Infl ation: Phase I Monetary policy should not, and in fact cannot, be focused solely on interest rate objectives— any more than it can ignore them completely. . . . The immediate goal of monetary policy should be to provide the reserves needed to sup- port a rate of growth in bank credit and money which will foster stable economic growth. It must take into account the international position of the dollar . . . It must be constantly concerned for the full employment of both human and physical resources. It must take into account price developments and the possibility of inﬂ ation, or the widespread expectation of inﬂ ation, which would do great damage to healthy growth. . . . All these things, and many others, must be constantly weighed and balanced by the Open Market Committee . . . We cannot produce through monetary policy alone, high or low interest rates, balance of payments surpluses or deﬁ cits, rising or falling prices, more or less employ- ment, or a sound or unsound ﬁ nancial structure. We do exert some inﬂ uence on all these things, hopefully in the right direction.