We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 19 October 2009
This paper seeks to document some simple and not-so-simple facts. My thesis is that, to an unprecedented degree, Federal Reserve (F.R.) Board Chairman Arthur Burns has engaged himself and the System in political action. Burns' leadership has contributed to politicizing the monetary control process, the dialogue concerning the nature and effects of that process, and perhaps even F.R. decisions themselves. These tactics have reduced the Federal Reserve's power to resist external political influence, a power that Chairman McCabe “bled” for in 1951 and that over the next two decades Chairman Martin labored assiduously to consolidate. On the other hand, this behavior at least maintained and probably increased Burns' standing with President Nixon.
1 Acheson, Keith and Chant, John F., “Bureaucratic Theory and the Choice of Central Bank Goals: The Case of the Bank of Canada,” Journal of Money, Credit and Banking (vol. 5, May 1973), pp. 637–655, especially pp. 639–640.CrossRefGoogle Scholar
2 See, for example, Dewald, William G., “An Evaluation of Monetary Policy Actions, 1960–1972,”(paper presented before the Western Economic Association in August 1972).Google Scholar
3 Simulation experiments by William R. Bryan and A.J. Heins in “Open Market Operations and Monetary Variables: A Simulation of Plausible Policies” (unpublished) suggest that, if an RPD proviso clause were enforced in the face of rising credit demands, monetary aggregates might even decline.
4 The following argument is derived from Poole, William, “Benefits and Costs of Stable Monetary Growth,”(prepared for University of Rochester Conference on Money, Unemployment, and Inflation, April 1974).Google Scholar
5 This unintended procyclical growth in total reserves is reminiscent of problems that arose under the FOMC's free-reserve strategy when the Fed's free-reserves target differed from banks' desired level of free reserves.
6 Italics supplied, courtesy of Milton Friedman.
7 One such decomposition, which includes unfortunately no direct measures of policy actions, is presented in Nordhaus, William and Shoven, John, “Inflation 1973: The Year of Infamy,” Challenge (May/June 1974), pp. 14–22.CrossRefGoogle Scholar
