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to stating my conclusion. In the present state of our knowledge, it seems to me desirable to state the rule in terms of the behavior of the stock of money. My choice at the moment would be a legislated rule instructing the monetary authority to achieve a specified rate of growth in the stock of money. For this purpose, I would define the stock of money as including currency outside commercial banks plus all deposits of commercial banks. I would specify that the Reserve System shall see to it that the total stock of money so defined rises month by month, and indeed, so far as possible, day by day, at an annual rate of X per cent, where X is some number between 3 and 5. The precise definition of money adopted, or the precise rate of growth chosen, makes far less difference than the definite choice of a particular definition and a particular rate of growth. |
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As matters now stand, while this rule would drastically curtail the discretionary power of the monetary authorities, it would still leave an undesirable amount of discretion in the hands of Federal Reserve and Treasury authorities with respect to how to achieve the specified rate of growth in the money stock, debt management, banking supervision, and the like. Further banking and fiscal reforms, which I have spelled out in detail elsewhere, are both feasible and desirable. They would have the effect of eliminating present governmental intervention into lending and investing activity and of converting governmental financing operations from a perpetual source of instability and uncertainty into a reasonably regular and predictable activity. But, though important, these further reforms are far less basic than the adoption of a rule to limit the discretion of the monetary authorities with respect to the stock of money. |
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I should like to emphasize that I do not regard my particular proposal as a be-all and end-all of monetary management, as a rule which is somehow to be written in tablets of stone and enshrined for all future time. It seems to me to be the rule that offers the greatest promise of achieving a reasonable degree of monetary stability in the light of our present knowledge. I would hope that as we operated with it, as we learned |
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