Monetary Policy

However imminent a change in British monetary practice may have been, few would have expected allegedly revolutionary reforms recently implemented. For although some three years ago Bank of England had expressed intentions (or some would say pursued a policy) of less concern with gilt-edged prices, actual behaviour echoed dilemma of seeking to control some monetary aggregate (be it money or Domestic Credit Expansion) while avoiding creation of conditions considered to be detrimental to health of gilt-edged market.2 Yet, contrary to what we were often led to believe, approach to this dilemma does not rest in deciding whether or not to sacrifice gilt-edged sacred cow of price stability on some Friedmanian altar. Indeed, some of our peers once approached a somewhat similar problem rather differently. After twenty years of almost uninterrupted fixity in Bank rate, disillusion with the use of public finance and direct controls as sole regulators of business activity resulted in 1952 witnessing initiation of a new monetary era-or so it was thought at time. Attention therefore turned to examination of questions of liquidity and ability to control credit. ability and readiness of banks [to extend credit to private sector] was greatly facilitated by two characteristics of contemporary situation. The first was that as a result of wartime cheap money policy and deficit finance banks held [comparatively too] large a proportion of short term low yielding liquid assets (chiefly Treasury Bills) .... The second was that in order to keep down cost of floating debt, Bank of England stood ready through its 'special buyer' to purchase Treasury Bills at pegged rate of 1 per cent. The banks were thus able to meet any increase in demand for advances by selling or running off Treasury Bills, without running any

Debt · Dilemma · Economics · Financial system · Market liquidity · Monetary economics · Monetary policy · Order (exchange) · Political science · Treasury · Finance · Housing, Finance, and Neoliberalism · Law

• The Inadequacy of "New-Orthodox" Methods of Monetary Control

  R L Crouch•The Economic Journal•1964

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• The Supply of Money and Its Control

  W T Newlyn•The Economic Journal•1964

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