A General Theory of the Price Level, Output, Income Distribution, and Economic Growth

By Sidney Weintraub | Go to book overview

9
A Miscast Federal Reserve

If these arguments are correct (and a professional economist who challenges conventional doctrines must proceed on this premise), they carry portentous implications for the role of the Federal Reserve Board of Governors--not the Federal Reserve Banks whose functions are largely of the service and routine variety.

Consider the situation. The Federal Reserve Board is the main, if not the only, discretionary agency with delegated power to stabilize the economy. To accomplish this worthy end it has been handed control over the money supply.

The irony of this is that the Federal Reserve accepts the responsibility without realizing how badly it has been miscast for a role to which its talents are unsuited. Invariably its officials spend lengthy and arduous afternoons before Congressional Committees explaining how well it has done and how wise it has been and is being. Yet the Congressmen always ask the same question; namely, why the economy is unstable, teetering on inflation or tottering on recession. In the last two years it has done both, teetered and tottered, with recession in employment, output, income, and profits. and inflation in prices.

Is there any wonder at these results? I think not. As directly as I can state it, the Federal Reserve is not equipped to combat inflation. Its operations take place via the money

-85-

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A General Theory of the Price Level, Output, Income Distribution, and Economic Growth
Table of contents

Table of contents

  • Title Page iii
  • Preface vii
  • Contents ix
  • Introductory Note 1
  • 1 - A New Predictive Theory 3
  • 2 - The Basic Truism 9
  • 3 - The Partition and Measure of Elements 13
  • 4 - The Law of k 33
  • Conclusion 43
  • 5 - The Law of the Price Level 45
  • 6 - On Predicting the Price Level 57
  • 7 - The Wedding Ceremony: Price Level and Aggregate Output 69
  • 8 - The Eclipse of the Equation of Exchange 75
  • Conclusions 83
  • 9 - A Miscast Federal Reserve 85
  • 10 - Wage Policy: A Way Out 89
  • 11 - Decomposing k 93
  • 12 - An Empirical Macroeconomic Theory of Income Distribution 105
  • 13 - A Final Price Level Generalization 109
  • 14 - The Price Level Over Time: The Final Synthesis for a Growing Economy 111
  • Conclusion 118
  • Concluding Note 119
  • Index 121
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