REGAINING CONTROL OVER
AN OPEN-ENDED MONEY SUPPLY*
THIS PAPER is an alarmist report on the state of U.S. monetary policy. It falls into three main sections.
The first section shows how the supply of effective money (transactions balances) has been growing much faster than is indicated by either the traditional or the revised form of the official monetary aggregates, through innovations which have added new types of claims usable to make payments. The second section shows how this process has been fostered by a permissive policy of the Federal Reserve Board--so much so that what has been perceived as an anti-inflationary monetary policy has given strong reinforcement to inflationary forces. The third section sets out an agenda for monetary reform, designed to regain control over a money supply which (as demonstrated in the first two sections) has been allowed to become open-ended.____________________