Book contents
- Frontmatter
- Contents
- Figures
- Preface
- 1 The Pragmatic Evolution of the Monetary Standard
- 2 Learning and Policy Ambiguity
- 3 From Gold to Fiat Money
- 4 From World War II to the Accord
- 5 Martin and Lean-against-the-Wind
- 6 Inflation Is a Nonmonetary Phenomenon
- 7 The Start of the Great Inflation
- 8 Arthur Burns and Richard Nixon
- 9 Bretton Woods
- 10 Policy in the Ford Administration
- 11 Carter, Burns, and Miller
- 12 The Political Economy of Inflation
- 13 The Volcker Disinflation
- 14 Monetary Policy after the Disinflation
- 15 Greenspan's Move to Price Stability
- 16 International Bailouts and Moral Hazard
- 17 Monetary Policy Becomes Expansionary
- 18 Departing from the Standard Procedures
- 19 Boom and Bust: 1997 to 2001
- 20 Backing Off from Price Stability
- 21 The Volcker–Greenspan Regime
- 22 The Fed: Inflation Fighter or Inflation Creator?
- 23 The Stop–Go Laboratory
- 24 Stop–Go and Interest Rate Inertia
- 25 Monetary Nonneutrality in the Stop–Go Era
- 26 A Century of Monetary Experiments
- Appendix: Data Seen by FOMC for the Stop–Go Period Shown in Figures 24.1, 24.2, and 24.3
- Notes
- Bibliography
- Index
- Titles in the series
4 - From World War II to the Accord
Published online by Cambridge University Press: 26 May 2010
- Frontmatter
- Contents
- Figures
- Preface
- 1 The Pragmatic Evolution of the Monetary Standard
- 2 Learning and Policy Ambiguity
- 3 From Gold to Fiat Money
- 4 From World War II to the Accord
- 5 Martin and Lean-against-the-Wind
- 6 Inflation Is a Nonmonetary Phenomenon
- 7 The Start of the Great Inflation
- 8 Arthur Burns and Richard Nixon
- 9 Bretton Woods
- 10 Policy in the Ford Administration
- 11 Carter, Burns, and Miller
- 12 The Political Economy of Inflation
- 13 The Volcker Disinflation
- 14 Monetary Policy after the Disinflation
- 15 Greenspan's Move to Price Stability
- 16 International Bailouts and Moral Hazard
- 17 Monetary Policy Becomes Expansionary
- 18 Departing from the Standard Procedures
- 19 Boom and Bust: 1997 to 2001
- 20 Backing Off from Price Stability
- 21 The Volcker–Greenspan Regime
- 22 The Fed: Inflation Fighter or Inflation Creator?
- 23 The Stop–Go Laboratory
- 24 Stop–Go and Interest Rate Inertia
- 25 Monetary Nonneutrality in the Stop–Go Era
- 26 A Century of Monetary Experiments
- Appendix: Data Seen by FOMC for the Stop–Go Period Shown in Figures 24.1, 24.2, and 24.3
- Notes
- Bibliography
- Index
- Titles in the series
Summary
The juxtaposition of the Great Depression and World War II raised expectations dramatically of what government stabilization policies could achieve. In 1932, the unemployment rate rose to 23.6%. In 1939, it was still 17.2%. In 1945, the last year of the war, the unemployment rate was 1.9%. The juxtaposition of massive unemployment in the Depression and full employment during World War II provided apparently incontrovertible evidence that government spending could provide a countercyclical stimulus to the economy. The Employment Act of 1946 gave the government responsibility for full employment. However, there appeared to be no place for monetary policy in the arsenal of government policies.
A changed Intellectual Environment
According to real bills, government could do nothing to arrest the painful economic adjustments that inevitably followed the collapse of a speculative mania. Depression had to run its course to eliminate excessive debt and to correct a maladjusted structure of wages and prices. The memoirs of Herbert Hoover (1952, 30) have forever associated this view with his Treasury Secretary Andrew Mellon, whom Hoover labeled a “leave it alone liquidationist”:
Mr. Mellon had only one formula: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” He insisted that, when the people get an inflation brainstorm, the only way to get it out of their blood is to let it collapse. He held that even a panic was not altogether a bad thing. He said: “It will purge the rottenness out of the system. High costs of living and high living will come down.[…]
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- The Monetary Policy of the Federal ReserveA History, pp. 34 - 48Publisher: Cambridge University PressPrint publication year: 2008