Defense, Controls, and Inflation.pdf - The Ludwig von Mises Institute

12 Defense, Controls, and Inflationthorities now lack adequate legal power to take the necessarysteps but that public pressures generated by a fall in capitalvalues will cause the Board not to take the necessary steps orto cause Congress to intervene. The argument was buttressedby reference to the history of monetary policy in the UnitedStates. Critics and proponents of monetary control agreed thatat several critical stages in the country's financial history whenprices were rising rapidly the Reserve Board's action was of akind that fostered the price rises rather than checked them. Onno occasion has the Board taken sufficiently vigorous counterinflationarymeasures. While the record clearly does not supportthe contention that the history of monetary policy shows thatit does not work, it is, on the other hand, disquieting evidencethat the political point may be well taken. Finally, it might beadded that in so far as gestures by the governn1ent are importantto morale during a national crisis, monetary measures havesingularly little political glamour. Of course the political fate ofmonetary policy depends on the cultivation of an informedpublic opinion.B. THE ALLEGED WEAKNESS OF DIRECT CONTROLS 9Will limited direct controls be ineffective in preventing illflation?-Therewas considerable feeling that the situation didnot call for· general controls in all areas but rather for selective9. MR. HALEY: The Introduction seems to be deficient in that, althoughit offers a very complete statement of the case for monetary controlsand of the counterarguments to criticisms of this method of control,it offers, in my opinion, a less adequate statement of the positive casethat was advanced for direct controls other than priorities and allocations-specifically the case for price controls. For example, I have been unableto find reference to the important political consideration that organizedlabor might be willing to exercise self-restraint in its demands for higherwages if effective price controls were maintained.MR. LEVENTHAL: There is a failure to state the case for the use of directcontrols in its, let us say, most appealing form-that fiscal and monetarycontrols must.be regarded as basic elements in a sound government programto combat the problem of inflation but that relying solely on theseforms of programs would yield many undesirable consequences and thatit is the part of wisdom not to push anyone program coldly and analyticallyto its logical extreme but instead to rely.upon a combination of programs,each having some role to play in supporting the others.