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

24 Defense, Cont-rols, and InflationA. Is keeping down interest rates a relevant objective?1. Is the argument for it that it keeps down interestpayments on the public debt? But if inflation is to beavoided, keeping down interest rates will mean ahigher level of taxation or more stringent direct controls.Are these preferable to higher interest paylnents?2. May not the objective of low interest rates preventachievement of any effective noninflationary program?3. If this happens do the gains to the rrreasury justifythe costs of inflation?B. Is the program of keeping down interest rates favoredbecause a rise in rates now ,vill make it difficult tolower them again when it becomes appropriate todo so?C. Can we have both the program of keeping down interestrates and a noninflationary monetary program withexisting institutional arrangements? Can the effect ofReserve purchases of securities (to prevent a rise ofinterest rates) be offset by increasing reserve requirements?Will the only effect of this be to reduce interestpayments while the interest rates on nonbank-held debtremain unaffected? Is the proposal to establish specialinterest-bearing security reserves for this purpose justifiedexcept as a means of providing banks with additionalearnings?VI. Can some inflation be justified as a means of putting specialburdens on groups not important for the lnobilizationprogram? If so, is this objective sufficiently im.portant tojustify weakening the bias against inflation?CHAIRMAN LEVI: In behalf of the Law School, my colleagues,and the committee, I bid you welcome to this conference andthank you for your willingness to participate in it, and we expressour appreciation again to the Volker Fund for its grantto the Law School which has made this conference possible.The issues to be discussed at this conference are cOlllplicated