Money Stock Control and Discussion

Over the next 10 years a major controversy developed over whether the Federal Reserve recognized or placed enough emphasis on its responsibility for controlling the growth of the money stock. The related question of which operating strategy to follow in controlling the money stock was pushed to the background. Economists can argue at great lengths over the extent to which the Federal Reserve tried to control money in the past. However, one thing is clear: since early 1970, the Federal Open Market Committee (FOMC) has moved in several stages to a position of placing more emphasis on controlling the money stock, relative to other objectives, than had previously been the case. Along with this move, there have been increased scrutiny of the current operating strategy and an analysis of the problems involved in controlling growth rates of monetary aggregates. In the spring of 1969 Chairman Martin appointed a subcommittee within the Federal Reserve under the leadership of Governor Sherman Maisel to study means of improving open market operations. The Maisel Committee focused on the problem that, if money market conditions are the primary target of open market operations, then the FOMC has no clear and definite way of giving instructions to the Manager of the System Open Market Account. The Committee’s primary concern was more with improving the performance