Money and Finance

Abstract

Monetary policy has aimed at a redistribution of the national income. It is increasngly more difficult to distinguish monetary and economic policies. The first legislation was permissive and not mandatory. In the fall of 1933 an active policy of dollar depreciation was adopted and a large flight from the dollar helped to establish lower rates of exchange. The practical consequences of the policy were not impressive. New stress was laid upon public expenditures and the stimulation of new activity in the banks. The Gold Reserve Act of 1934 gave a permanent form to the experimentation of 1934. A "Stabilization Fund" was set up to enforce the new parity. The aim of returning to 1926 prices is open to many serious objections, partly theoretical and partly based upon recent experience. Technical ability to check an inflationary process is beyond question. Whether the technical ability will be used sufficiently early is a political problem. The incidence of a capital levy by inflation is not difficult to determine. A hit-or-miss inflationary policy may widen gaps in the price system rather than bridge them.