U.S. MONETARY AND CREDIT POLICIES BETWEEN THE END OF WORLD WAR II AND THE OUTBREAK OF THE KOREAN WAR*

Abstract

THIS STUDY IS INTENDED to provide a thorough analysis of monetary and credit policies for the foregoing period. Most of the discussion is devoted to quantitative credit controls. Selective instruments are touched on briefly, and some consideration is given to debt retirement. Chapters i and ii present a brief discussion of monetary policies for the period 1933 to 1945. Chapters iii and iv are devoted to an examination of credit controls during the 1946-48 boom. A similar review of the 1949 recession and early 1950 period of renewed business activity follows. The objectives and actual measures undertaken during each of these periods are treated historically against a background of economic conditions. Their rationale is heavily documented with material from publications of the monetary authorities and testimony of their officials before numerous congressional hearings and investigations. The policy actions are then thoroughly analyzed in terms of their effect on bank reserves, money stock, interest rates, security prices, lending and investment activities of financial institutions, and ownership distribution of the debt. A critique of the broad objectives is presented in chapter vii. Reserve proposals are discussed briefly in chapter viii. A final evaluation is set forth in chapter ix. The study reveals that the record of monetary management was unimpressive since its character was predominantly influenced by debt considerations rather than changing economic and business conditions with the possible exception of the second half of 1949. During the 1946-48 boom, the Federal Reserve System was an engine of inflation. Some restrictive measures were adopted, but with the exception of debt retirement from surplus, their anti-expansionary effects were small. The net influence of Federal Reserve openmarket policy during the entire 1949 recession appears to have been deflationary. Other actions, apart from the repayment of Federal