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TObe {University of Cbicago
Department ot Economics
May 1 5 , 1944
Governor J&arriner S. Bccles
Board of Governors
J'ederal Reserve System
"Washington, v* C.
Jjear Governor Eccles:
I was distinctly nappy as I perused theApril
issue of the Federal Reserve Bulletin and found the
announcement of your reappointment as a member of
the Board and as Chairman. The really big job in
monetary policy is still to be done and in many
ways the crucial test and major opportunity comes
as w» make the transition to a peace economy. It
will take more than wishful thinking and scattered
effort to assure us that we will have a level of
demand that will be high enough to support and induce
full use of our resources and technology. *our reappointment is significant because of your concern
and belief that monetary policy should contribute a
maximum to that end.
I wish you every success.
•Sincerely yours,
Theodore W. Schultz
TWS/gw
June 20,
Dr. Theodore Hi. bchultz,
Department of Economics,
The University of Chicago,
Chicago, Illinois.
Dear Dr. Schultz:
On my return from a trip to theftest,I was pleased to
find your thoughtful note of May 15 on my desk. I just wanted to
let you know how much I appreciated it.*
So far as monetary policy is concerned, it seems to me
that the probable course for a good many years is already clearly
indicated. In its Annual Report, the Board was at pains to emphasize, much as Governor Towers did in the report for the Bank of
Canada, that monetary action is by no means the important instrument of control it was once supposed to be and that it plays a
minor role at best in influencing the course of economic life.
Our report further indicated the probability that after the war interest rates would remain at approximately their present levels,
though it would be possible for short-term rates to firm up somewhat without affecting the long-term rates. In other words, in
my judgment, monetary policy is not only a very subordinate factor
but will be virtually automatic so far as one can see in the
postwar world as it has been during the war.
as I have said many times in the past, fiscal policy is
infinitely,,more import-ant. If we learn how to use %t properly, it
can, I think, be a potent factor toward maintenance of a high level
of economic activity in this country, "nether it will be intelligently used is beyond my powers of prophecy, but unless the social
sciences, including economics, catch up with the tremendous progress
made in the physical sciences, I cannot take an optimistic view of
the future beyond the postwar conversion period.
I hope I shall have the pleasure of seeing you when you
come to Washington.
Sincerely yours,
[. §. Eccles,
Chairman.
ET:b
m
Juno 7,
Dear Dr. Sohultz;
It was ay intention to hold your v*ry
thoughtful note of May 15 until Mr. Ecolee re*
turns the middle of this month, but you nay
wonder if it has gone astray. And, accordingly,
I as acknowledging it on his behalf, knowing
that he will be pleased at your generous personal
references to him*
I hope you will not fall to cone in
when you are in town*
Sincerely yours,
(Signed) Elliott Thurstou
Dr. Theodore W. Sehults,
Department of Economics,
the University of Chicago,
Chicago, Illinois*
ET:b
@FedFRASER