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The present policies of the Open Market Committee are highly inflationary because they add to the already excessive money supply. For the past
ten months inflationary pressures have been mounting due to this policy.
The expenditures of the Federal Government have npt added, to. the inflationary
pressures, but W the contrary they, have

cu. -






• -•

•" theytetve^paAdbut, agr

mope-in ~


not.of t&e—fiscal-

ihing, has/been anti-inflationary^//It is largely the growth of bank





K l/
' credit which has enabled businesses and individuals to get funds through.

-feemkr^uredit which Jaa-s brought about the present inflationary situation.

j IP V This is evidenced by nearly 20 per cerit inpuu^
bank loans from May 31, 1950, to
%f •i the
end of the year. In this same period demand deDosits and currency in#


creased to approximately T^fmillion dollars, or f per cent. This growth
jVJ t
V'" yK in the money supply is ggnraty due to the Federal Reserve's purchases of
government securities in its support of the cheap money policy of the
Treasury. 11f we are to have a sound economic policy it must rest upon tkax
restrictive monetary policy which will prevent the public from adding to
the inflationary pressures through the use of bank credit and a fiscal
luZeX&t aA
policy which will prevent inflationary pressures from Government spending.
So long as the Federal Reserve stands ready to buy government securities
in unlimited amounts in accordance with the cheap money policy of the
Treasury, all efforts to control inflation must be doomed to failure.
i\ Our future security demands a major defense preparedness program to develop
as rapidly as possible. This program is sure to greatly increase inflationary
pressures, which can only be held in check by collecting in taxes what the
Government spends and stopping the growth of bank credit by adopting restrictive monetary and credit policies.^To this end I propose that the Federal

M Reserve should announce that its policy henceforth shall be to present-further
^ ii :-in i • . -e irLA*^J^pl^O^Ay
^ growth in the supply of money and credit so long as the inflationary pressures

continue even though one of the incidental effects of the policy will be
to increase the interest rate on government securities.