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Summary of Remarks
M. S. Szymczak,
Member, Board of Governors
of the
Federal Reserve System,
Washington, D. C.

before the

Annual Convention
of the
Associated General Contractors of America,
Hotel Statler,
Washington, D. C.

March 12, 1S>57
9:30 a. m.

J y topic today is "What Is Monetary Policy?"
A cardinal requirement of monetary policy is proper
adaptation to the particular circumstances of each change in the
economic situation.
In 1 d u r i n g which unemployment rose in the United States,
the Federal Reserve System followed a policy which facilitated an
expansion of credit and an increase in the money supply.
In 1956, with employment at peak levels, and with the
economy pressing against the limits of capacity, the Federal Reserve
System followed a general policy of restraint on further expansion
of credit.
This does not mean in the literal sense that the Federal
Reserve decided to "make" credit scarce. Fundamentally, the
scarcity of credit was a product of the market forces of supply and

It merely reflected a scarcity of economic resources relative

to demand in a free market economy. What the Federal Reserve System
did was to refrain from making new Federal Reserve credit available
in amounts that would have been necessary to meet all demands at
current rates, since to do so would obviously have resulted in more
price inflation as holders of the new credit bid against one another
for the limited economic resources available.
The efforts of the Federal Reserve to foster high levels
of business and employment, maintain stability of the purchasing
power of the dollar, and promote sustainable growth in the economy

are a matter of more than academic interest to the construction
industry that you represent.
The construction industry is a vital force in the American

Over-all construction outlays— public and private, residential

and nonresidential —


billion last year.

In particular, the

members of this organization are remaking in important ways — tangible
and intangible -- the face of the American scene.

Industrial and

commercial buildings, engineering projects of all sorts, schools, roads,
and other public works are largely your handiwork.
The importance of the industry rests not only on its size
and the usefulness of its output, but also on the economic activity
it generates for other business groups.

Truly, because of its

enormous direct and indirect influence on the level of economic
activity, all of us have a big stake in the quantity and quality of
your work.

Correspondingly, you —

as well as all Americans — have a

big stake in the stable growth of our economy.
struction industry —

Indeed, the con-

even more than the economy as a whole — has

suffered from violent ups and dox-ms over the years.
The adaptation of Federal Reserve policy to the differing
circumstances I have cited illustrates how Federal Reserve policy
is, at all times, based upon an awareness of the high economic cost
of violent and excessive contraction or expansion of credit.

In the

past the economic climate ha3 undergone important shifts, and we can
safely expect that it will continue to do so in the future.
for example, some changes appear to be taking place in demand



forces, and yet industrial and manpower resources continue to be
intensively employed and average prices are still rising. Always
it is difficult to foresee the future, but we can at least — and
indeed we must — be alert to signs of change and ready to adapt
ourselves accordingly.
I want to emphasize, however, that monetary policy alone
cannot achieve economic stability at high employment levels. It
is only one essential part of a much broader program —


both government and business — all aspects of which must be wisely
pursued if we are to realize our goal.