The transaction's velocity of money surged during this period. But you had to splice the G.6 release during this period because of a redistribution in SMAs
During the decade before 1965 the annual compounded rate of increase in our means-of-payment money supply was about 2 per cent. During the same period, the annual transactions velocity of money increased from c. 21 to 31. In ten in-year period since 1964, the money stock grew at an annual compounded rate of c. 6.5 percent and the transactions velocity of money reached an average level of 70 in 1973.
Velocity continued to increase to over 80 during 1974. Both money and velocity figures were taken directly from the Federal Reserve Bulletin. The impact of both an accelerated increase in the volume and velocity of money on prices is made even more evident if the rate of increase in aggregate monetary demand (money time’s velocity) is examined.
During the decade ending in 1964, money flows increased at an annual compounded rate of about 6 percent. In the nine years since 1964, the increase was more than 13 per cent, and in 1972-73, nearly 30 percent. Because R-gDp and presumably, the volume of goods and services offered in the markets, was increasing at a rate of less than 5 per cent, it should have been no surprise that there was an intensification of our chronic rates of inflation to devastating levels.
The problems stemmed from using the wrong criteria (interest rates, rather than member bank legal reserves) in formulating & executing monetary policy. Net changes in Reserve Bank credit (since the Accord) were determined by the policy actions of the Federal Reserve.
But William McChesney Martin, Jr. changed from using a “net free” or “net borrowed” reserve approach to the Federal Funds “Bracket Racket” c. 1965. Note: the Continental Illinois bank bailout provides a spectacular example of this practice.
The effect of tying open market policy to a fed funds bracket was to supply additional (& excessive) legal reserves to the banking system when loan demand increased. Since the member banks had no excess reserves of significance, the banks had to acquire additional reserves to support the expansion of deposits, resulting from their loan expansion.
If they used the Fed Funds bracket (which was typical), the rate was bid up & the Fed responded by putting though buy orders, reserves were increased, & soon a multiple volume of money was created on the basis of any given increase in legal reserves. And the problem was always on the top side of the brackets.
This combined with the rapidly increasing transaction velocity of demand deposits resulted in a further upward pressure on prices. This is the process by which the Fed financed the rampant real-estate speculation that characterized the 70’s, et. al.
The transaction's velocity of money surged during this period. But you had to splice the G.6 release during this period because of a redistribution in SMAs
During the decade before 1965 the annual compounded rate of increase in our means-of-payment money supply was about 2 per cent. During the same period, the annual transactions velocity of money increased from c. 21 to 31. In ten in-year period since 1964, the money stock grew at an annual compounded rate of c. 6.5 percent and the transactions velocity of money reached an average level of 70 in 1973.
Velocity continued to increase to over 80 during 1974. Both money and velocity figures were taken directly from the Federal Reserve Bulletin. The impact of both an accelerated increase in the volume and velocity of money on prices is made even more evident if the rate of increase in aggregate monetary demand (money time’s velocity) is examined.
During the decade ending in 1964, money flows increased at an annual compounded rate of about 6 percent. In the nine years since 1964, the increase was more than 13 per cent, and in 1972-73, nearly 30 percent. Because R-gDp and presumably, the volume of goods and services offered in the markets, was increasing at a rate of less than 5 per cent, it should have been no surprise that there was an intensification of our chronic rates of inflation to devastating levels.
What do you know about the short period ('70'2?) in which supposedly the Fed DID target the money supply. It was supposedly a failure but how? Why?
https://www.chicagofed.org/publications/chicago-fed-letter/1994/october-86#:~:text=The%20U.S.%20monthly%20average%20import%20price%20for%20crude,oil%2C%20then%20in%20January%201974%20doubled%20it%20again.
"In 1970, a presidential commission recommended the elimination of oil import quotas."
So, you'd have to look at the oil imports
????
As the sub-title stated: "It all didn't begin in 1973"
P*T = M*Vt and an increase in M increases Vt
See: “Quantity Leads, and Velocity Follows” Cit. Dying of Money -By Jens O. Parson
The problems stemmed from using the wrong criteria (interest rates, rather than member bank legal reserves) in formulating & executing monetary policy. Net changes in Reserve Bank credit (since the Accord) were determined by the policy actions of the Federal Reserve.
But William McChesney Martin, Jr. changed from using a “net free” or “net borrowed” reserve approach to the Federal Funds “Bracket Racket” c. 1965. Note: the Continental Illinois bank bailout provides a spectacular example of this practice.
The effect of tying open market policy to a fed funds bracket was to supply additional (& excessive) legal reserves to the banking system when loan demand increased. Since the member banks had no excess reserves of significance, the banks had to acquire additional reserves to support the expansion of deposits, resulting from their loan expansion.
If they used the Fed Funds bracket (which was typical), the rate was bid up & the Fed responded by putting though buy orders, reserves were increased, & soon a multiple volume of money was created on the basis of any given increase in legal reserves. And the problem was always on the top side of the brackets.
This combined with the rapidly increasing transaction velocity of demand deposits resulted in a further upward pressure on prices. This is the process by which the Fed financed the rampant real-estate speculation that characterized the 70’s, et. al.
Good thing we've moved to FAIT. :)