“Monetary control” refers to the various procedures and devices the Fed and other central banks employ in their attempts to regulate the overall availability of liquid assets, and through it the general course of spending, prices, and employment, in the economies they oversee.
I regard any need for last-resort lending as reflecting, not the inherent shortcomings of private financial markets, but the debilitating effects of misguided regulatory interference with the free development of those markets.
The sad reality is that the battle for monetary freedom has for some time now taken the form of a rearguard action, aimed at resisting as much as possible ever-increasing government incursions into an ever-shrinking realm of financial choice.
Financial systems, like economies generally, are organic entities. They must be allowed to flourish in a natural way.
The multiplier’s significance to monetary policy is, or used to be, straightforward: it indicated the quantity of additional bank deposits that monetary authorities could expect to see banks produce in response to any increment of new bank reserves supplied them by means of either open-market operations or direct central bank loans.
There is, after all, at least one impulse among humans that’s more deep-seated than their “propensity to truck, barter, and exchange.” I mean, of course, their propensity to let themselves be thoroughly bamboozled.
Government has been the cause of monetary disorder in our society. A free market in money and banking would be the solution to our “age of inflation.” Government central-planning of money has been tried and it has failed. It is now time for monetary freedom to be given a chance.
Free banking and monetary rules were rival ideas for guarding against abuses of discretionary monetary policy, today they are properly seen as complementary schemes, one for improving the performance of the banking system, the other for reforming the base-money regime.
On the Fed’s “instruments of monetary control,” which include devices for regulating the total quantity of bank reserves and circulating Federal Reserve notes, and also for regulating the quantity of bank deposits and other forms of privately-created money that will be supported by any given quantity of bank reserves.