Word: monetarist
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...switch ended what monetarist economists had found a cliffhanging suspense story. Early in 1971 the Federal Reserve pumped money into the economy at a stunning pace, but around midyear it almost turned off the spigot; the money supply in the last half of last year grew only very slowly. Monetarists consider the money supply the most important influence on the economy, and they feared that a continuation of the summer-fall Federal Reserve tightness would cripple any chance for a strong advance in 1972. In their view, the board's shift came in the nick of time-or perhaps...
...Monetarist Beryl Sprinkel believes that the lag effect of the extremely tight money policy pursued by the Federal Reserve in the second half of last year will "knock a few billion dollars off the G.N.P. in 1972." Despite these caveats, most board members agree that the economy should pick up strongly in the months ahead-if only because of the stimulative effects of the Administration's big election-year budget deficit. One early sign: the unemployment rate dropped slightly to 5.9% last month...
This analysis differs sharply from the reading of Administration economists and the monetarist school led by Milton Friedman, who see a vigorous expansion developing. Friedman recently went so far as to say that the problem is "to keep the economy from going too fast" and setting off another inflationary spiral. Yet most economists and businessmen tend to agree with TIME'S board...
...Reserve Board: "We've been putting out money for some time at about the rate Friedman said, and we still have a sick economy." The unwelcome combination of recession and inflation is also spreading doubts about Friedman among businessmen, politicians and economists. Many complain that Friedman's monetarist philosophy oversimplifies the complexities of the world's largest economy. That philosophy appealed to the Nixon Administration, says Arthur Okun, who was chairman of the President's Council of Economic Advisers under Lyndon Johnson, because "it meant the less economic policy the better...
...Economists have long realized that monetary restraint affects output first, prices later. Friedman for the first time articulated the typical length of the second lag last September during a speech in London. The effect is to double the delay between dosage and result that has been popularly attributed, to monetarist medicine...