Is a tight monetary policy a delicate instrument?
No. And this is the cause of much of the controversy about monetary policy. The effects of monetary policy are extremely widespread. For example, a tight money policy works by slowing down the whole economy. Sometimes this is what the Federal Reserve wishes to do. At other times, it is clear that the Federal Reserve is interested only in restricting some particular activity as was the case with the consumer buying upsurge of 1955 when consumers were devouring autos and other drabbles. In order to restrict consumer buying of durable goods, the Federal Reserve tightened money. But there are times when the Federal Reserve is not interested in restricting consumer buying and, nevertheless, tightens money for other purposes. An example is the period from late 1961 1962. The Federal Reserve tighten money during this period in response to the balance-of-payments deficit. It had no wish to restrict consumer buying. On the contrary, there was widespread concern about sluggish demand and unemplo
